With revenues flat, capex expenses near historic highs and no hot smartphone chips in 2014, Intel faces a pivot point in foundry.

SAN JOSE, Calif. — Intel's new chief executive Brian Krzanich is clearly on the hot seat. The world's largest chip maker told analysts yesterday 2014 will be another flat year for the company accustomed to outpacing chip industry growth, yet it is maintaining historically high capex spending, seeing the need for a new 450mm fab on the horizon.

The good news is Intel claims it will have an edge over the rest of the industry in lower cost with its 14nm process that's now ramping. The bad news is it doesn't appear to have any hot smartphone products to make in the process next year, and it's not clear to what extent it will let high volume competitors use its fabs.

Costs per transistor are expected to remain flat for foundry giant TSMC as it moves to its first FinFET process at about 14nm. Intel said it will have an edge in more dense wafers at the node which will be its second-generation with the vertical transistors.

That's potentially a huge benefit, but it's not clear how Intel will harvest it. The company is gaining some share in tablets, but is going nowhere in smartphones. Intel is not expected to have until 2015 the kind of integrated LTE applications processor rivals like Qualcomm are selling now.

Krzanich, named CEO in May, said Intel is stepping on the gas in foundry services. However, the signals he sent were not clear about the extent that might include direct rivals such as Qualcomm. It's not clear Intel could strike and deliver on profitable, high volume deals with competitors even if out of desperation it became willing to do them.

High volume foundry is a very different business model than the "copy exact" strategy Intel has had in place for decades. The signs from yesterday's meeting are Intel still very much wants the lion's share of 14nm chips it makes to be ones it designs.

Interestingly, Intel said it will make its next-generation integrated 3G smartphones chips at a foundry for faster time-to-market. It aims to build the follow-on LTE devices in its own 14nm fabs.

Wall Street analysts remained upbeat on the strength of Krzanich's aggressive stance.

"We believe Intel can return to growth in 2H14/15 as the PC market stabilizes and share gains emerge in tablets, phones, foundry etc.," said Ross Seymore of Deutsche Bank, though he shaved $2.2 billion of his estimates for Intel's 2014 revenues. "Even incremental success in these areas should yield above consensus rev/EPS and a rising share price," he added.