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Speaker 1: Now.

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Speaker 2: Intel was once a high flying market darling back in

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Speaker 2: the day, and it used to dominate the computer chip

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Speaker 2: industry and so on with more than eighty percent share

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Speaker 2: market and PCs and servers. But that's all changed now

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Speaker 2: and the company's now on its knees and at risk

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Speaker 2: of being acquired on the cheap by rivals. To took

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Speaker 2: us through what's going on here is Fisher Fund, Sam Dickey?

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Speaker 1: Hey, Sam, here, that good evening.

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Speaker 2: Take us back to the start, Sam. How did Intel

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Speaker 2: actually become big? And then what happened for it to

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Speaker 2: fall away like this?

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Speaker 3: It was It did nothing for the first twenty years

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Speaker 3: of its life, from the seventies of the nineties, and

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Speaker 3: it took off when the PC boom took off. So

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Speaker 3: remember what it was. It dominated the design and manufacturing

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Speaker 3: of PC laptop and server computer chips, and it dominated

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Speaker 3: the software wrapped around that. So it had the whole

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Speaker 3: shooting match and the stoff went up about seventyfold or

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Speaker 3: seven percent of the nineteen nineties, and it kind of

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Speaker 3: peaked in the early two thousands, and that's when the

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Speaker 3: rots set out. So sadly there was quite a few

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Speaker 3: things that went wrong, but sadly, the most high profile

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Speaker 3: one is they decided against producing chips for the first iPhone,

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Speaker 3: and years later the company admitted that their forecast was

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Speaker 3: wrong and the actual volume of iPhones relative to their

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Speaker 3: business case was a hundred times.

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Speaker 1: What they expected.

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Speaker 3: So on top of that, they made a few other missteps.

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Speaker 3: But one notable one is if you think about computer

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Speaker 3: chips and how far we've come, they used to have

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Speaker 3: a few thousand transistors or tiny electrical switches on them,

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Speaker 3: and that the iPhone you've probably got on your desk

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Speaker 3: there here there has got tens of billions of these

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Speaker 3: tiny electrical switches jammed on top of them, and that

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Speaker 3: requires extremely efficient manufacturing, and Intel just couldn't keep up

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Speaker 3: with the prowess of the tiny So the Taiwanese chip

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Speaker 3: manufacturing giant TSEMC, And because of all that and all

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Speaker 3: those missteps and several more, the stock underperform the US

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Speaker 3: stock market by about ninety percent over the last quarter century.

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Speaker 2: Is that what we talk about when we talk about

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Speaker 2: the chip wars, just that they're like the development and

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Speaker 2: the fine tuning of these chips.

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Speaker 1: I think that's what's underpinning there.

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Speaker 3: But the chip wars is really that I guess the

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Speaker 3: cold chip wars, and there's a book written about this.

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Speaker 3: But if given the fact that the manufacturer of these

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Speaker 3: advanced computer chips is considered the most complex and precise

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Speaker 3: manufacturing process humors have ever undertaken, and given those chips

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Speaker 3: underpin every bit of technology we touch, and they underpin

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Speaker 3: economies and militaries, it's no wonder there is a big

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Speaker 3: power struggle. So a few factors to put that those

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Speaker 3: chip wars in context. China imports more in chips than

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Speaker 3: it doesn't oil, so has a natural disadvantage there. And

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Speaker 3: then you've got Taiwan or TCMC, which controls ninety percent

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Speaker 3: of high.

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Speaker 1: End chip manufacturing.

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Speaker 3: And then you move back to the US, and they

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Speaker 3: even have an active government called the Chips Act, which

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Speaker 3: is funneling billions of dollars into US based chip designers

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Speaker 3: and manufacturers to make sure they win this war.

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Speaker 1: So some pretty big picture stuff there.

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Speaker 3: And the fact that Intel that the US darling is

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Speaker 3: falling behind is a big deal for the US as

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Speaker 3: a whole.

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Speaker 2: So why has the company been slashing costs and cutting

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Speaker 2: expansion plans more recently?

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Speaker 3: Yeah, I mean it's announced it's laying on fifteen percent

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Speaker 3: of its workforce, cutting Cross by ten billion, delaying opening

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Speaker 3: new chip factories in Germany and Poland, arguably in favor

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Speaker 3: of opening up domestic putting more money into domestic chip

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Speaker 3: designer manufacturing facilities. But that's all to stop the bleeding

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Speaker 3: of I mean, they're making losses because of all these

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Speaker 3: poor decisions they've made.

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Speaker 1: And on top of that, it's been given around.

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Speaker 3: Twelve billion dollars of funding under the US Chips Act

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Speaker 3: to try and shore it up.

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Speaker 2: Okay, who's bidding for Intel?

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Speaker 3: By the way, it's rumors only so far. So Qualcomm,

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Speaker 3: a US based mobile phone chip designer, is rumored to

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Speaker 3: be buying Intel. And and why would anyone want to buy

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Speaker 3: this company after all these missteps? Presumably potential suitors see

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Speaker 3: Intel is a cheap company that still has an enormous

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Speaker 3: amount of IP and valuable assets that are critical in

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Speaker 3: this chips wars that we talked about.

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Speaker 2: And so what does it mean if this purchase goes ahead?

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Speaker 2: What does this mean for the chip wars?

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Speaker 3: I think it could create a it's larger US based

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Speaker 3: chip design and manufacturing company that might just might be

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Speaker 3: able to compete against the likes of TESSEMC and Taiwan

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Speaker 3: And if it is true it is Qualcom, who's a

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Speaker 3: US based company, I'm sure that the combined entity would

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Speaker 3: still qualify for the You know that the hefty tailwind

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Speaker 3: of US government grants under that US Chips Act.

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Speaker 2: Okay, So what do investors need to consider when they're

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Speaker 2: thinking about this.

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Speaker 3: There's a lot going on there isn't that it's not

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Speaker 3: the first changing of the guard, and this this sort

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Speaker 3: of pointy end technology computer chip design. Man, So if

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Speaker 3: you remember back to mainframe computers, computers that were as

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Speaker 3: big as a small house, IBM dominated those chips until

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Speaker 3: we talked about that, dominated PCs and service for data centers.

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Speaker 3: ARM and Apple dominated the mobile chipset chipset wars, and

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Speaker 3: now in Nvidia is dominating the design of AI chips.

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Speaker 3: The only constantly, by the way, is TARSMC, the Taiwanese

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Speaker 3: giant has dominated manufacturing for decades. So the point is,

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Speaker 3: if you're an investor at this point a end, you

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Speaker 3: need to be really careful. Company are not being left behind,

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Speaker 3: So make sure they have a healthy degree of paranoia

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Speaker 3: about disruption or competition. Make sure they're not underspending on

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Speaker 3: research and development and just make sure those companies are

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Speaker 3: not resting on their laurels, which is potentially what Intel

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Speaker 3: did back in the day.

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Speaker 2: Yes, such a good point, Hey Sam, As always thank you, Sam,

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Speaker 2: Dickia fisherpuns For.

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Speaker 1: More from Hither Duplessy Allen Drive.

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