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Yahoo Finance Presents: Intel CEO Pat Gelsinger

In this episode of Yahoo Finance Presents, Intel CEO Pat Gelsinger sat down with Yahoo Finance's Brian Sozzi to discuss their recently announced $20 billion investment to expand chip production, psuhing past the chip shortage, and to discuss Intel's relationship with other companies such as Apple.

Video Transcript


BRIAN SOZZI: New Intel CEO Pat Gelsinger has come out hot since taking over the top job in February. The company is saying it will continue to make its own chips and invest $20 billion to help further those efforts. Intel's new CEO, Pat Gelsinger joins us now. Pat, good to speak with you here.

I would say this. This announcement of a $20 billion investment to increase your capacity, it surprised a few folks on Wall Street. Why that amount? And why now?

PAT GELSINGER: Well, when we think about the world situation today, there's an extraordinary demand for semiconductors. As we've seen basically the world is becoming more digital, every aspect of that runs on semiconductors. And then COVID put us into a higher gear. It just accelerated remote work, remote education, telemedicine, automotive. All of these are now seeing the shortages of semiconductors. So the world needs more of these capabilities.

Also, the world wants a more balanced supply chain. There's an extraordinary concentration in Asia. So US and Europe, and we're one of the few companies that could step into that. And we've also seen that our own supply situation, wow, the demand signal is just off the charts. So we want to step into that in an aggressive way. And the fastest way that we could expand our capacity was at a site that we were already at was in Arizona. So we announced two new fabs, $10 billion apiece.

So maybe there's a shopper discount when you do them two at a time. But also that we announced that we'll have our next major locations in US and in Europe that we expect to announce within the next year as well. So it's $20 billion and more to come.

BRIAN SOZZI: And what do you say to the critics of Intel, that they have seen Intel try to do things like this before, this is a costly endeavor? What do you say to them today?

PAT GELSINGER: Well, first, it's a great market, $100 billion, very profitable market that the world wants dramatically more of. The world is a different place today. And some of these international requirements, balanced supply chains, we're uniquely positioned to go do that.

Some of our past attempts in the foundry space, I say, have been somewhat halfhearted, right? This is going to be a business unit reporting to me, clear accountability, separate PNL, dedicated capacity. We're throwing the teams, the resources, the talent to make it successful.

Also, we're making the best of Intel available for the foundry business. We're making our best process, our unique advantages in 3D packaging, the full gamut of our intellectual property available, including x86 cores, the heart of our business today. And many of our biggest customers are saying, yes, please, because imagine a cloud vendor who's running 10 million cores. He says, boy, I want a little bit less of this, a little bit more of that, and I can be better optimized. And maybe I'll throw in some of my own unique IP. Wow, this is game-changing for them if we can start to create some of those efficiencies at scale.

So for all of those reasons, we say the market is different. Our strategy is very refined. We've learned from some of those issues in the past. And we are going aggressively into this space. And the response, as you saw from yesterday's announcement from customers and industries, was overwhelmingly positive. And we've yet to deliver. Just saying, please, make this happen rapidly.

BRIAN SOZZI: And there's been so much attention on how much one of your rivals, Taiwan Semiconductor, is in fact spending. If I have it correct, $28 billion this year on capex. At what point does Intel pull even with them? When do you start closing that competitive gap?

PAT GELSINGER: I don't think it's-- it's not a capex race in that sense. It's about how you build the overall factory network. And we'll say this $20 billion that we're investing this year, the commitment of $20 billion in these fabs, this is a large capital gain. And we're ready to go make those investments.

Clearly, the financial community wants to understand that. But at a $100 billion market by 2025, yes, this is a market that needs investments. It is a big market. And we're ready to step forward in a meaningful way.

Later on this year, we'll have a financial analysts' conference where I'll give a multi-year outlook to our capital spend cycle as we go into this business area. But it's a good business. We're one of the few companies on the planet and the only US and western-based company that can really step into this in a big way. And that's exactly what we're going to do.

BRIAN SOZZI: How far away do you think we are from moving beyond the chip shortage?

PAT GELSINGER: I think it takes a couple of years because sort of what happened was, COVID caused people to hold back. And COVID caused digital acceleration to need more. So essentially, you had exactly the wrong business dynamics happen versus the market signal. And that's caused some delay for the industry and gaps for the industry.

You can't build fabs overnight. It takes a couple of years to get it built up. That said, we're stepping into this aggressively immediately. We have some foundry offerings that we have available today. I've asked our team to immediately look at stepping up and starting to help the auto shortage and some of these other gaps more rapidly.

And I'll say, everybody, if they're in a factory for Intel, it's seven by 24. We're going faster to help close those gaps. But I really do think it takes a couple of years. It just is that long to establish new capacity.

BRIAN SOZZI: Do you view it as a as a national security risk that China is investing so much in its chip supply? And we are still having a shortage here in the US. It's impacting cars demand. It's impacting notebook computers. I know you released your guidance in the first quarter. But still, we are starting to see shortages.

PAT GELSINGER: Yeah, there's a supply challenge for the industry. And different component parts, different things, the demand has just surged so quickly that we're seeing that across all of the industry segments. Now, within that, obviously, the issues of, I'll say, geographic balance do become a key consideration. And that's exactly why we've laid out the strategy because far too much of the supply and manufacturing sits in a few countries in Asia. And we do see that we have to have a more balanced supply chain, where today only, 15% in the US, and only 5% of that supply is done in Europe.

And we're going to step in and start to change that trajectory immediately. Now, we put our chips on the table. We're putting these investments in place without a penny of commitments from states or governments. But we're ready to be meaningfully accelerated by their help. And the chip act that's today being discussed for funding by the administration and Congress-- there are European accelerations that the EU is putting on the table. We are ready to go faster and look forward to their help to go bigger and faster to make these gaps to rebalance the supply chain because it's the right thing for the nation, the right thing for the world, the right thing for the industry.

BRIAN SOZZI: I know you have a lot on your plate. You just took over the top job here at Intel. But have you had a chance to talk with President Biden about the chip act? He's putting forward a potential $37 billion in funding to help the chip shortage.

PAT GELSINGER: You know, I've talked to several members of the administration, several people on his team and to quite a few senators and representatives at this point, also members of the defense community as well, strong support in that direction. And yesterday's announcement, we had Secretary of Commerce Raimondo participating with us formally and speaking on behalf of the president.

So so far, I think that our announcements yesterday are superbly aligned with those of the administration. So we expect those will come together very nicely over the course of this year.

BRIAN SOZZI: Is a $37 billion investment, is that a game-changer for the semiconductor industry?

PAT GELSINGER: It's a major, major statement by the administration. And the fact it's fully funded, fully supported, there's strong support across the semiconductor industry-- in fact, we have a meeting of the Semiconductor Industry Association today. They met with commerce secretary last week, as well as with the cyber secretary. So all of these, I think, are coming together very nicely.

I'd also say there's a 52 billion set of incentives that are put aside in the EU as well in a very similar vein. So these are very serious statements on the parts of governments. And now to see them fully funded, move forward rapidly, good bipartisan support for it, the winds are blowing in the right direction. Our strategy that we announced yesterday is simply to align with those directions in a very substantial way.

BRIAN SOZZI: Switching gears a bit back to your business, you mentioned on the conference call you held on Tuesday evening, you are open to pursuing opportunities with Apple. What is the status of your relationship with Apple right now?

PAT GELSINGER: Well, clearly, there's aspects of the relationship that have become a bit more competitive. And I'll say what we're doing is to work with Microsoft, HP, Dell, and Lenovo to, I'll say, bring energy to the PC ecosystem because we're innovating. We're proud of it.

And in COVID, the world has needed more of it. And so obviously, you've seen some of those competitive energies resume because there's a lot of great innovation to be done. And we haven't seen PC demand at this level for a decade and a half. The world needs more of that.

And there's a bit of competitive fun going on with the Apple and the Mac ecosystem as a result. At the same time, Apple's a customer. And I hope to make them a big foundry customer because today they're wholly dependent on TSMC. And we want to present great options for them to leverage our foundry services as well, just like we're working with Qualcomms, Nvidias, Microsofts, and others. Leverage us as a foundry because we're going to be delivering great technology, some things that can't be done anywhere else in the world.

And as we talked about, for instance, the system unpackaged technologies that we have, years ahead of what anybody else can offer. And we're ready to combine other foundry technologies with our packaging and our foundry capabilities to enable our customers with the best products in every category. And hopefully Apple becomes a customer along with many others participating because it's the right thing for the industry, the right thing for the world.

BRIAN SOZZI: Have you talked to Apple CEO Tim Cook and told him, hey, we want your business back, and this is what we're going to do? And do you think you can win back a good chunk of that business over the next 18 to 24 months?

PAT GELSINGER: We've certainly said that to Apple. I've talked to Tim and Microsoft and Qualcomm and Jensen and so on. We're very much interested in winning their business, building their confidence, building their trust, and really having them know that we have world class technologies that they can take advantage of for their business as well.

BRIAN SOZZI: So for those not too familiar with you, Pat, yesterday on the conference, you sounded as if you've been at Intel and you never left. You joined the company at 18. And when you did leave to take the CEO role at VMware, I mean, you were their first chief technology officer at Intel. What does it mean for you to go back to the company where you started and try to get it through some of these big challenges?

PAT GELSINGER: Well, I consider it-- as I say, I learned at the feet. I was mentored by Grove, the founders. And there's such deep emotional connections there.

Also 30 years, as we joke inside of the company, you bleed Intel blue. And there's still a lot of Intel blue in these veins. But it also is an opportunity to restore one of the most iconic, important customers in a critical phase of the industry.

This is an opportunity, maybe an honor, an obligation for the company, for our industry, for our nation, and the world. So I treat it almost as a holy calling, if you could, to this role. When I was a young person here, I made the statement I wanted to be CEO of Intel, not even knowing what I was saying at the time. Now it's become this passion and, as I've described it, the dream job that I could be part of this great, iconic company.

BRIAN SOZZI: I followed your career for some time, Pat. How has faith helped change or shape your leadership?

PAT GELSINGER: Well, when I left the company 11 years ago, somewhat, I was pushed out of the company. And it was hard. And there's this biblical phrase that what was meant for evil worked out for good. And boy, it hurt at the time. It was difficult. But it made me better.

And in my 11-year vacation, as I call it, I've become a seasoned, tenured CEO. I've learned new leadership skills, new customer focus, new emphasis on diversity, inclusion, and what it means to build a culture, how to work with finance and the Street, depth and software, all of these things I'm now bringing back and combining with that 30-year experience that I had here.

And I'll say every neural pattern that I've ever exercised is being used fully every day on the job at Intel. It's exhilarating. It's with great honor. And to join with the 110,000 other talented souls that are part of this great, iconic firm, it really is an extraordinary opportunity that I've been given to come back and play this role.

BRIAN SOZZI: Well, we do wish you well on your journey in turning Intel around. Intel CEO Pat Gelsinger, good to see you. Stay safe. And we'll talk to you soon.

PAT GELSINGER: Thank you so much, Brian.