Intel Outside, Looking In

Why Intel CEO is betting so much on chip manufacturing | Pat Gelsinger interview
Intel CEO Pat Gelsinger today launched Intel Foundry as a sustainable systems foundry business designed for the AI era.

This interview was conducted ahead of Intel's first foundry event, so Gelsinger doesn't specifically name some of the big partners – notably, Microsoft,1 which is huge and makes sense – he was saving for the on-stage reveal. Still, there are a lot of compelling answers in this Q&A. A lot of the talking points are around "insourcing" chip production, and Intel's reorientation around producing chips for others, as well as their own:

I’ve committed the Intel strategy to this. Before, as I call it, it was a sort of hobby on the side. Now I’ve centered the Intel strategy. I’m restructuring the company with this in mind. We are rebuilding and we’ll be presenting, in the next quarterly earnings call, the first ever unique financials. We’re running technology, manufacturing, and foundry as a P&L. I’ve fundamentally changed the operations of the company to make this not a hobby, but the center of how we run our operations. I’ve centered our strategy on it. I’m rebuilding the company to do this.

We’re already way beyond in terms of the revenues that we’re seeing, the bookings that we’re already committed to. We’re already far more progressed than we ever were before. Early on I think people might have had that skepticism. Now look at what we’re doing, the revenues we’re committing to. We’ve talked about lifetime deal value. We’ve already gone way past some of those early projects in the developer of the strategy and the execution.

I actually like his ownership here. And it's starting to feel like it's working – after an obvious lull where it didn't appear to be working (at least for shareholders) as Gelsinger implemented this strategy. But it's also just great timing, from a macro-perspective. Given the geopolitical environment, the US government is pumping so much money towards Intel (and others, but Intel is the clear winner here) which is allowing Gelsinger to play catch-up, quickly.2

There's been a lot of talk about how the combination of ARM, TSMC, Samsung, Apple,3 and others have lapped (or "murdered" if you prefer 😆) Intel over the years – even AMD's market cap is $100B more than Intel's now! But the truly wild stat is that Intel's market cap is now 1/10th that of NVIDIA.

On September 1, 2000, Intel's market cap was around $170B. Roughly the same as their market cap today, 24 years later. NVIDIA's market cap on that date in 2000 – one year after they had gone public – was $2.4B. Today, when their stock opens after another blistering earnings report, NVIDIA's market cap will be nearly $2T. Yes, trillion.

Sure, NVIDIA largely went down the GPU path while Intel largely stuck to the CPU path, but that wasn't for a lack of trying to break into each other's markets. And now, as chip companies are arguably more important than they have ever been, this discrepancy between the two companies is just crazy.

But again, it feels like Gelsinger is starting to right the ship – I was skeptical, but hopeful when he was put in place 3 years ago. He just needs more time, and the CHIPS act buys (quite literally) him exactly that.

As an aside, in my initial thoughts on Apple's M1 chip nearly three and a half years ago, I closed with the following:

And Intel should be… hoping Microsoft calls.

Well, they called. Fun to think that Microsoft may help buoy the comeback effort by a struggling former partner and tech powerhouse, just as they once did.

1 "Wintel" is back, baby! Well, minus the "Win" part...

2 Questions, of course, remain if Intel can walk and chew gum at the same time -- make their own chips, while reliably focusing on making others' chips as well.

3 "I couldn't see it."