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Speaker 1: Joining us now Intel's CEO Pat Gelsinger. You know, Pat,

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Speaker 1: this is the second consecutive quarter where investors have cheered

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Speaker 1: the earnings results shares up, and I think before twenty

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Speaker 1: twenty three, ten out of the eleven earnings prints that

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Speaker 1: you had shares fell. Is this job done for you

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Speaker 1: in the turnaround at Intel?

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Speaker 2: Well, we have a long way to go yet. But boy,

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Speaker 2: having two good beat and ray quarters in a row,

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Speaker 2: you know, is a super positive and really I think

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Speaker 2: indicative of that turning point for the company.

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Speaker 3: But we still have a lot of work to do yet.

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Speaker 2: You know, as we said, our client business is now

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Speaker 2: healthy footing. You know, we've returned markets shared to where

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Speaker 2: it traditionally was a strong roadmap. You know, the markets recovering,

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Speaker 2: inventory levels are good, you know, data Center, we still

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Speaker 2: have work to do, but boy, you know, two quarters

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Speaker 2: in a row where we did a bit better than

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Speaker 2: we expected, you know, but we still have challenges and

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Speaker 2: AI and many of our really good products are only

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Speaker 2: coming to market over the next year.

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Speaker 3: You know.

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Speaker 2: Networking is still a lot of inventory to work through,

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Speaker 2: and our foundry business is still just a seedling just

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Speaker 2: starting to show some green shoots. So I'll say, boy,

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Speaker 2: far from finish, but it is nice bouncing off the

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Speaker 2: bottom of a bit and feeling that momentum in the market.

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Speaker 1: Response, Pat, why do you have the confidence to kind

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Speaker 1: of cool the end of the PC slump and also

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Speaker 1: at the same time state that the server recovery is

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Speaker 1: delayed to the end of the year.

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Speaker 3: Yeah.

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Speaker 2: And the PC side inventory levels are now healthy, right,

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Speaker 2: you know, everything that we've seen and a lot of

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Speaker 2: the issues that we work through Q four, Q one

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Speaker 2: and Q two were over inventory levels by the OEMs

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Speaker 2: and the channel, and now everything is healthy. Our roadmap

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Speaker 2: is very good. We've gained share multiple times in a row.

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Speaker 2: I think we're now at five out of six quarters

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Speaker 2: where we've gained market share. So I just say, in

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Speaker 2: the PC business healthy, Our position is good, and we're

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Speaker 2: looking forward to the AI PC and with our launch

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Speaker 2: of our next generation product, Meteor Lake later this year.

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Speaker 2: You know, we believe that ushers in the AI PC

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Speaker 2: generation and I've compared that to like Centrino and Wi Fi,

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Speaker 2: you know, two decades ago a major new use case

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Speaker 2: for why the PC is the best platform. So we're

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Speaker 2: quite excited about that. On the data center side, you know,

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Speaker 2: we still saw that. You know, the inventory levels still persist.

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Speaker 2: You know, China was weaker than expected. Their recovery is

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Speaker 2: going slower. And you know, cyclically, we see the shift

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Speaker 2: toward AI. You know, these big training machines. Every cloud

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Speaker 2: vendor is shifting their dollars to more focus on that.

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Speaker 2: So those three things are leading to a bit longer

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Speaker 2: recovery cycle on the data center. Like I said, we

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Speaker 2: performed a bit better than we thought on the data

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Speaker 2: center in Q one and Q two, So we're feeling

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Speaker 2: like our momentum and execution is rebuilding despite some of

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Speaker 2: those headwinds that still persist in that air.

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Speaker 1: For our global TV and radio audience. Here at Bloomberg,

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Speaker 1: we're speaking to pack Elsing at the Intel CEO. Pat

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Speaker 1: You're forecasting groce margin of forty three percent in the

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Speaker 1: current period, but it's a long way from that sixty

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Speaker 1: percent gross margin level. You know Wall Street used to

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Speaker 1: look at Intel and say sixty percent. You know, they

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Speaker 1: cheer you as a leader in that space. Can you

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Speaker 1: just explain to our global audience the timeline and path

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Speaker 1: to getting back to profit at that level.

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Speaker 2: Yeah, and we're working our way back to margins and

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Speaker 2: obviously a nice bet and Q two on margins, and

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Speaker 2: we forecast Q three a bit better and Q four

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Speaker 2: a bit better, you know, And part of it is

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Speaker 2: the cyclicality of the semiconductor industry is brutal on margins.

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Speaker 2: And when we had an oversupply situation inventory, you know,

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Speaker 2: that just depresses margins because you know, the factories cost

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Speaker 2: the same whether they're full or whether they're empty, so

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Speaker 2: you end up with these charges that burden the price

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Speaker 2: points and depressed margins. We also realize that our own

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Speaker 2: product execution has weakened our product position, which doesn't have

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Speaker 2: asps as strong as well, so that's another factor. And

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Speaker 2: the last factor here is the plan that my CFO

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Speaker 2: Dave and I have laid out is an expensive plan.

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Speaker 2: We are making aggressive investments to build the capacity to

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Speaker 2: get back to leadership, and thus we're moving through nodes

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Speaker 2: very rapidly. We sat five nodes in four years, so

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Speaker 2: that causes us to have a lot of undepreciated capacity

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Speaker 2: that we're working through quite aggressively. Also building up a

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Speaker 2: bit more capacity for our foundry initiatives. So all of

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Speaker 2: those factors depressed margins to historically low levels in the

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Speaker 2: first part of the year and we're just seeing ourselves

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Speaker 2: now working to build back to margin levels. But we're

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Speaker 2: still very confident that as we build our foundry business

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Speaker 2: get back to leadership and process and products that those

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Speaker 2: kind of margins, that's exactly what Dave and I aspire to.

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Speaker 3: To the future. And we feel like you two was

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Speaker 3: a good marker. You know that. Yes, we're building momentum

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Speaker 3: to get back there.

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Speaker 1: Thank you for joining us here on Bloomberg Television and

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Speaker 1: Radio worldwide. We're joined by Pat Gelsinger, Intel CEO. You

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Speaker 1: described the foundry business as a seedling, but every time

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Speaker 1: you and I have spoken, you've hinted that there is

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Speaker 1: a big customer waiting in the wings to give life

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Speaker 1: to that business. What can you tell us about that, Pat.

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Speaker 2: Yeah, and we're having good momentum, and as I said

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Speaker 2: on the Ernie's call yesterday, we have two big customers

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Speaker 2: in particular that we made very good progress over the

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Speaker 2: last quarter for our foundry business. We did have one,

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Speaker 2: i'll say confirmatory, not as big a customer, but the

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Speaker 2: ericson announcement their commitment to eighteen A and our next

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Speaker 2: generation work. You know with them that we announced this quarter,

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Speaker 2: So I'll say over all, we're seeing good momentum and

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Speaker 2: a really strong pipeline of customers, and we hope to

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Speaker 2: make meaningful announcements later this year on that. We also

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Speaker 2: pointed out on our earnings call that now we're seeing

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Speaker 2: a lot of interest in our packaging technologies. So it

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Speaker 2: isn't just wayfer manufacturing, it's also package assembly and tests.

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Speaker 2: And Intel has long term been a leader in packaging technologies,

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Speaker 2: and because of key areas like high performance computing and AI,

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Speaker 2: there's tremendous interest in these advanced packaging technologies, and we're

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Speaker 2: finding a lot of customer interest in that incremental area

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Speaker 2: of the foundry business as well. So overall, you know,

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Speaker 2: and the numbers were good for us in Q two

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Speaker 2: for Foundry, great pipeline of activities, great progress on a

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Speaker 2: couple of these most major opportunities. So I'm feeling good

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Speaker 2: like we're starting to really see that momentum build in

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Speaker 2: this new business area for Intel or Intel Foundry services.

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Speaker 1: If we think about what a potential customer might be,

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Speaker 1: you know, at the scale of Apple, Google and Video,

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Speaker 1: what is it that they want from you? What is

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Speaker 1: it do you think that you can provide them.

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Speaker 2: Yeah, you know, when I view it, you know, we

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Speaker 2: have to go through four stages. You know, One is

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Speaker 2: are my transistors good? You know, can they build good

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Speaker 2: products using Intel? Second is do I have the design tools?

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Speaker 2: You know, the cadences and synopsis, c D A S

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Speaker 2: and the IP libraries. Have we've gotten all of those

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Speaker 2: basic stunts so that they can design on us, you know?

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Speaker 2: Then third, you know, do we have good terms and conditions?

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Speaker 2: Are they better off coming to me versus you know,

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Speaker 2: T s MC or Samsung as an alternative? And then

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Speaker 2: finally are we customer oriented? Can they really have the

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Speaker 2: support because my factory becomes their factory, you know, So

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Speaker 2: we have to work through all four of those stages

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Speaker 2: before they're ready to commit major businesses to us.

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Speaker 3: And that's why it takes a while.

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Speaker 2: You know, they got to do designs and tests and pilots,

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Speaker 2: and you know, work through the financials. You know, this

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Speaker 2: isn't a mature business area for us. But I'll just

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Speaker 2: say we're making great progress, and in particular, you know,

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Speaker 2: the two most significant opportunities. It was a really good

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Speaker 2: quarter and I'm feeling very optimistic that yes, we'll bring

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Speaker 2: them across the line and start to really accomplish what

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Speaker 2: we've laid out, you know, with our you know, reshoring

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Speaker 2: and building the Western founder and we also had great

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Speaker 2: success with both the EU and the US chipsack this

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Speaker 2: last quarter, which are affirming the strong support you know,

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Speaker 2: of the Western governments on this strategy.

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Speaker 3: It's the right strategy at the right time. We're making

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Speaker 3: good progress.

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Speaker 1: A big part of your smart capital approach, we have

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Speaker 1: to talk about AI. You see a world in which

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Speaker 1: the PC plays a role for localized running of l

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Speaker 1: l ms. But what are the use cases that you

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Speaker 1: see pat the applications where a PC with AI specific

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Speaker 1: chips is relevant.

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Speaker 2: Yeah, and you know to some degree, they're numerous in

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Speaker 2: you know, let's just give one example, you know, in

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Speaker 2: the future, my word process or you know, I'm going

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Speaker 2: to hit a button and say, give me a legal

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Speaker 2: brief that describes this and it's going to get locally generated.

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Speaker 2: You know, my video conferencing, my zine, my teams or zooms.

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Speaker 2: I'm going to say, you know, give me, you know,

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Speaker 2: real time translation across multiple languages, you know, for this meeting,

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Speaker 2: and I'm going to have that in real time on

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Speaker 2: my PC.

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Speaker 3: You know, my games, you know, for my you know, all.

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Speaker 2: Of that is going to become synthetically generated worlds locally

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Speaker 2: on my PC in real time. So we see it

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Speaker 2: across creator, across productivity, you know, and as I've said,

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Speaker 2: this is sort of like a Wi Fi moment, you know,

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Speaker 2: for the PC of the future, and that begins with

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Speaker 2: our meteor like launch in the second half of this year.

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Speaker 1: Pat quickly a one billion dollar pipeline for AI products

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Speaker 1: through twenty twenty four. Just give me a sense of

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Speaker 1: the pace at which that pipeline is growing.

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Speaker 2: Now, Yeah, we had a super exciting quarter. As I said,

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Speaker 2: we succect that pipeline in Q two, so we saw

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Speaker 2: a huge uptick on that, you know, and I've deployed

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Speaker 2: a lot more sales resources, software resources, you know, to

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Speaker 2: jump on those opportunities worldwide. You know, when we have

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Speaker 2: our Gouty two chip that is now in volume. You know,

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Speaker 2: we've just seen the first wafers on the next generation

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Speaker 2: Gouty three, which will be our twenty twenty four product,

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Speaker 2: and then we have our twenty five and twenty six

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Speaker 2: products underway. So you know, we're seeing a lot of

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Speaker 2: momentum there and the world is looking for a great alternative,

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Speaker 2: an open alternative, a more cost effective alternative, and Intel

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Speaker 2: as a trusted supplier, we think this is a great

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Speaker 2: area for us to put a lot of energy into

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Speaker 2: and we're seeing the response from the marketplace now.

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Speaker 1: Intel CEO Pat Gelsinger, we appreciate your time here on

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Speaker 1: Bloomberg TV and radio.

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Speaker 3: Thank you.