Gelsinger Out at Intel, 20 Years of Structural Challenges and Strategic Blindspots, The Board and What’s Next
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Hello and welcome back to another episode of sharp tech. I'm Andrew sharp and on the other line, bent thomson. Then how you do in little .

worried concerned, this is our second take to start start tech. We somehow talked about the weather for two minutes, and IT wasn't even funny. I was very borried like the .

worst cocktail party stating you.

yeah, yeah, that is what IT is.

But look, we're going to spare the audience any weather chatter here. We have a lot to get to, a lot to wrap our arms around with the state of intel once more onto the intel breach. Here are this episode for anyone who missed IT this week, about twenty minutes after monday's podcast publish news broke that pat gelsinger, er intel CEO would be retiring after nearly four years as the o right.

And that would be retiring it's had retired ago trots tive backdated so .

that's how you know the board meant IT. Um there were subsequently reports that he was ousted by the board. He was at intel for about thirty four years overall.

He joined the company when he was eighteen years old in one thousand nine hundred and seventy nine, a pretty incredible run overall. Obviously, the story was a little bit more complicated over the last couple of years. Um one of most successful companies in the world for most of glasses time there.

But he left in twenty in two thousand and nine after being passed over for CEO and then after returning a CEO in twenty twenty one. Intel sales have fAllen by nearly a third and the stock has lost sixty one percent of its value. So you wrote a fantastic overview of interest decline and some of the missed opportunities in the modern era.

I mean, you have a linker. I'm not sure which article that goes to because I feel like article a five or six times two years yeah.

ten years ago you were writing that article and you've just been sort of continuing to beat the drum. You do now get being right points. The decline IT was habiting very slowly and almost imperceptibly if you are looking at the stock Price. And then this past year, it's happened all at once.

Yes, i've been completed about intel, but I think the a it's been right in a sort of academic sense or a podcast sense in a taxman sense. The problem, and this is really the core of the problem for intel, is the core the problem for what happened this week. It's just it's a problem with the intel board where where a lot of this goes back to the fundamental promise that chips take a long time IT.

IT takes the design of a chip is three years. Maybe if you're really fast, the building of a boundary four to five years and the overall sort of road map of what you're doing, doing we're talking sort of decade longtime and the investments that go into sort of new technologies. S IT.

Takes something like E, U, V, the big thing in a factor in intel sort of falling behind the manufacturing. Intel invented the concept of E, U. V. In, I think, the early two thousands or might have been the nineties. So we're talking these huge lead times.

And IT is such a chAllenging portion of the industry because you're making decisions a decade ahead of time that don't hit the financial results for four years and years later. And so the issue with me and analyzing people to make this sort of solbes, I think, you know, serving here is I was in two and thirteen when my first articles on the checker, uh, I wrote that intel needed to change to being a foundry. And and and the reason for this is if you zoom out in the long run of time, you need volume as a foundation like like to make these chips.

The upfront orient d, the upfront. Uh, so there's true factors is up front. R N D, that's similar to say, a software company where that's the actual like talent to create the new design in the concept.

But also what's different things software is you have up front capital costs. You have to actually buy the equipment. And the equipment at this point is on the order of tens of billions of dollars to to sort of this off the ground. And so the issue is if you don't have volume, you're not going to make that up. You you these are costs your spending regardless.

So your profitability over time is a function of how much can you spread those cost over discrete units, all which on an individual basis don't cost anything, cost a few hundred dollars for a wafer, uh, that goes in with things and off of a wafer cups, tens or hundreds of chips. And so like the cost of good sold for actually the base factories, Frank electricity to make this. But the actual I cost of good sold for a chip is miniscule.

All the cost of a chip in its profitability is appreciation and also sort of your amatis R N D. And so so you have to have volume. The reasoning intel was already in trouble in two and thirteen when I wrote that article. And the funny thing is, when I wrote that article, my sense then was that, well, I just started a cheery, so I need to say this, but I might be too late, which was, they missed mobile.

And by, you know, the reasons they missed mobile are there's a lot of the commonly accepted story was won that until tob, which was, and I think, paul, we need to CEO at the time he since passed away, but basically says something lines of, oh, yes, Steve jobs came to us, we thought, be know, making enough money and now turns out of this huge market. Oops, what a shame. I've passed on that.

Sorry, before I tony fadel, who a was you basically the created the ipod and the hardware portion of the iphone. This actually I had of my podcast he gave me is like, no, you don't understand this. We're going to talk about this.

And basically, his stake was no, intel was never competitive. The issue for intel was they were always focused on performance even when they had armed chips they owe, uh uh menti called x scale that made ARM chips. They were all in L S.

Always sort of assumed it's pug in. And and so they've always been focused on performance in the problem with the phone is obviously the most important thing was efficiency and and is like dangerous. Didn't have the view and mindset or product to do that. And so he said that actually Steve jobs desperately wanted to go within l and um you IT was clearly .

going according to .

him and this is all the interview that will link to when the ipad came out. Jobs was actually still on. Okay, let's go.

Let's go with intel for this one. And they had to be like if you put an intel chip in this, we're walking out the door. It's just it's not gonna sort of what's going to work.

And that's our apple and that actually is we drove apple then to acquire P A M I, which is like, okay, where if we want the performance that we want from an email, but we want the efficient of ARM we're going to have to do to ourselves. And and the crazy thing is these discussions were happening like what chip goes in the ipad. The ipad watched twenty ten.

The discussions weren't happening then. They were discussing in two thousand and six to seven before the iphone even launched because this is the time mind you're talking about. And and so this time mind bit sort of really important.

So i'm doing a massive wave here, but I promise to come back to the beginning. okay. So the issue is, uh, intel, mrs.

Mobile ARM becomes the standard and and this was devastating to on a few regards. One is which when you restart a platform, when you start from scratch, all the software locking at intel had deep matter. And you, this is actually where glass are enters the story.

So in til starts out with, this was called a sister architecture. This doesn't really matter, just the way that instructions are sort of ordered. And there was generally their sst versus risk. And the general thought is that risk is just fundamentally more efficient.

But for various reasons, the initial intel l eight zero eight eight processors and that eight zero eight six, which where the eighty six Normal nature comes from, where sic processors and and so the intel made the, I believe IT was they had the eight zero eight six. They had the, I think that was then the two eighty six or three to six. Somewhere along those lines, there was a real movement within intel to say we need to restart this.

We're on we're not on the most efficient path. And pet ginger was the leader of the faction that said, no, what we need to do is actually we now have five, six, seven years of entities building low levels software, assuming x ty six chips. We own the P.

C. market. Yes, in theory, the risk approach is Better than hours, but I will take at least two years to rebuild the sort of software layer on top of that.

So IT will be functional. And in two years, guess what, we will have learned how to make the chips even faster through our manufacturing process. And so pat girl singer was and he ultimately on the day, uh, he he was deep, he actually was the weed designer of the four eighty six.

I mean, he is very technically a capable, but but the big thing was a strategic bit was he won the day by saying IT doesn't matter that were sort of structurally less efficient because of the software mote that we have and we can make up for the lack of efficiency through our superior manufacturing product is over time. And he was one hundred percent correct. IT was absolutely the correct call.

Intel cam to dominate was when the most profit companies in the world masses for years and years and years because they own X, Y six. Now the whole sensor is risking is sort of less important over time, like internally, the way these processors Operate as changed a lot in sort of a transition layer. But it's it's sort of A A less important detail today.

Then IT was then, other than to say gossip was critical in this major strategic inflection point within intel, which where the outcome of the inflection point was that there was no inflection point we're going to keep on the path that we're doing because we have this sort of luck in. So you fast forward to mobile. And so number one, you can see this intel sort of intrinsic dismissal of efficiency is long rooted, right? Econic goes back to that discussion.

Uh, go sing a one. By pushing the we don't have to be the most efficient because we make up for manufacturing. We need to have our software remote r sort of view.

And again, IT was one hundred percent the right thing to do. He was right. If they try to reset to risk, you're resetting the whole ecosystem.

You're giving up your advantage in the pursuit of more elegant solution. That opens the door for other companies to come in and compete with you. And so so he was absolutely the writing to do.

And but you fast forward to to mobile, just intel, structurally and culturally, is a company that's optimized and efficient, is optimized on performance, sorry, and they gain their performance through their manufacturing process. yeah. And so that's everyone. So you you get to mobile and the promote mobile, as I just discussed, is efficiency matters most. So that's number one.

Number two, the key thing that apple did with working microsoft, they were just trying to do a small version of windows on the phone and they have assumed they have sort of a compatibility and the the old VISA support the programs and all those sources of things like there would like microsoft mobile had start. But IT like just IT, was definitely a small for the windows and apple correctly and appropriate realized. No, we need a complete reset.

Yes, we will use the kern nel of macos. But everything in user space, everything that that that sort of matters, is going to be completely rebuilt from the ground up. Guess what, if you are completely rebuilding from the ground up, suddenly, all those little advantages, and if your number one priorities, efficiency, the, the, the gains of staying on X A D six kind of disappear because you're rewriting everything anyway.

And and, and and this was this was such a critical moment for intel. IT wasn't just that they didn't get those sales. It's that mobile inspired a ground up rewrite of all software, right, that actually undid sort of intel's core differentiation and mote uh in their sort of advantage.

And so so you fast forward um and so little has this. Then of course, you have the classic disruption story of arms get Better and faster and there's all this volume behind IT. But so intel had to this big problem in two and thirteen, which was number one, we don't have the volume of mobile. Having volume is critical, especially as every time we a new technology is introduced, like you want to fin fat or you you fast for, you go to E, U, V, you can get so much more expensive. You need volume to do that.

And when you say you need volume, you need volume from third parties, and that's what they could have done had they gone the founder.

And so you see volume period wherever that volume comes from. In a perfect intel world, they have the best performing mobile chips. So I was just buying mobile intel chips like they did for pcs, but that was my point. In twenty thirteen.

had already miss the boat.

There you miss the boat. So you need to get in back on that wave. The only way to get back on that wave is to become a foundry so that what you can do is you can go to an apple and say, look, well played, you got IT arms, the winner we have the best manufacturing what does help you make the fastest possible chips and um they obviously number one did not do that.

And then number two, everyone points, this is the intel as the intel failure. But as we just recorded, actually they were in serious trouble before this happen, which was they got stuck at fo anomie than ten anomie. And and so T S.

Encies surpassed them. The reasons for this are long and complicated. You getting uv to work with a real chAllenge. IT was massively expensive.

Intel felt confident they could use their old dv sort of approach, do this sort of quad patterning, and they could get IT to work. This is sort raving into to the Smith in all seven and two thing. They could make a tension meter ship.

They just couldn't do IT in an economic fashion, which means their yields were too low to spend the amount of money to scale that up. They would have, they wouldn't have been able to make up, make IT up in volume as IT were. And so so um so they get surpassed.

And suddenly that advantage that I was highlighting in two thousand and thirteen, look, you can still partake in the future. You just have to be a manufacturer. You're gonna volume in the long run. This is actually a much rare capability and ship design, because the everything that happened was T, S, M, C came along. And this, that to have a foundry, you are this explosion of fabric chipmakers where they could create their own chips without having to create their own foundry.

And so suddenly until like like the the design bit was less important, that used to be, yes, right? So this is the reality is, is that intel, intel by twenty thirteen was already screwed. Now to take this back where we started in results and stock Price returns in the twenty hands were phenomenal.

And this was this is the chAllenge that I felt as an analyst where I was one hundred percent right. And yet, if you believed me and and shows stocks based on what I wrote, you were getting screwed. If you short IT and tell you're really screwed, but at the metal of you're missing sort of all this sort of upside. And the problem is a in general, i'm sort of skeptical of the um people like to blame the stock market for sort of making short term decisions, but this is an example that is very much in sort of the critics favor of the stock market theoretically is valuing the long run terminal value of the company and all these sorts of things that was not happening with intel because here's the reality by twenty and thirteen when I wrote that article, intel was screw. The extent to which they were screwed was not fully visible into two thousand sixteen and twenty and six past them, but they were already screw and that was not reflecting the stock Price until twenty twenty two or so when patrolling er is suddenly back at you.

right? Well, you talk about time. I mean, pack elsener takes over and now tries to employ the plan that you proposed basically a decade ago, but they're too late. okay. Well.

here's another, here's another bit of of history that is in related. So one of that one of coursing is big projects before he left was called therapy. So I was pretty critical larby. But just sort of explain what a what larby was basically an invidia competitor, uh, where IT was A A, what's the word G P?

G P U, R G C was a general computing, and G P U, G C, G P, U, where basically a invidia started by making chips that were just for 3d graphics。 But then they realized, well, there's actually completely different kind of computing you can do on gp. Use this measly, paralyzed computer.

And intel started out there be a sort of a graphic Better, but they sort of provided to, and this is just gonna a parallel compute architecture. And there be, as you would expect from someone that was, uh, that was LED by pat gelsinger, was x ty six bed. So all these little cores on there were x ty six cores.

And so on one hand, you could like that's what intel did, is what pack causing you did in particular. No, that was more married to x ty six than he was. On the other hand, I got you can see that could potentially have real gains in terms of program mably.

And like there's like just understand how IT works. Maybe was the wrong approach, like interest trying to shoe horn X, Y six and to literally everything they want, mobility, X, Y six, they wanted you know all these best in pieces. So there's a lot, like I generally thought, whereby was a over, you know, a little too.

The sixty six focus didn't necessarily make sense. But in broad strokes, in sort of the grand scheme of things, IT was in line with the future, which is this paralyzed sort of capability, and that in video, was a long term threat in terms of taking over processing workloads. So pat nosing her a leaves in two thousand and nine goes emc, the vm, where CEO, and year later, or six months later, where be killed.

And, you know, again, political infighting, whatever IT is again, some people don't just think IT never would have worked. I weren't I hear to sort of what like where be other than to note that intel also is suddenly sort of is nowhere in terms of the future of computing, which is AI. And this again speaks to the time skills like there is I just read the in video away my interviews to take him the author of IT a and shakeri which you we come about today as well and he recounts this meeting in two thousand and thirteen with with uh Johnson wang, where he's all in a panic because this A I sort of approach is were a little late to this.

All hands on deck were resetting. Things were moving forward. And the video is actually already very well placed. They just in general, the idea of shatters this paralized platform.

They'd already invented kuta back in two thousand and six, which, by the way, in video was murdered in the stock market for doing like they were spending all this money. They were spending money on good a two. Number one, the R N D cos were astronomical.

So they were a to build this out. They're basically build out an entirely new platform, an Operating system. And all these sorts of things are not Operating system, but that sort of platform. In the number two, they were putting CUDA dedicated cores onto their chips. So onto the chips.

It's it's it's dice space is like it's actually a cost because either number one, you're making your chips less performance because you're taking up space to put on these other cores that aren't useful for games or you're making your die bigger, which means your yields gna be worse because likelihood there's a defect on the chip goes up. The larger of the chip is and so IT was hurting their margins. IT was hurting or their cash flow, and wall street was killing them for that.

They had an activist in western board who was like a very upset about this. And then you have to do this. And and yet you look back this period.

Two thousand six hundred thirteen is the foundation of everything that happened to in video over the last four to five years. Like this is how IT works in semicon. On doctors, the three times are even longer than you think.

And at that time, in video was making the right investments, and intel was killing them and killing the, the, the appropriate investments are on their side. And in the whole point of all this is, this is the period, this history that i'm talking about that seems ancient. This is why in tells stock is in the dumper.

This is why the results are down. They lost the x ty six advantage because of mobile. Mobile starts this rebuild of low level software you fast forward. And not only IT is ARM progressed extremely rapidly, but also when the au s comes on, as we should put ARM in our servers, there is already a ton of low level software written ford who's already develop for mobile.

And so they, like the just ARM, becomes dramatically more capable when the big things that weren't host, the current CEO of ARM, has done 啊， in part of tone, if I join the board board a few years ago, but is sort of ARM have this poverty mindset, which is, oh, we are just like the chip that's used for, like your power windows in your car, and we can't sort raise the Price too much because, you know, someone else going to come on disruptive. What he realized is actually, the whole mobile revolution has built up a software mode around ARM that is just as good as the x eighty six one used to have. So guess what we can do? We can jack up Prices, we can force you to these new contracts.

And that's why, like the arms sort like I got the r IP wrong in part because I was I was little too angered on the just crappy business generally and sort of historical returns. And what what hospital right is actually know we have a lot of capacity to jack up Price because everyone is stuck with us, just like pack kelling to realized I always stuck with sixty six back back in the nineties and and all that downstream down stream from mobile. And so now you have ARM in the data center that is infringing ing an intel and and A M D.

Both you have AMD with, Frankly, Better architecture and also on T S. M, C, Better process. That is that is pressuring intel.

All this pre is before happened in the period was. So what happened when I was there? Again, the misery mobile, he was there.

But all this intervening period IT all happened then. And so there's a lot of mistakes that got in a may. We should get you in a moment. But the key thing is that all the problems into has go back years and years and years, right?

gulling. Your failure was a failure to stop a spy role that he didn't necessarily start although IT is interesting that some of his decisions were part of the failure .

to okay so let's get to what what is point so um you go back to um you go back to write before or right around when he took over, I wrote an article saying that until needs to split up and the reason is that a look, the design business over time like intel, owns markets like on premise and government and they do very well in pcs.

They do have a lot of surrounding technology and also like an amazon or A A meta or microsoft is going to do the work to get AMD at par. If you're a sort like you've been building on the intel forever, like a government agency, you're not going to buy anything else. It's just like so that they have like they have good safe markets, like it's not growing, but you can bring a lot of money out of IT sort of overtime and that sort of like you become just fab less business.

You become like you become like AMD and then you have this foundry bit, which kind of is behind IT doesn't have reason to exist outside a sort of national security concerns, to be totally Frank, like there is just no economic reason tmc is ahead. They have scale. They're structurally Better because they don't compete with their customers. And you you really and so so before .

we get to kells's plan, that was one of my questions is like and we're now twenty five minutes in a great overview of intel history and where IT all went wrong. But why is intel l in today? Is l in today? They don't make the best chips anymore.

They don't have the best manufacturing. And you know what used to be a central role in the story of american technology now looks more peripheral or ceremonial. So like is that an unfair assessment of where intel stands in twenty twenty four.

economically speaking? No um there is no reason for any company to uh work with and when they can work with T S M C antis N C is kind of going for the kill like there. They're building a ton of two animal capacity. They built a ton of three capacity.

They're not giving space to intel um which is I mean good to them from a business perspective, but that that is one of the many problems sort intel faces and then yeah x eighty six I mean yes, there are nine cities and advantages that come with intel chips um as supposed to AMD like and there's things like firewire and and some of the very standards that they're involved in on a firewall thunderbird. But so there's there's things that um but by a large no there no there's not really reason for them to exist. There is a long run, I think, whether critiques of T, S, M, C is they did bring U V to market in the history of micon doctors every few years.

There's some sort of transformative new technology that has to come to keep more as law going on. And and the thing about more is law is not an inevitability. It's a choice.

You choose to figure out what's a we hit a all here, what something else we can innovate on sort of figure for. The people are locked under theocratic because most people never knew what a chip was until three years ago. At that time, photography mattered.

Method phy was just the current one before that, before dog free, I was thin, fat so fine. Fat was, uh, changing. Basically making, uh, transistors 3d instead of two d and up of extremely difficult， costly change.

That was pioneer by intel. EV was pioneer by intel. Backside power, which is A A new shift going forward, was pioneer by intel. The reality is, is that intel, for all their flaws, has been the driving force between more law.

They are the company that just as release ously, not just push forward their chips, but has been investing in thinking about long term technologies to the extent where T. S. M. C. Is, has just been copying what intel did for almost its entire existence OK.

So does that culture still exists? You wrote on tuesday that they spent a decade thrown spaghetti the wall. Uh, I culturally can make that .

was a product perspective from the X A. Like what's happening? Like so gay all around is is a new transistor of type and backside power that that is doing stream from intel.

Like like, I think there's a legitimate questions and concerns. Is T S M C? Yes, again, the U V was great, but again, that was ultimately an intel invention. And A S M L play a big role that and for various reasons, intellect.

But is T S M C culturally capable and willing to push through more slot due to keep IT going? Um can they be the stand bears for IT? I certainly hope so, but I would say that remains to be seen.

Is that a chAllenge that all of these companies face? I mean, it's similar to intel where they had really successful business lines to thirteen years ago and didn't want to disrupt that.

Here's the cornel problem. This is goes back to my my general view on life and people in general, like when I give career advice, whenever might be, which is you have to understand two things. Number one, your strength are your weaknesses.

There are two sides of the same point. Number two, you should focus your career on actuating your strength. And doing the bare minimum necessary to emulate your weaknesses like that is how you get.

And so many people, they get so frustrated with their weaknesses, to see the weaknesses, and others without appreciating that is part in parcel of the strength. And they want a world of no trade office, where you just got all the best thing of everything. But then over two, they spend way too much time, sort of a million weaknesses.

And the reality is, is intel is, if they were a person, it's the coccus son of a bit you ve ever seen. They think they are the best in the world. They think they can defy physics.

They can defy the limitations of of materials, of light, of quantum mechanics, right? And you know what, for fifty years, that's exactly what they did. And the problem is that the sort of entity that does that and is capable of that is really horrific to work with.

Everyone hates intel in tech. Everyone hates them. They treated everyone my crap. They screw you over. They they like, if you try to work with them, there's still, still your attack.

And just the whole way the processing and work was their manufacturing with such king of the world, they would like, tell the design what to do. You need to adjust to figure out, to work with us. Xyz, all of this is the exact opposite of our T S M C works.

T S, M C is there to serve you. They're going to help you out. They're going to get out to a great customer service and all the pieces you need, they're gonna adjust like try to figure or can we adjust our process to get this to work for you, all these sorts of things.

And I think and so so the problem with intel becoming a boundary is they ended up in a situation where their success depended on getting really good at the exact stuff that they were Better. And that's just that's just a tough place for, uh, a person to be, and it's a tough place for a company to be. And on the web side, the worry I have about T S, M C in the long run is they are too good at customer service. And do they have the arrogance and the annoyance ss, to work with to force the industry .

forward by short?

That's right. Like and so the problem, the point I came to a couple of month ago and and I was so nasty in this article, I felt asty afterward. I still felt asty today. I like, um is that this cultural problem can be overcome. I just don't see how intel ever acquires a meaningful customer base outside a national security incident.

And that's the answer to why is IT until important today is a national security concern going forward is the way the american government is friend.

And yeah the U. S. Is like talk before like like trump has accused to one you know being like the office up over chips. And the reason why a number one that's correct because number two is so um we are the Better at tawana uh wan um does not properly invest in my estimation um in multiple facts in its own sort of defence because IT just assumes the us will save them because the us no choice ah and so everyone's right people again, it's all types apple people can really mad at trump for say something that's like just what our percent true because the way he said .

is well in time and they are also correct that we have no Better option but that.

uh so so the thing I can going back to is like intel is never gonna x this cultural problem. I think that's a reason they don't have any customers. No one trust them.

No one things to do in now. Those going to really trust them, right? You, especially after they just nee APP, the guy that was building up this whole thing.

And so you should go back to his plan. His plan, he comes back to tell and he's like, yeah, we're going to become a founders y we're not onna split. We're all in.

And there's a lot of logic to that. If you're gonna build a boundaries and you want to get customers, but you have you need scale. And intel has its own scale. They sell a lot of chips. And so they were through their first best customer. The concern along is, if you don't truly split intel, can you actually have a customer centric foundry? And I think that was the sort the concern of lots of folks at the same time, by all accounts, got you did a really good job fixing their technical processes like they're coming out eighteen next year.

Now it's still tb d how well is going to scale? They have their own internal twenty eight uh or do they step twenty eight like l three there? The cost their margins were horrible as cord because they cost out out of control and they tried to scale up.

This is the big problem with the whole five notes in four years. There is a lot of learnings and tacit knowledge that comes from not just inventing a process but scaling a process. And and it's it's T B D if intel can scale ata in sort of a meaningful way.

But A A is a is a big tactical achievement. It's new transistors get all on transistors and it's a new it's backside power where IT used to be uh the transistor level and then you'd have uh these all these communication. Why are you have power on top? And the promise these wires are going dinner and dinner, you would have this real problem of like interference, like trying to send power on these big thick cables and all these communications cables around IT.

Now you're putting power on the bottom, transitions in the middle, in the communication layers on top, which is much more elegant. You know, the interference problem is also much more chAllenging, because your, your, in your process, your lying down all those power layers before you do the transistor layer, which is the most fragile, which means if you screw up on the transition layer, you're throwing away a lot more work than you were sort previously. That's why transistors run the bottom first, you do the harness first.

Um because if you screw up then you are sort of last process time. Um so we don't know if it's going to scale, but IT is a technical achievement. IT is the sort of achievement that is helping push the industry forward, which is what intel does.

And my view is, look, at the end of the day, there is not an economic reason for the intel foundry to exist. To the extent we want IT to exist, the U. S.

Government needs to pay for IT. If the U. S. Government going to pay for IT, IT needs to be to be viable in the longer that needs to be separate from intel.

A standalone an energy yeah because the third party customers, we've talked about this in the past, but the third parties that would potentially be working with intel are taking a risk on a process of manufacturing process that may not be as reliable as tmc. IT may be more affordable in the short term.

but like also if IT work, it's does we take the process to lead.

by the way, well. But the other concern for third party customers is that if intel is also serving itself with that foundry, then intel is gonna get the priority going forward. And so IT makes more to sort of severe the connection. Uh, if you're trying to market as a service business to third parties, is that right? And I remembering what is conversations correctly.

I think that's correct. And you also can't overstate the extent to which everyone hates and tell it's a very real and true thing that I think is underrated by. And this is one where the .

analyst there's .

a lot of angles that got mad about my article. And I think that and I think they had all intel actual reasons that we're correct. I think this is one area where I was influenced by being in taiwan.

And in taiwan, I I know lots of people that working lots suppliers and lots of various I do say my chips and you just can't escape that sentiment like there is a sets where you have people on an intellectually level what tells you to succeed. They understand what was important and they're also just delighting in their downfall because they fuck excuse, because they hate those guys, right? Like, yeah and yeah. So to your point, the other bit about is if you go with intel for a major chip order, uh teasin cy yi to watch you back in like you're back of the line and and guess what, you can afford to be back of the line today with smm .

very competitive line with T S M C these days.

Yes, that's right. That's right. And tmc was, well, I think this be hard ball in their own right, be very hard about and this are play play hard ball. And so yeah, you're just sort of stuck in this limbo. And I do think that so that we can do all sort of pass for, but that was the situation. And so I do I do think there's a bit where, if only, again, girl's overall view of the world may have been incorrect with a view the world that would to l missing mobile.

And so in where we .

are not sure was the right of IT was in broad strokes in the right area. Not sure what is the right approach.

But if intel would have embarked on this manufacturing shift in twenty twelve thousand and thirteen, when I was out to wrote about IT, not only would they be partaking in the volume of mobile, they'd also be protesting the volume of A I like that's how you like and this is my point the way like if you're a founders, you going to take part everything and uh which is not just a good thing, is also a necessary thing because you sort of need the volume. And so I think gassing er's plan was the right one a decade ago. If intel had done that and embarked on this, they would be in great shape right now. The problem is that is by the time you fast for a decade, is IT do able inviable or is IT sort of gone to foreign? So this way of a real on one thing.

there's a real symmetry. Both you guys were dead on but off by ten years.

So it's great. Yeah, I think and on this way, like I gave him a lot of rope because I think it's a necessary now big mistakes he made. If you are embarking on this, you have to realize every dollar of cashes critical he needed to kill the dividend they want.

They're spent billions and dividend s you a CEO ah they needed to lay off a lot of people on day one. You needed to realize you're going to have a massive cash crunch to pulled this off. And I think there's a bit where IT again, is that his fault? Is that the boards fault? Uh, the reality is intel board is an absolute disasters when the worst boards in the history of technology theyve been a problem for years and years theyve higher.

The wrong CEO again and again and again, they're been focused on short term outcomes again and again and again. This divide has been their number one priority again and again and again. And the reality is they were a decade behind doing what they needed to do.

They were fifteen years behind having missed mobile and does fundamentally change you the launch trajectory. And this piece of crap board has not recognized or realized a single thing. And if you are going to bring pack out here back in twenty twenty one, he says this is the plan and you say you support him, then it's like, wow, you actually are putting your read on the line because this might not work.

It's super aggressive. It's going to be really hard. But hey, if you're all in, you're all in and then to turn around three years later and fire the guy because of results that are downstream from your lack of governance is disgusting.

Every single person on that board is disgusting and should be ashamed of themselves. And yet they seem to have no, no awareness. This is the issue.

You can go back and say, actually, gassing was the wrong guy for the job because intel was already dead and they should have embraced that and they should have split the company and had this pathetic x eighty six design team that can mol long and make their little chips for PC and government entities and get someone to take on the founders y and try to build something Better. That won't been a legitimate outcome. That's exactly what I prescribed when gasser took over.

But if you're gonna a commit to this guy, if you're going to go down this direction and then give up after three years, you have no right to be anywhere near the board room of a chip manufacturer and uh uh a uh uh business that requires decision making in decades. These guys can't look back a single courter. It's disgusting.

Wow, a lot of heat there. I love IT. So we should also note another a mistake that glass or mid is he did not lay off enough people because no.

I didn't mention that. But in the question like I also feel sympathetic for him like the one thing that really screwed intel was coded. And the reason is screwed tells because they had phenomenal results that were undeserved.

And and when you're getting phenomenal results, your stock Prices back up, it's hard to lay off a bunch of people. It's hard to kill your dividend. And so i'm actually i'm even those critiques, i'm fairly sympathetic tic to him.

Where i'm less sympathetic is tell you you to take this job and to try this, you have to be a really optimistic guy. And again and again, intels forecasts were too optimistic. I think there was a real CFO fAiling as well.

Gassing they're needed. Someone in there who was just the biggest wet blanket of all time that was like like that, that we've seen. I mean.

I came away from the gelsinger interview on the text ary a couple years ago rooting for him and also feeling like maybe this can work because there was just a lot of positive energy and sometimes that's that's what's required.

exactly. Intel needed that internally, but they needed a CFO that was going to make sure they didn't over forecast. And then this projections and all these sorts of things.

And and again, could he have realistically push through a cut to the divide and a cotton workforce during covert when the the results are great? Probably not. That doesn't change the fact that was still a mistake like that should have happened sooner.

But glaser was clear that I asked the first question I i've interview twice. The first time I interview is the first question I asked was about this split or whatever. And his answer was, if you want to split, I was the wrong guy for the job.

The board agreed with me. There are behind me is what we're going to do. Well, guest are not agreeing behind you anymore this idea that you're going to execute this plan and see results in three years.

it's infantile again.

You can go back and say, OK, pat, you're not the right for the job. We're not onna hire you. We're not sure we can do okay.

That's a mature board management to hire the guy and say you behind him and the fire after three years, it's disgusting. I there's very few episodes and technology that may be more disgusted than this one even as the board might be correct. IT might be the wrong plan, but IT doesn't matter. You don't sign up for IT and go for IT and give up for three years when you the idiots that .

didn't see this coming a decade ago there ago um IT sounds like the arrogance at intel has actually yield in real benefits over the course of the last technical .

just gone there people and like I like they now again, I don't want i'm not necessarily going to the map four pack singer, I think the plan might have been in a bad one. There's you know he's also a bioactive ts are pretty arrogant die that seeks he's always right about everything. I think he made a lot of really critical mistakes and regularly like was Carrying too much inventory.

They didn't understand consumer trends. Uh, they had some real misses in terms of products. Their margins exploded out of control last quarter because they they are scaling issues and things like that, which they did forecasting in the streets was a total surprise.

That's what sort of triggered all this sort sort of right now. He's made some real fundamental manage is interesting. And criticizing these work for all being finance folks .

galls y is screw .

up a lot of finances, a couple finance exactly. But again, just it's the broader it's the broader trend of intel having its eyes closed as they wandered into this ditch well and it's also .

IT is completely incoherent to bring gulling your back in twenty twenty one and commit to this path. And now a couple years later, say, my god, look at the stock Price. Someone needs to take responsibility for this, and we need to go a different direction.

I hear what you're saying. I love the energy out of you. You said you got a good nights sleep for the first time in a week.

It's coming back to thai AI. I can feel IT here on the podcast. We've got too long though without talking about what's next. So there's an email we got from shan and um I actually had a similar question reading your daily update earlier this week.

So shann says, hey, guys, in tuesday's daily update, ben noted that the chip sack grants intel seven point nine billion dollars for investment into american fabs, but requires intel to own at least fifty point one percent of intel foundry. Then then concluded in his update, the until board has called feet about intel foundry efforts, and this provision forced their hand. The best way to quote, put our product group at the center of all we do, which is a quote from intel, is to preserve the ability to separate IT from the foundry business and potentially go fabulous, just as AMD did fifteen years ago.

That option, however, is about to be foreclosed. So and john question is, is been implying that intel's board is now on a path to, one, selling intel foundry off and two returning the about eight billion dollars back to the department of commerce. This seems ludar ous to me for a company that lost over sixteen billion dollars last quarter, driven by the foundry investment.

Or he asks, is the case that glasser wanted to take the money to go all in and bet the company on foundry? But the board said, maybe we just take the chips, money. Half asked this boundary thing, go fabulous and contract everything to T, S, M, C.

Then asked the government for more money when the fb stuff fails. Do you have thoughts on that question? Because I wasn't sure what exactly you meant in terms of the board getting cold feet and the the path that they've chosen to go down at this point.

So at the end of the day, is all about cash for and until. Is the reason why all the panic is about intel that a potential cash ful problem? They have, like twenty five billion dollars on hand or something like that, but they also like six billion dollars to five quarters. So and if this isn't about profits, because the profits for S. M, I conductor company are very divorce from the actual reality, because, again, there is cash out the door to buy this equipment that only shows up in the earnings as appreciation over a number of years.

And and like when you're building like a shell, that shell might be on a thirty year appreciation schedule, the equipment might be out of five year depression because what I think is what is usually is, but the point is, is not actually hitting the numbers until you're actually you know producing the sort of stuff, but the money is going out the door. And so there's a bit where intel could take the world's largest loss of all time by simply stopped buying stuff and writing down all the stuff they've bought. But that doesn't look like they would report like tens or hundreds of billions S A dollar laws.

But that doesn't IT actually improves our cash hole position because or not sending money out the door more, right, like their their successful chip in the market right now, lunar lake is made by T S M C like tmc, this playing the money there. And so there is a bit where like sorry, Shawn, it's not luter, Chris, like it's a cash flow issue. They can stop buying stuff and fix their cash flow sort of issues be again a massive of accounting loss, but from a cash ful was a position.

So the issue with the chips that grant is again, but it's not very much money. It's only billion dollars, really watch money, not much money. This is just an aid help. It's not even mote these million. It's not gonna really help.

I was gonna pay for IT and IT comes with the tie that 有 or locked in to the foundry business because guess what you can't do， you can't sell IT off for pieces right now. Intel could sell. They have all this equipment, right? Uh, so this could be a book for.

They bought high N U V machines from S M L, which is like to get to like one anoma tre and beyond. H T S M C I think is thought like one for A S L, is driving S M crazy. They keep play on the earning calls.

Tcc like we don't need to yet again. Number one, tcc being conservative. Number two, um the hold out, there's no rush.

You know this. Why would people say why is the S M L tic of the profits in the industry? Because they have one buyer. That's what like there get advice or of the overall thing. And and so maybe will be like IT, we're sell off our high and a machine will just on to tmc, right?

Because where words closing down thought like they can get some of this money back, they can sell the pieces they can like into by the ways with selling a total stuff, the chinese over the, I think of everything, all the old stuff, anything that moves intel in self for a while? No, they they you talk to people in the spy chain. It's been a big thing. Oh, all this into equipment, intel equipment. That is just sort of being thought of 批 a legal .

national champion here。 No.

everybody where they're the national current chapon and they are just selling a quick .

and left right need cash.

So I know what of IT happening.

Would they actually give the a billion dollars back in that scenario?

Well, I was reading through the until the disclosure and basically all the penalties are like you have to get the money back. There was one which is and other things that are available to department commerce.

It's not like basically, this is my view of what happened and this is influence by the suddenness of this decision and why over things giving weekend and he's retroactively retired to a day before taking this money and spending this money is an aspect of we are truly committed to the im two point of the pack telling your vision yeah and I think the board has had called feet about IT for a while and this was a forcing function where were truly locked in. And I think that they got very, this is peer speculation, to be clear. My sense is like said, they ve got called feet, and I go, we need to preserve our options.

X, Y, Z. And I think pack is, like you said, you support me on this, we're going down this road and they're like, uh, and he's like, if you don't let on this, I am out and they're like, so we put the retirement for yesterday. That's my that's my I think just the circumstances around IT.

That's my view on what happened. By all accounts, the board was pretty blind, incited by this. They have no one in place, is no success in plan.

Glasses like not staying on as a console is not chaman or whatever you like that i'm i'm done. And by the way, I think it's completely justified. He came back on the point that they were going to support him in doing this.

And I think the wait, the abbot ness of this, the ugly ss of IT, I would bet more details come out, speaks to the fact that he felt stabbed in the back by that. Now, again, big picture. This might be the worst person the world was right scenario, where the part that right is the right way to go.

But that's my view on probably what happened is this was a forcing function. Now again, I think here's a life advice for you. I think people do.

There's a bit with false, where people get so obsessed with the voting false, they actually make bad decisions. And I always talk about old confirmation bias. I want to be very careful of that is the way that I write.

And then I wrote an article because I was like looking for this confirming evidence that showed that I was wrong. I thought I found some. So I wrote the article and I was totally wrong because I actually had was right along.

I I got so obsessed with a militating, my weakness in that regard that I would like just wrote the wrong thing. And I think there's a bit with some cost fsi where it's a bit where everyone's where if some coffy y don't be overly your decisions by what you've already spent money on or what you've already done. I think there's an inverse of that where you are made decisions like IT is what IT is your.

At the position you are in life. You're at the position where you are as a company. There's so much to go back with intel and change. You don't get to make decisions as if IT stays zero. And I I think this is maybe a case like I wrote the intel sweet thing in twenty twenty or twenty twenty one, that was the time to realize we're not going to go on this road. But once you commit, commit and they didn't commit and that's why I have such scorn for them for the board and and so yeah no, that's my this specter to point out point .

room um it's wonderful. Well, so what the intel board is disgusting.

It's been disgusting for twenty years. Like that's the thing. If this isn't a one time thing, this is an entity that is prioritized financial engineering and financial results for twenty years and intel lls disaster is twenty years in the making.

I mean, that's a thing like looking IT from a far it's like half a blockbuster story where there is some to some degree, there's just like natural disruption that happened as the paradise have shifted and chip making has become more modular and the trajectory makes sense to me. And then there's also this sort of bowing angle to everything where it's a boy.

sorry, i'm pretty object of blockbusters. There are there are bricks and motor retailer. Why do we expect them to figure .

out streaming?

No, I don't have any feathers. They in boys, they are. They were pursuing financial results.

They drove out longer engineers. They move manufacturing out the northwest because they want to deal the union. They move their headquarters.

This is, don't give me start growing in intel, really, r tubes in a pod. There are two entities. Airliners are another industry that requires decades out sort of investment. This idea, what's going to another seven, thirty seven, even though he was clear than sixties, is too low to the ground.

Because because of you wasn't even conceive a modern jet ways, are they on those lines instead doing a clean sheet design because IT cost too much? Or we're going to outsource the entire production to seventy seven doctors out to make IT first because we're trying to be cheap that there two peas in a pod. Their long term companies that depend on long term thinkers at the top that prioritized and got obsessed short term financial results total, they are very much to vers the same story.

yes. okay. I don't want to argue too much on intel behalf, but where i'm coming from with the sympathy is you .

look back .

missing to call.

you univer know.

You look back on why they miss mobile. Well, they were really good at making chips for the things that they did well at that point. And you talk about some of gossipers decision making that was rational until IT wasn't in terms of some of the sort of warrants that he signed for them. And like I understand how that could happen to a company that was already really successful, unless i'm misunderstanding the history that we went through at the beginning of the episode, some of those decisions were good.

I completely agree. I think you're talking right. I actually i'm more sympathetic intel missing mobile than a lot of people for the exact reasons that you said they miss mobile for the same reason.

Microsoft, which like in the grand scheme of things like I like an objective basis, it's bad. On the other hand, this is what happens, your focus, optimize. That's right. That's right, I think. But that's why what microsoft did and I took a while to get there.

But what they ultimately deal of missing mobile and why I was so critical, see, bomber, was he was, he couldn't let go of the paradigm, he couldn't let go of windows. And what much do as they let go. And they realized, okay, given the fact that we lost mobile, how can we participate in the future growth of this industry? And that was through azure and the cloud, and that prepared them for the A I.

Wave to come along. They were already ready for IT intel in to that. The the answer in in, by the way, the cloud are much lower margin business than windows.

They could step down to that because IT offered opportunities for growth and participating in the food future of technology. Microsoft pulled off what intel did not IT was under your totally right. IT was understandable that intel, mister mobile.

But what they didn't do is they didn't pave IT to leverage their strength to participate in the future. Even if IT was lower margin, they couldn't do IT, the board could not do IT. And and they was fine for a while because the cloud was intel sold all those processors in the cloud.

The cloud went hand in hand with mobile, but in the long run, they are not a part of a eye because they weren't investing like in video was twenty years ago, the way to be a part of A I to be a foundry making a video chips. The way to be a foundry making video chips is to have pivoted to be a foundry making mobile chips in in twenty ten. And um and that is the great by friction of these two companies that were that came up together.

okay. So i'm going to make you chairman of the board for intel right now as they searched for a CEO. How would you define success for intel in five years like if your chairmen in the board was the star that they should be okay?

It's over where for all glassing ers flaws, you're not gonna anyone of his level and capability ah who's going to take this job number one, no one's gona trust them ever. Like why would you imagine anyone that that had signed up but if the apple signed up the interest you I get theoretically ally, he wouldn't pushed out of that would happened. But regardless um at the the path is to figure out a way to spend out.

So what should have spend out the other days become a amy? They become famous business. They make their chips on T, S, M, C.

whatever. The real question is more A U S. Government question. What you do about if you want A U S.

Fab follow up.

I think the us. Government was going to need to fund this. And I think there's a bit where, of course, i'm generally anti like the socialization of an industry. Whatever you just got to take IT over, it's got to be built.

And I think the way you get volume is a there was this sort of there was like a progressive al report a few weeks go out a manhattan ject for ai. Um okay, let's do that. Let's do all up.

We're going to build our own A I systems. We're going to doing that. Designers on chips were going to make our own chips and figure out what that looks like, what IT is like.

And and I think there's a bit where we talk about on the trade stuff. You want to bring manufacturing back. How do you do that competitively? Well, you integrate because U.

S. Has differentiation in software. And so you leverage that to overcome the higher cost of doing something domestically.

There is extended with tesla sort of as and pulled this off to a certain bit. And is there a route of the U. S.

Building out its massive AI capability and actually integrating all IT down to the chip level and making sure that all the key pieces are domestic? I think, I think you go more all in as the us. You take up the fabs, you say the volumes are going to come from us.

We're building R A. I. systems. We're going to build these hundreds of thousands million dollar ship customers. So we are going to be the biggest customer.

And over time, IT pushes through and becomes successful and can bring on third parties because it's proved itself and maybe can be spin out to a private company. Again, again, this all sort of makes my skin call. But I think gift, like the reality is, is, and this was pack, there was a gift to the U.

S. government. Because I do think there was a bit, and this came across interviews like just being fairly like IT was strategi C2Be pat riotic bec ause tha t the y nee ded gov ernment hel p.

But I also think he was patriotic and doing I D M two point o in defiance of intel's reality because the U S. Needs its own boundaries. That was a great gift to U.

S. Federal government. They they wanted that. And the reality is, is there's a bit where the incentives are just always a little bit off IT never made economic sense if the U.

S. Whats this, they need to pay for IT and they can't need to own IT. And and I think that's the answer to the fb business. interesting.

And that is you can kind of get up for free like if the intel didn't have the fat business and just started making other ships at T S. M. C, there will immediately be a very profile company, right?

They're not gonna fight. So the losses are all derived from the foundry business that is currently foundering.

IT would be really hard to spend this out and think out a way to do IT effectively. It's not AMD struggled for years and years and years after doing this. I'm not trying to say it's easy. I am saying the court until design business has a functional market, IT has products and IT IT. They can make ships at tsc and make money.

Okay, good 开始。 A couple minutes ago, I thought we were just hanging up the intel shingle for good after an illustrious fifty year run. But there's a version of the .

that intel well and in .

terms of funding the sort of project that you're spit bowling here, there would need to be just wait more money than the chips act as currently allocated to these companies.

Is I think you think that by saying like this is a national security concern we're allocating.

we actually project in twenty twenty four. okay. Yeah um well, uh a lot of ground covered here and i'm sure there will be more to cover next week. We got an email about bob noise that i'm rolling over to the male bag. I'm excited. Hit that and who knows what else will get into? Maybe we'll talk more about the manhattan project that mayor may not ever get off the ground here but then great energy across the board here um any final thoughts before we sign off the weekend?

Now he said it's kind of obama but and I do wonder I provide like I said, I I wasn't this thing. I wasn't fully on board with with the girl plan, but I wanted, yeah I wanted succeed. And if like a cent from the board perspective, if you're going to say you support you gotto support IT.

And it's a weird thing where they may be doing the right thing. And yet in a way that only just increases my disdain for demand. Their performance over the last fifteen years.

absolutely. Boeing, for the last twenty years, boeing, without the regulatory capture, seems to be the Cliff notes version of the entire story.

Yeah, work buying with network effects.

yeah. Well, on. Fortunately, they're all we got so maybe we can fold the intel foundry into the future here um for now and this was delightful and I will talk to you on monday for another monday mail bag.

People can continue to send questions, email at sharp tech dot F M. And until then, I hope you have a great couple of days. I'll talk to you soon.

Thank you later.