Pat Gelsinger, CEO of Intel, speaks in a photo taken as CEO of VMware on March 9, 2017 in Santa Monica, California.
Patrick T. Fallon | Bloomberg | Getty Images
In his first extended public remarks since being appointed Intel CEO, Pat Gelsinger offered a fundamental message: Intel, the American chip maker, is getting its bragging back.
Contrary to some industry expectations, Intel said Tuesday that it would not change its decade-long strategy of becoming a chip design company that outsources manufacturing. Instead, production will be doubled and $ 20 billion will be invested in two new chip manufacturers in Arizona.
“Intel is back. The old Intel is now the new Intel,” said Gelsinger.
Investors had hoped that Gelsinger, who started his career at Intel when he was over 30, would find the ship to be overtaken by Asian competitors like TSMC, who can currently manufacture smaller transistors, after years of challenges in which the most advanced chip development stalled , could bring it back to order and with it superior chips.
On Tuesday, Gelsinger was energetic when speaking about esoteric semiconductor technologies, and much of his talk appeared to be aimed at getting the Intel workforce going.
“We’re bringing back Intel’s execution discipline. What I called the Grove-ian culture is that we do what we say, what we do,” said Gelsinger, referring to legendary CEO Andy Grove, who Intel built into a US tech juggernaut in the 1980s and 90s.
“We have this confidence in our execution. That our teams will be fired. You know, if we say we’re going to do X, we will do 1.1x every time we make a commitment,” said Gelsinger.
Investors were delighted – the stock rose more than 6% in extended trading on Tuesday.
The biggest change
Gelsinger showed on Tuesday that he is not wasting time making big changes. The most important change in strategy is a new division called Intel Foundry Services that leverages one of the biggest trends in the semiconductor world.
Many high-tech companies and chipmakers have moved to a model of designing chips, but are turning to Asian factories run by companies like TSMC and Samsung to make them.
Intel has only dealt with the production of chips for other companies and instead preferred to develop and manufacture its own high-performance chips.
Most of its high-end chips will continue to be manufactured, but now Intel will operate these factories for other companies too – and they’re based in the US and Europe for customers like governments who care about it.
“I believe this is the first time Intel is seriously doing what it takes to create a ‘real’ foundry,” said Patrick Moorhead, analyst at Moor Insights and Strategy.
The foundry strategy also underscores Intel’s position as a major American manufacturer, which many lawmakers incentivized to protect, as supply chain problems and chip shortages have uncovered issues with manufacturing many of the fastest chips in countries like Taiwan and Korea.
Intel’s announcement and $ 20 billion investment in new factories on US soil suggest that companies that may have been forced to go to Asia to manufacture semiconductors will see similar performance with chips in a few years’ time that were made in places like Arizona.
“Today’s announcement from Intel is proof that our legislation, which invests in semiconductor manufacturing, is helping the Arizona economy grow, creating well-paying jobs in our state, improving our national security, and ensuring our country continues is a leader in innovation, “Arizona Senator Kyrsten Sinema said in a statement.
Gelsinger said government incentives aren’t the only reason Intel is taking this step.
“This is Intel’s strategy, period, period. It doesn’t depend on a dime of government or government support or other investment to be successful,” said Gelsinger. Intel announced Tuesday that the foundry market could be worth $ 100 billion by 2025.
Intel suspected that its foundry services would be in great demand, particularly from large American technology companies. It said it has received enthusiasm for its foundry services from companies including Amazon, Cisco, Google, IBM and Qualcomm. Microsoft CEO Satya Nadella even appeared on a short video to support the plan.
Not on that list was Apple, which replaced Intel chips with its own chips in its latest line of laptops and spurred the latest round of craftsmanship on Intel’s future of technology. Intel is currently running ads comparing its chips to Apple’s.
But Gelsinger had so much boasting on Tuesday that he said he believed Intel could win that business back with its new foundry unit.
“We’re also going to chase customers like Apple and say, ‘Boy, you know, is it possible to build and expand your foundry capabilities too? “Said Gelsinger.