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We will be a leader in chips again: Intel CEO

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  • Pat Gelsinger
    American businessperson, CEO of Intel.

Patrick Gelsinger, Intel CEO joins Yahoo Finance’s Brian Sozzi to discuss the latest Intel news.

Video Transcript

BRIAN SOZZI: Intel laying out its future product roadmap, very key development and development for the company. Joining us now for more on this product roadmap is Intel CEO Pat Gelsinger. Pat, always good to speak with you here. Pretty big event for you, laying out the next couple of years of chip development. You say you can get back to a leadership position in the chip industry by 2025. Why are you so confident?

PAT GELSINGER: Well, what we laid out yesterday was a roadmap of our process innovations over the next four years. And what we described was basically the path back to parity. We're embracing the industry EUV technology that we helped them-- that we actually helped create, but we weren't maximizing its use. So we're quickly putting that into the center of our process technology. And then we laid out some breakthrough innovations and this idea of the next generation transistor architecture.

And Intel has a history. Going way back for, you know, 25 years, the first use of strained silicon, the first use of high-k metal gate, the first FinFET. You know, we've been about every decade, we've created a fundamental new transistor architecture. And that's what we described yesterday. And we'll be delivering that. And we believe the embrace of the industry partnerships, this radical new innovation of a new transistor architecture, some other new process breakthroughs as well, will put us back into a leadership position, you know, parity in 2024 and leadership in 2025, back where Intel belongs.

BRIAN SOZZI: Pat, what changes have you had to make inside the organization to get the company to accelerate its product roadmap, where you can come out with a release like this and say confidently that you will be back leading the chip industry by 2025?

PAT GELSINGER: Yeah, and, you know, we've done restructurings. We've also given those new leaders the tools. I've given them R&D teams, expand the R&D, so we can hire the best. Also, the capital resources so that we can run more in parallel. You know, what we said is normally we do a process generation every two years. Now we're going to do five generations in four years. So they need more capacity to run all of those experiments and those test cases to operate.

So I've given them the tools. We've given the new leaders. We've brought key capabilities into the company. We've also eliminated maybe some of the arrogance that we had in the past by embracing the industry. And we announced an expansion of our partnership with ASML yesterday, a key, key tool provider, and relationships with iMac, the European Research, our partnership that we announced with IBM, and really benefiting from the best of the industry, as well as expanding our own capabilities and setting the torrid pace, as I've described, for our internal teams to put us back in that leadership position. And the energy, the mojo, is rebuilding inside of the company. So we're feeling very excited about what we described yesterday.

BRIAN SOZZI: It sounds like a cultural reboot of the company.

PAT GELSINGER: Well, I've used the words, "Grovian culture," where, you know, we had sort of lost our way for a decade and made different decisions that weren't as good, weren't as focused on core technology and manufacturing. But what was old is new again. And we're going back to some of those hardcore, competitive, data-driven, engineering-centric technology leadership perspectives that made Intel famous. And this Grovian culture, as I like to call it, is coming back. And with that, we saw that that was part of what made Intel so unique.

And I was mentored personally by Andy for 35 years. And I really feel like I grew up at the feet of Noyce, Moore, and Grove as the founders of the company. And we're going to live in their legacy and make them proud in this next phase of the company.

BRIAN SOZZI: How do you anticipate your key competitors responding to what you put forward last night?

PAT GELSINGER: Well, I think every one of them is going to say, well, you know, can they do it, right? They've been stumbling for a while. Yes, we can. Well, our products are good. Well, ours are going to be better. And boy, you know, they haven't been good suppliers lately to the different competitors in the-- or the different customers in the industry. Well, we're coming back, and we're rebuilding those relationships. You know, we saw a marked increase in customer scores just over the last couple of months.

We're going to compete in the supply chain. Where everybody's constrained, we're going to be a bit better because we have our own manufacturing, as well as use the industry. So it's going to be a competitive period in the industry but overall, it's a rapidly expanding industry. It's going to be good for everybody. And we're just going to make it a whole lot better for Intel as we go to this next phase of our journey.

BRIAN SOZZI: And as part of this, you're announcing that you'll also be making chips for Qualcomm and Amazon. But on Qualcomm specifically, clear this up for us-- is Qualcomm a competitor? And how does that relationship work if you are, in fact, competing with them? Now you're going to be making their chips.

PAT GELSINGER: You know, for the most part, Qualcomm and Intel, you know, we aren't really in each other's market very much. And particularly when Intel exited the modem business a year or two ago, you know, the areas of competition even became smaller. And with me coming in as the new CEO and Cristiano Amon coming in as the new CEO, you know, both of us, we've spoken many times since then. We said, boy, you know, both of us sort of looked at each other as competitors. And we really don't compete a lot today. Why don't we go forge a partnership that's deeper and more meaningful?

And out of that, you know, we're seeing great promise for greater collaboration in a variety of areas. And yesterday's announcement that they're planning on taking advantage of Intel 20A, this breakthrough, new transistor technology, and becoming an IFS and Intel foundry services customer, was really a point in that journey that excites both Cristiano and myself. And I'm sure we're going have more to say about this in the future.

But, you know, the market was also saying, is Intel ever going to be successful with this new foundry business? And I think the combination of Amazon, Qualcomm, and over 100 customers in our pipeline for that business area is really saying yes, they have the momentum of the industry. The industry needs more supply. Intel is stepping into that with leading edge technologies for a more globally balanced supply chain. This is good for the United States. It's good for the tech industry. It's good for national security. And this is a great step forward and one that I'm excited to have my friend Cristiano joining me on that journey.

BRIAN SOZZI: Qualcomm, Amazon, household names in tech certainly. You say you have a pipeline of 100 other companies waiting to potentially use your foundry's frame revenue. I mean, how much revenue can you generate from potentially 100 new customers, including Qualcomm and including Amazon?

PAT GELSINGER: Well, you know, overall, the foundry business, there's a gestation time. Because a major new design on a foundry-- and as we said yesterday, Intel 20A only becomes available in 2024. So there's a fairly long cycle until designs start materializing. We have some of our modern nodes available more quickly. And we'll start seeing revenue from some of those customers as soon as next year and the packaging offerings. But it takes a while to build up that revenue stream.

But overall, the foundry business today is over $100 billion market. So we're going into a large market. I've set a goal that by the end of the decade that we want to be the number two player in that market. So we're expecting that this becomes a large growth opportunity for Intel over that period. And yesterday's announcement was just a proof point on the way that we're making very good progress at the process, packaging, and now with some of our early customer announcements.

BRIAN SOZZI: To service that potential demand, 100 plus customers, Pat, do you need to go out there and make a play for global foundries? There has been some reports of that.

PAT GELSINGER: Yeah, of course, Brian, I can't comment on the rumors in the industry. I can say more broadly that this is a big expensive industry to play in. The R&D demands are extraordinary. The capital demands are extraordinary for it. So you can't be a little player.

And as a result of that, we do see that consolidation will be appropriate going forward, as we see the industry players continue to refine to those that can play at these highest scales. So I do think consolidation will happen. And I think we'll be a consolidator in that journey. And we're going to continue to build out our own organic capabilities. But we're also not averse to considering inorganic opportunities as well as we go forward in this and a range of other areas.

BRIAN SOZZI: So nothing imminent.

PAT GELSINGER: I can't comment further at this time, Brian. Sorry.

BRIAN SOZZI: Fair enough. We heard a good deal last night about-- from Elon Musk over at Tesla. He wants to make more cars, Pat, but he can't because there's no chips necessarily to go into his cars. He's also had to push back when he releases his semi truck, his Cybertruck. When does the shortage end?

PAT GELSINGER: You know, I've said that I think it's about a year to two years until we start to see some reasonable balance of supply and demand. So we still have a ways to go. I do think that Q3 second half of this year is the bottom, is the worst of it. And we'll start to see things get better as we go into next year. But we still have a ways to go. And the reason for that is it takes a while to build these factories.

If I build a Greenfield new fab, that's three to four years until it's producing. You know, if we're expanding existing capacity, that's still a year or two until that occurs. And this gap where we saw the industry demand go from 5% or 6% growth to 20% growth with a year of disruption, where supply dropped to maybe zero expansion in the COVID peak year, oh, this created a big gap. And you're not going to get over that overnight.

And clearly, the auto industry has been one of the most acutely hurt, but it really is across every aspect of the business. And as I said on our earnings call, you know, I'm struggling with my supply chains. And I would give stronger guidance if I was able to get more supply of some of our piece parts, like substrates.

So we're working on this super aggressively, the expansions of our investments as I'm building factories as fast as we possibly can. I'm just beating up on my construction teams, you know, telling them, run the concrete trucks 7 by 24. We got to go faster at getting capacity online.

But you're somewhat defying the laws of physics and going too fast here. But I'll tell you, we are all over it. And we do see the challenges of the auto industry. You know, a $30,000 car is idled for a few dollars of semiconductors. That's just politically and economically untenable. So we and the industry got to go faster to close this gap. But we still have a ways to go.

BRIAN SOZZI: Well, go easy on those construction workers, Pat. You know, come on, they're doing what they got to do here. But you see a lessening in the shortage. By early next year, things shouldn't be as severe in terms of a shortage as it is right now, right?

PAT GELSINGER: Yeah, I think the bottom is Q3, Q4. We're predicting Q3, right? And then it will just get better every quarter, but there's still going to be meaningful shortages through next year and, as I predicted, into 2023.

BRIAN SOZZI: Before we let you go, I need you to debunk this. There is this view on the Street that Intel is no longer innovative. It can't mount a comeback. Now that you have been inside of this company for several months and I've been following your journey, debunk this myth for us.

PAT GELSINGER: Well, you know, yesterday, right, we said, here's our packaging innovations that have us years ahead of the industry. And we just rolled out two major new innovations yesterday. Yesterday, we rolled out and said, hey, here's the next major innovations in process technology with RibbonFET, a once in a decade kind of transistor architecture, and this new power delivery network in the backend, major innovations for the industry.

We also said, boy, Mobileye, those guys are crushing it. You know, we are the leaders in autonomous vehicle technology for the industry, another area of innovation. Silicon photonics, we're way ahead of the industry in the ability to have-- move from copper to photonic interconnects.

We're leading the industry in this disruption of the 5G network to move to what's called an Open RAN or a standard open interface. Three years, we're super concerned that, you know, boy, are we ever going to be able to innovate in the 5G area and dependence on China? Well, now the industry has adopted this technology. And Intel's the leader in delivering that innovative edge platform around open RAN and vRAN. And these are just a few of the areas.

And come up in October, we're going to have the Innovation Conference. And this is where we fling the doors of Intel Labs open wide. And we're going to have a geek fest. And if you come away from that geek fest, then we're going to throw you in a Mobileye car. We're going to show you what these transistor structures look like. And we'll probably have another dozen or so innovative announcements.

If you come away from that and say Intel isn't innovating anymore, you know, I'm going to check your pulse because there is so much going on inside of this company. I mean, we got PhDs and labs and researchers all over the place. And I say it's like, you know, a CEO like myself, who loves technology, right, it's sort of like, you know, the rain coming on a desert. The flowers are blooming all over the place, as we're seeing innovation, the geeks alive and well at Intel. And show up in October, Brian, and we're going to give you a geek fest delight.

BRIAN SOZZI: Well, I was planning to show up in October, Pat, but you kind of got me worried with those construction worker comments. I'm just saying.

PAT GELSINGER: [LAUGHS] Come on down. We'll take care of you. I promise.

BRIAN SOZZI: All right, fair enough. Go easy on me. We'll leave it there. Intel CEO Pat Gelsinger, always good to see you. Have a great rest of the week.

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