On August 29, Intel CEO Pat Gelsinger was interviewed at Deutsche Bank's 2024 Technology Conference. Below are 4 key takeaways from his interview.
Since the beginning of 2024, Intel's advanced packaging pipeline has tripled.
I don't know how Intel measures their pipeline for advanced packaging, but it seems outside parties are interested in their services. If they can deliver good results to their customers, companies will change their perspective of Intel and offer them the opportunity to manufacture their chips. The advanced packaging business is Intel's foot in the door with manufacturing customers.
Pat Gelsinger said he couldn't tell his Technology Development and Product Teams to simultaneously focus on regaining product leadership and being efficient at the same time. Intel had to strive for product leadership first, and then focus on being efficient afterwards.
Intel recently announced that they will cut 15,000 jobs. Former Board Member Lip-Bu Tan and former executives believe these cuts should have been done years ago. Based on Pat's statement about prioritizing product leadership over efficiency, it seems he wanted the cuts to be done in stages so the company wouldn't get hollowed out while it's pursuing product leadership. Now that the 5 nodes in 4 years strategy is in sight, Pat believes Intel can cut more jobs now.
Cutting jobs in stages is risky because it creates a lingering fear among employees. If major cuts to the labor force are made once, the remaining employees will recover and move forward. But when major cuts are made periodically, employees will feel uncertain about their future and grab hold of any opportunity to leave. If Intel continues to make major cuts, it will eviscerate their employees' morale.
When discussing strategic options for the company, Pat Gelsinger mentioned reducing the number of sites they're building and reducing the number of businesses they're in. He didn't mention splitting the foundry and product businesses.
Bloomberg reported yesterday that one of the scenarios Intel is exploring with their advisors is separating their product and foundry businesses. At the conference, Pat did not mention this option.
It would be better for Intel to reduce the number of fabs they're building and exit businesses that don't align with them regaining product leadership and winning foundry customers. It doesn't make sense to build new fabs in Germany when the fabs in America are struggling.
Intel needs to slow down the pace of their expansion. They might not reach their goal of becoming the 2nd largest foundry in the world by 2030, but that's okay. If they get there by 2031, they're still on track. The name of the game is to stay solvent and cross the finish line.
Pat Gelsinger and Commerce Secretary Gina Raimondo are surprised that companies are not more concerned about their over-reliance on Asian supply chains.
After companies suffered massive setbacks with their Asian supply chains because of Covid, Pat Gelsinger and Gina Raimondo thought people would be more proactive about diversifying their supply chains. That has not been the case. I feel the same way they do. I don't see CEOs doing enough to break away from their reliance on China, and I don't see investors factoring the risks from China into their valuations.
I also see politicians treat the CHIPS Act as if it was a charitable event instead of a national security measure. When Pat returned to Intel, he probably thought that he would get more love and support from customers, politicians, and investors. Instead, he's getting hammered by everyone.
I think Intel is making the right moves. Not everything they do will be perfect, but they're heading in the right direction. They're cutting costs, divesting businesses, and advancing their technologies. I can't wait to see how the company looks in a few years.
Stay strong, stay blessed, and God willing, I will see you next week.
"If you faint in the day of adversity, your strength is small."
Proverbs 24:10 ESV
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