Intel CEO Pat Gelsinger speaks on March 9, 2017 in Santa Monica, California, in a photo taken while he was CEO of VMware.
Patrick T. Fallon | Bloomberg | Getty Images
In his first extensive public comments since becoming CEO of Intel, Pat Gelsinger gave an underlying message: Intel, the US chip maker, is getting its swagger back.
Intel, contrary to some industry expectations, said Tuesday it would not change its decades-old strategy to become a chip design company outsourcing manufacturing. Instead, it will double production and invest $ 20 billion in two new chip factories in Arizona.
“Intel is back. The old Intel is now the new Intel,” said Gelsinger.
Investors had hoped that Gelsinger, who started his career with more than 30 years at Intel, could save the ship after years of challenges in which the most advanced chip development stalled and was passed by Asian rivals, such as TSMC, which can currently produce smaller transistors. and thus superior chips.
On Tuesday, Gelsinger was energized when he talked about esoteric semiconductor technologies, and many of his speeches appeared to be aimed at boosting Intel’s workforce.
“We’re bringing back Intel’s execution discipline. What I’ve called the Grove-ian culture, we do what we say we do,” said Gelsinger, referring to legendary CEO Andy Grove, who built Intel. in an American tech juggernaut in the 1980s and 1990s.
“We have that confidence in our execution. That our teams are on fire. You know, when we say we’re going to do X, we do that 1.1x every time we make a commitment,” Gelsinger said.
Investors loved it – the stock rose more than 6% on Tuesday during long-term trading.
The biggest change
Gelsinger showed on Tuesday that he is not wasting time making big changes. The most significant strategy shift is a new division called Intel Foundry Services that capitalizes on one of the biggest trends in the semiconductor world.
Many top technology companies and chip makers have switched to a model in which they design chips, but are turning to Asian factories run by companies like TSMC and Samsung to manufacture them.
Intel has only been concerned with manufacturing chips for other companies, but prefers to design and manufacture its own high-performance chips.
It will continue to manufacture most of its high-end chips, but now Intel will run those factories for other companies as well – and they are based in the US and Europe, for customers such as governments to whom that matters.
“I believe this is the first time that Intel is really seriously doing what it takes to create a ‘real’ foundry,” said Patrick Moorhead, analyst at Moor Insights and Strategy.
The foundry strategy also highlights Intel’s position as a major US manufacturer, which many legislators have sought to protect with incentives, as supply chain problems and chip shortages have revealed problems producing many of the fastest chips in places like Taiwan and Korea.
Intel’s announcement and the $ 20 billion investment in new plants on US soil suggest that companies that may have been forced to go to Asia to produce semiconductors could get similar performance from chips manufactured in places like Arizona.
“Today’s announcement by Intel is proof that our legislation to invest in semiconductor manufacturing will help grow Arizona’s economy, create well-paid jobs in our state, help improve our national security, and keep our country ahead of the curve. the field of innovation, ”said Senator Kyrsten Sinema in Arizona in a statement.
Gelsinger said government incentives were not the only reason Intel took this move.
“This is the Intel strategy, point, point. It doesn’t depend on a penny of government aid, or state aid, or other investment to make it successful,” said Gelsinger. Intel said Tuesday it believed the foundry market could be worth $ 100 billion by 2025.
Intel suggested that its foundry services were in high demand, especially from major US tech companies. It said it received enthusiasm for its foundry services from companies such as Amazon, Cisco, Google, IBM and Qualcomm. Microsoft CEO Satya Nadella even appeared in a short video endorsing the plan.
Not on that list was Apple, replacing Intel chips with its own in its latest line of laptops, sparking the most recent round of hand-wringing about Intel’s tech future. Intel is currently running ads comparing its chips to Apple’s.
But Gelsinger had so much swagger on Tuesday that he said he believes Intel may be able to win that company back with its new foundry unit.
“We’re also going to look for clients like Apple and say, ‘Boy, you know, is it also possible to build and expand your foundry capabilities?’” Said Gelsinger.