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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal and I'm Tracy Allaway. So, Tracy, you know,

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Speaker 1: we haven't talked about it in a while, but one

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Speaker 1: recurring topic on the podcast over the years has been

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Speaker 1: China's efforts to really sort of leap into the lead technologically.

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Speaker 1: We've talked about it with a few different guests, invested

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Speaker 1: aggressively in airlines, UH, semiconductors, UH and so forth, setting

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Speaker 1: us at all the current noise. That's still like one

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Speaker 1: of the bigger long term storylines that attempt to sort

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Speaker 1: of supplant the US at the lead in the lead

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Speaker 1: of a technological manufacturing and development. Yeah, that's right, and

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Speaker 1: I think that's where a big portion of the trade war,

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Speaker 1: or the Trump administration's trade war with China actually came from.

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Speaker 1: And that's why we see so much of it centered

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Speaker 1: around technology things like Bye Dance, TikTok and UH of

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Speaker 1: course five G and Huawei and UH. Of course we're

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Speaker 1: seeing Beijing rolling out it's it's new plans for I

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Speaker 1: think it's for the next twenty years or something like that.

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Speaker 1: And of course tech dominance features quite highly. Once again,

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Speaker 1: absolutely but it also like it takes it takes two

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Speaker 1: to tango because in addition to UH China's own endeavors

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Speaker 1: to leap frog or surpassed the US in terms of

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Speaker 1: technological development, there's also an another element, which is that

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Speaker 1: a lot of the US companies that we sort of

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Speaker 1: associate with, you know, the great heritage of US manufacturing,

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Speaker 1: whether it's Boeing, g E or Intel with chips, all

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Speaker 1: of them seemed to be not doing so great. So

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Speaker 1: literally going in the other direction. Yeah, so this is

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Speaker 1: something that I wasn't that aware of just because I've

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Speaker 1: been outside of the US for a while. But Intel

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Speaker 1: seems to be struggling. So I think in the summer

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Speaker 1: they said they were something like twelve months behind schedule

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Speaker 1: when it comes to developing like their new next generation

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Speaker 1: of chips, and the share prices come down quite a

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Speaker 1: bit since then. And it's sort of the polar opposite

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Speaker 1: to what you see happening at some other chip companies

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Speaker 1: like t S mc over in Taiwan for instance, they

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Speaker 1: seem to be doing quite well during the pandemic, well

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Speaker 1: relatively well yeah, I mean you haven't exactly right. There

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Speaker 1: seems to be going in the exact opposite direction, falling

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Speaker 1: further and further behind, and their stock has really been

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Speaker 1: got hammered this summer. So, like what happened is sort

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Speaker 1: of an interesting question because we could talk about China's

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Speaker 1: research effort, but how this company that basically invented the industry,

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Speaker 1: one of the you know, to put the silicon and

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Speaker 1: Silicon valley, so to how it lost its lead and

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Speaker 1: ability to be one of the world pre eminent manufacturers.

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Speaker 1: Is itself pretty interesting storyline here. Yeah, absolutely, And I

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Speaker 1: mean I remember during the early two thousand's Intel was

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Speaker 1: this massive, massive company and it had the branding and

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Speaker 1: the advertising around it and just a huge deal. So

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Speaker 1: it's interesting to see it um sort of turning around

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Speaker 1: this year. So we're going to talk more about Intel

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Speaker 1: and what happened, and I'm very excited about our guest.

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Speaker 1: We're going to be speaking with Stacy Raskin. He's managing

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Speaker 1: director Senior analyst U s Semiconductors at Bernstein Research, and notably,

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Speaker 1: at a recent uh Intel conference call after one of

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Speaker 1: their quarters, the company didn't call on him, leading him

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Speaker 1: to a subtweet a company on Twitter, which is always

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Speaker 1: fun and doesn't happen that often with analysts. So Stacy,

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Speaker 1: thank you very much for joining us. Oh my pleasure.

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Speaker 1: I'm glad to be here. And by the way, um, uh,

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Speaker 1: nobody knows what that tweet was about. Okay, it was

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Speaker 1: a subtweet of anything. Okay, So just on the day

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Speaker 1: that you didn't get called on by until during their

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Speaker 1: quarterly conference call, you tweeted cowards dot dot dot. But

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Speaker 1: we'll we'll all pretend that we have no idea what

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Speaker 1: that was about. Maybe it was something completely unrelated to

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Speaker 1: your professional career. This is one of the mysteries of

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Speaker 1: the universe. We'll leave it at that. It'll be a

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Speaker 1: mystery forever. We'll just leave that. We'll just leave that tweet. Um,

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Speaker 1: but it is true that you didn't get called on

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Speaker 1: that part. That is true. So let's forgetting the subtweet

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Speaker 1: aside or whether it's a subtweet, what were you going

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Speaker 1: to ask? Like, uh, you know, if here's your chance,

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Speaker 1: Stacy Raskin at Bernstein Research Europe, what would you have asked? Oh? Boy,

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Speaker 1: I don't even remember what I was going to ask

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Speaker 1: at this point, and I have to go back and

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Speaker 1: look at my question list. Um, I'm sure it was

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Speaker 1: something pointed though, Um, it typically as I have a

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Speaker 1: reputation I suppose for asking those kinds of questions. And

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Speaker 1: it's not really my fault. I can't help it. My

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Speaker 1: my BS detection threshold is set kind of low, and

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Speaker 1: I tend to forget who I'm talking to once I

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Speaker 1: get going, So I can't help it. But it doesn't

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Speaker 1: always engender a lot of love. Um, but that's okay.

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Speaker 1: I don't have to uh, I don't have to believe

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Speaker 1: this is gonna be a good conversation. Yeah, this, this

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Speaker 1: should be a great conversation. I'm looking forward to it. Well, well,

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Speaker 1: we'll see if that threshold gets hit or not. I

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Speaker 1: feel like cell side analysts with low BS detector is

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Speaker 1: fairly unusual, or at least we don't get to talk

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Speaker 1: to many of them. Um, it goes with the territory.

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Speaker 1: Can you set the scene for us, like, how bad

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Speaker 1: are things at Intel at the moment? In your view,

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Speaker 1: like Joe said, you're sort of noted critic of the

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Speaker 1: company recently. What's going on there? How bad is it?

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Speaker 1: I mean, it's it's problematic right now. And so you know,

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Speaker 1: you started out the beginning of this call talking about

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Speaker 1: some of the issues they're having with manufacturing. Um It's

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Speaker 1: important to note these are not new issues. So the

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Speaker 1: current issues are with seven nimeal seven animeter process, and

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Speaker 1: you're right. In July they disclosed further delays there. They

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Speaker 1: said the process was was twelve months delayed. They said

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Speaker 1: the products, I think it versus the prior road net

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Speaker 1: were six months delayed. That being said, this is not

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Speaker 1: the first time they've had they've had a problem ten nnimeters,

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Speaker 1: which was the prior generation manufacturing technology. And if you want,

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Speaker 1: we can go into what the numbers and everything mean,

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Speaker 1: but just in general, ten anners was the prior one.

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Speaker 1: They had big problems with that one as well. That

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Speaker 1: one was delayed for five or six years and forced

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Speaker 1: them to sit on on the you know, the two

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Speaker 1: generations back, which was called fourteen animeters. They were sitting

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Speaker 1: on that one for many more years than they intended.

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Speaker 1: But even fourteen nnimeters was delayed a little bit when

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Speaker 1: they when they originally launched it, it it was it took

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Speaker 1: about a year longer than they had originally anticipated to

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Speaker 1: reach sort of like fully manufacturable yields and reach full volume.

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Speaker 1: So these are not new problems that Intel. These have

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Speaker 1: been building over probably half a decade plus and they

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Speaker 1: finally hit a wall. So I mean that that's sort

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Speaker 1: of the current state of affairs. So Tracy and I

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Speaker 1: aren't technologists, but we see these terms or hear them

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Speaker 1: ten men, ten nanimator, seven min nanimator. Why don't you

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Speaker 1: take this moment to describe like what these means? I mean,

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Speaker 1: I get it, okay, smaller and smaller chips and efficiency

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Speaker 1: and all that, but talk to us a little bit

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Speaker 1: about like what we're really talking about. Yeah, But so

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Speaker 1: in theory, like it used to be, like some measure

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Speaker 1: of the size of the transistor there was called the

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Speaker 1: gate length that at one point um. In reality, these

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Speaker 1: numbers are complete in total marketing. They don't actually mean

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Speaker 1: anything in isolation um, and they're not comparable from one

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Speaker 1: company to another. So, for example, an Intel tenometer part

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Speaker 1: is not the same as as a t SMC ten

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Speaker 1: nimet part. I'll give you an example of this, by

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Speaker 1: the way, And when when t SMC went from what

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Speaker 1: they purport really called twenty nimes to sixteen, they didn't

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Speaker 1: shrink the transistors at all. What they did is they

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Speaker 1: changed the structure of those transistors. Um. They went from

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Speaker 1: what and again, I we can talk about what these

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Speaker 1: terms mean. But they went from a transistor that was

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Speaker 1: called a planar transistor structure to a three D or

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Speaker 1: a fin fet transistor structure. But they didn't make them

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Speaker 1: any smaller, They didn't squeeze them closer together, they didn't

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Speaker 1: do anything. They just went from planer to fin fet

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Speaker 1: and called it sixteen no shrink, know nothing. So that's

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Speaker 1: so that's that's the thing that the members themselves actually

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Speaker 1: stopped really having actual meaning or more than more than

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Speaker 1: a decade ago. It's been marketing ever ever since. What

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Speaker 1: you can think about them though, in terms of meaning,

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Speaker 1: it is typically some measure of improved transistor density. So

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Speaker 1: squeezing more and more transistors onto a given area of silicon,

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Speaker 1: it is some measure of that. And with every further note,

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Speaker 1: in every further transition in theory, you should be getting

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Speaker 1: better performance out of these chips and and better power efficiency.

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Speaker 1: This is really what Moore's law is. By the way,

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Speaker 1: it's sort of these three legs in the stools. It's

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Speaker 1: better performance, better power, and lower cost. And by the way,

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Speaker 1: when people talk about Moore's law dying, which is sort

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Speaker 1: of the situation we're in right now. It does not

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Speaker 1: mean that it's impossible to to to shrink these things

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Speaker 1: to make the transistors any smaller. What it actually means

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Speaker 1: is that the cost leg of that three legged stool

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Speaker 1: is going out the window. So we can still do this,

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Speaker 1: like engineers are smart. If there's a if there's a

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Speaker 1: business case to shrink, they'll do it. But now we

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Speaker 1: have to pay for it, whereas before it we used

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Speaker 1: to get it every two years for free. It was fantastic, right,

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Speaker 1: But that's kind of the situation of what's going on now.

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Speaker 1: So we keep comparing in this discussion Intel to uh

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Speaker 1: T SMC. But my understanding is they're they're not exactly

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Speaker 1: the same company, right, the business model is slightly different.

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Speaker 1: Could you maybe explain how they differ? You bet? So.

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Speaker 1: There are two primary um uh semiconductor broad semic connector

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Speaker 1: business models in the industry. The first is called they

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Speaker 1: called an i DM or integrated device man facturer, and

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Speaker 1: these are companies of both design and manufacture their own

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Speaker 1: ships like Intel. Right. The issue is, you know, a

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Speaker 1: leading edge semiconductor manufacturing facility can cost these days, you know,

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Speaker 1: ten billion dollars, Like it's very expensive. And if you're

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Speaker 1: going to build a factory that costs that much, you

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Speaker 1: better have a lot of revenue in order to put

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Speaker 1: through in order to cover those costs, and most most

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Speaker 1: semi conduct companies do not. And so decades ago this

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Speaker 1: became clear and the supply chain atomized, it split apart,

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Speaker 1: and he gave rise to what's known as the fabulous

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Speaker 1: foundry model, where you have companies, um say, like an

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Speaker 1: Nvidio or a qual Colm. These are referred to as

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Speaker 1: fabulous companies in the sense that they do not have

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Speaker 1: fabs fab as as a semiconductor manufacturing facility. They only

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Speaker 1: design chips and then they outsource the manufacturing to a

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Speaker 1: company known as a foundry. This is what t SMC does,

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Speaker 1: and they're able because of this model. They can agglomerate

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Speaker 1: demand together from many semiconductor companies and build up the

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Speaker 1: revenue scale that is required to support them the high

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Speaker 1: costs of of of manufacturing um that ordinarily all these

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Speaker 1: companies would not be able to support on their own.

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Speaker 1: And so that's what t SMC does and it's it's

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Speaker 1: been kind of amazing, I mean in the sense that

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Speaker 1: you know, for the longest time, Intel talked about being

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Speaker 1: an i DM as being an advantage because you could

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Speaker 1: verily tightly couple both the process and the design together

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Speaker 1: and get really good products. And I guess as long

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Speaker 1: as as both of those things were on the right trajectory,

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Speaker 1: that was true. The problem is now because they're their

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Speaker 1: their manufacturing side has followed by the way side, it's

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Speaker 1: actually really impacting them. Not only can they not tightly

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Speaker 1: couple those two things together anymore, but it interferes with

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Speaker 1: the design because you designed for a specific manufacturing process.

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Speaker 1: If the process isn't ready, you gotta throw that stuff out.

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Speaker 1: And so the fabuless founding model, the founding model, it

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Speaker 1: stuff actually seems to be growing. It's ascending now. Um

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Speaker 1: it seems to have the advantage of especially because they

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Speaker 1: are able to at least at this moment, to stay

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Speaker 1: on their manufacturing road map. So we can kind of

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Speaker 1: think of Intel in theory as you know, designing chips

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Speaker 1: all in video and also having a fab t SMC.

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Speaker 1: What you're saying is it sounds like you can't really

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Speaker 1: like sort of neatly divide the two and if they're

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Speaker 1: having trouble on the fab side, on the foundry side,

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Speaker 1: then that also bleeds through to the design side. Yeah,

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Speaker 1: because you don't design in isolation, right, you have to

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Speaker 1: design for a specific set There's a set of design

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Speaker 1: rules that go with a specific manufacturing process. So, for example,

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Speaker 1: if I'm Intel, you know, and we'll probably get to this,

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Speaker 1: but until it's talking about using outsourcing potentially in a

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Speaker 1: bigger way, until cannot just take their current designs and

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Speaker 1: just throw them over the wall to t SMC, they

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Speaker 1: have to completely redesign them um to to correspond to

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Speaker 1: t SMCS manufacturing process, and and and and and t

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Speaker 1: SMCS design. So these two things are are coupled. And

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Speaker 1: if you have problems with one that causes problems with

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Speaker 1: the other. Sure, Wait, could could we do of into

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Speaker 1: the manufacturing problems Intel a little bit more than like

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Speaker 1: what exactly is happening there and what's gone wrong? Because

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Speaker 1: of course, as we mentioned in the intro, you know,

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Speaker 1: Intel was supposed to be the state of the art

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Speaker 1: global standard for chip making for many many years, and

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Speaker 1: now it seems like it's not. Yes, So so first

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Speaker 1: I want to step back and and say, um, this

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Speaker 1: stuff is very very difficult to do. So the fact

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Speaker 1: that people are having problems is not in and of

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Speaker 1: itself a shock. These are the most technologically advanced products

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Speaker 1: that humanity has ever devised. And I don't know if

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Speaker 1: either of you have ever been in in a in

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Speaker 1: a in a semiconductor factory, but you can think about this.

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Speaker 1: I mean, if if if I just take these nodes

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Speaker 1: sizes as as gospel, which I know they're not, but

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Speaker 1: I mean, let's just just take them. You know, at

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Speaker 1: at Intel's right now is delivering ten anometer products right

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Speaker 1: when when they're actually doing the manufacturing and they're imprinting

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Speaker 1: these these features onto the onto the wafers. I'll try

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Speaker 1: to be plaistic here, but they use use a laser

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Speaker 1: light to to do this. The laser right now has

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Speaker 1: a wavelength of a hundred and nine three nimes. So

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Speaker 1: they're printing purportedly ten nnimeter features using a wavelength of

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Speaker 1: light that's almost twenty times the size of the feature

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Speaker 1: that they're trying to print. Like, I'm amazed that any

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Speaker 1: of this stuff works at all. So just just to

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Speaker 1: get that out of the way, like it's it's it's

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Speaker 1: astonishing by the This is why one reason that I

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Speaker 1: love this space, because it's it's like I'm just continually

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Speaker 1: in awe of the things that that that that humanity

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Speaker 1: collectively has has been able to pull together here. But

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Speaker 1: in terms of specifically what's going on it Intel. So

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Speaker 1: I'll step back at fourteen nimes. Like I said, that

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Speaker 1: was a minor delay. Um it was. Like I said,

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Speaker 1: it took them about an extra year to yield the process.

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Speaker 1: Whether when I when I say yields, that's a simple

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Speaker 1: concept that is, you know what, I'm making a silicon

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Speaker 1: wafer full of chips. How many of those chips are good?

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Speaker 1: That percentages your yield. The more the higher yield, the

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Speaker 1: lower your costs. So that's a good thing, um. And

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Speaker 1: it's the yield that determine how quickly you ran for

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Speaker 1: process into production. Fourteen anometers took a little bit longer.

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Speaker 1: We still don't know why, but it didn't hurt them

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Speaker 1: because back then they had a genuine five plus year

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Speaker 1: process leadership. So they burned a little bit of it.

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Speaker 1: But it was fine. With ten n we kind of

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Speaker 1: know qualitatively what was what was wrong, um until had

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Speaker 1: was using multiple patterning on some of their layers for

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Speaker 1: the first time. Again, we can talk about what that

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Speaker 1: is if if we need to, but they were using

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Speaker 1: a specific type of of of advanced process for the

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Speaker 1: first time, and it caused problems. They were using um

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Speaker 1: new materials at the time, like cobalt and other things,

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Speaker 1: and they were using other techniques to get a much

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Speaker 1: greater density improvement that was normal with a normal node transition.

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Speaker 1: They their their transistor density transitions permillimeter squared of of

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Speaker 1: silicon area typically went up by maybe two point two

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Speaker 1: to two point four times. With ten anometers, it was

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Speaker 1: a two point seven times improvement. So the way the

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Speaker 1: company has discussed this is it was just too big

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Speaker 1: of a lead and they bit off more than they

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Speaker 1: could chew and it caused problems. UM, I have no

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Speaker 1: idea what's going on at seven animeters. All I know

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Speaker 1: is that it is it is something that's completely different

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Speaker 1: from anything they hit them at ten and seven was

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Speaker 1: supposed to fix those problems attend it. It was a

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Speaker 1: smaller density improvement, it was only one point seven. They're

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Speaker 1: using a new lithography technique that's called EUV or Extreme

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Speaker 1: multra violet lithography, that was going to replace that multi

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Speaker 1: multi patterning and fix those problems. And so they were

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Speaker 1: taking steps in order to to to to learn lessons

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Speaker 1: from the ten nnimeter debaucle and and and to repair.

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Speaker 1: And that that's why the seven nimeter announcment came as

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Speaker 1: such a shock, because they've been telling everybody, you know,

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Speaker 1: for a year or seven animeters is on track, we've

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Speaker 1: learned the lessons, it's gonna be good, and then they

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Speaker 1: came out and just dropped the bomb on us. And

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Speaker 1: this is why going forward it's so problematic, because their

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Speaker 1: credibility on this stuff is now zero. Right, so when

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Speaker 1: they're telling us where we think we've got to handle

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Speaker 1: on it, we think we know what's wrong. I mean,

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Speaker 1: like nobody knows what to believe anymore. So many good questions.

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Speaker 1: I think we're gonna have to extend this episode to

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Speaker 1: about two or three hours. But in all seriousness, we saw,

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Speaker 1: you know, Tracy mentioned it when they dropped this bomb

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Speaker 1: this summer. Uh, the stock took quite a reaction. I mean,

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Speaker 1: it was a major plunge. I don't think it's like

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Speaker 1: a really recovered very much since then. Was that because

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Speaker 1: this was understood to be fundamentally different, as you describe it,

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Speaker 1: than those other delays, Because there's this nobody really understand,

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Speaker 1: like explain the sort of financial market reaction to this

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Speaker 1: one versus the previous setbacks. They've bet, yeah, you you bet,

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Speaker 1: and I need to full d A m D. I

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Speaker 1: think and do this discussion a little bit. Um. So

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Speaker 1: if you go look at A m D stock versus intels,

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Speaker 1: their polar opposites, right, and and and part of the

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Speaker 1: reason there was a A m D is now on

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Speaker 1: a trajectory and and they've come a long way am D.

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Speaker 1: You know, four five years ago, the controversy on that

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Speaker 1: stock was are they going bankrupt or not? And the

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Speaker 1: stock bottomed out, you know, in below two dollars. That's

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Speaker 1: that's kind of where it was. The stock now was

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Speaker 1: you know, close to eight and it's been it's been

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Speaker 1: even higher. The reason is a A m D. Actually

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Speaker 1: um uh, they had already gone fabulous back in the

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Speaker 1: financial crisis. Um they had been using Global Foundries, which

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Speaker 1: is as another foundry and Global Founderies back in the

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Speaker 1: time from shot am B in the foot um Global

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Speaker 1: Founders had problems with their process technology as well. And

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Speaker 1: then A m D. I mean the business was in

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Speaker 1: was in total free fall. I mean they're there, their

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Speaker 1: revenues a back cut in half. They had four or

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Speaker 1: five different rounds of restructuring was pretty awful. They had

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Speaker 1: a last Hail Mary effort to get a new architecture,

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Speaker 1: which they're delivering now. They're on their third generation UM

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Speaker 1: and that architecture was extremely successful, and they made the

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Speaker 1: shift from Global Founderies to t SMC. And so now

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Speaker 1: you're in a situation where where am D actually has

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Speaker 1: a competitive and in some cases even superior architecture, and

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Speaker 1: they have a superior process technology. And so they've been

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Speaker 1: taking share from Intel both on the client side pecs

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Speaker 1: as well as in servers. Right now, the real bulls

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Speaker 1: on am D. They have this vision right that A

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Speaker 1: and D is gonna go And I'll make up the numbers,

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Speaker 1: but I mean twenty two there were twenty three. They'll

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Speaker 1: be doing two fifty or three bucks and earnings, and

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Speaker 1: by five they'll be doing five or six bucks and earnings.

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Speaker 1: And and this is a duopoli market. It's them an

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Speaker 1: Intel primarily, so all that would be coming at Intel's expense.

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Speaker 1: But am D has been kind of a dream. And

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Speaker 1: so before Intel announced these seven animeter issues, it was

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Speaker 1: kind of like, well, okay, maybe am you'll get to

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Speaker 1: this two or three dollar number. In a few years.

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Speaker 1: But by then a Intel will be going harder and

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Speaker 1: seven they'll have fix the issues. At ten they gave

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Speaker 1: am D an advantage. And at that point, like it's

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Speaker 1: all over right, and and Intel is going to be

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Speaker 1: back on on on the ascendancy now because of these

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Speaker 1: issues with seven animeters, like with A and DNA, you

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Speaker 1: you could believe whatever you want, like there's there's no

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Speaker 1: pushback because you have no idea what Intel is gonna

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Speaker 1: be doing at that point um, and it makes the

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Speaker 1: idea of the the x C E six CPU market

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Speaker 1: and PCs and service, which today is sort of like

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Speaker 1: a nine ten or an eight twenty kind of market.

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Speaker 1: You know, if you wanted to believe that it could

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Speaker 1: be a true duopoly, a fifty fifth or sixty market

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Speaker 1: in fears, if you want to believe that, you can

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Speaker 1: and that all comes if it happens at Intel's expense,

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Speaker 1: and the driving force behind it is a continued loss

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Speaker 1: potentially of competitiveness on Intel's part. And with the seven

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Speaker 1: animeter delay, which like I said, was was really a

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Speaker 1: bomb that was dropped on people, it becomes very easy

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Speaker 1: if you want to believe that sort of thing, to

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Speaker 1: believe it, So this was potentially a thesis changing announcement

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Speaker 1: for Intel. That's where the stock reacted like it did.

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Speaker 1: So is this just I don't know? Is all of

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Speaker 1: this just down to Intel doing basically a chip version

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Speaker 1: of vertical integration for far too long when other companies

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Speaker 1: decided to specialize in various ways. Yeah, so again, I

396
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Speaker 1: don't know why Intel's having this, but it's kind of

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Speaker 1: amazing that they are, because they looked. Intel is a

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Speaker 1: hundred and thirteen thousand employees. They spend over thirteen billion

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Speaker 1: dollars a year in revenue, which which is like almost

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Speaker 1: double amb's revenue. And in R and D they Intel

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Speaker 1: spends that much, it's almost double ADS revenue. AD's growing. Now,

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Speaker 1: I don't, I don't know what's going on, like we

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Speaker 1: we don't, We don't know why. And now, by the way,

404
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Speaker 1: it's it's causing bigger problems because like Intel's face with

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Speaker 1: a choice now and and we'll find a little bit

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Speaker 1: more about this in January. Intel is now mate trying

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Speaker 1: to make the decision. Are they going to outsource it

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Speaker 1: in in a greater fashion? Right? Intel sources some don't,

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Speaker 1: don't get me wrong, Like in Intel's bought companies like

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Speaker 1: all Terror and Mobile I that use t smc UM

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Speaker 1: And for some of Intel's internal volumes, you know, maybe

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Speaker 1: not CPUs, but like chip sets and peripherals and other things,

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Speaker 1: they've they've used t SMC So it's not new to Intel.

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Speaker 1: But I mean Intel is now talking about if they

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Speaker 1: can't fix their seven anime or problems, they may have

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Speaker 1: to scrap up it entirely, and and outsources that that

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Speaker 1: as well. UM And so there's a lot of unanswered

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Speaker 1: questions with into right now. Like right now, I have

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Speaker 1: no idea what the company looks like in three years.

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Speaker 1: That's probably the biggest problem. Like if they were to

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Speaker 1: come out and give us a concrete plan and give

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Speaker 1: us certainty that they could execute on it, I think

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Speaker 1: the stock still would have fallen, you know, as much

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Speaker 1: as it, but maybe you could felt a little more

425
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Speaker 1: comfort with buying it at the bottom. Like right now

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Speaker 1: it is. It is very easily a valued trap because

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Speaker 1: again we we don't know what's going to happen in

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Speaker 1: three years. They're gonna make some announcement in January. We

429
00:22:30,880 --> 00:22:33,280
Speaker 1: don't know what they're gonna say. And in the meantime,

430
00:22:33,880 --> 00:22:36,479
Speaker 1: the competitive problems no matter what they do, we're only

431
00:22:36,520 --> 00:22:38,240
Speaker 1: gonna get worse. A and D is gonna keep taking

432
00:22:38,280 --> 00:22:41,680
Speaker 1: share on some trajectory. Apple made an announcement yesterday, so

433
00:22:41,840 --> 00:22:43,959
Speaker 1: like a good chunk of I wouldn't be surprised if

434
00:22:44,040 --> 00:22:46,399
Speaker 1: three quarters of Apple's notebook business goes away from until

435
00:22:46,480 --> 00:22:48,639
Speaker 1: next year, which I'm not sure as in the numbers.

436
00:22:48,840 --> 00:22:50,240
Speaker 1: I know you didn't want to talk so much about

437
00:22:50,240 --> 00:22:52,760
Speaker 1: short term, but I still think numbers next year, I

438
00:22:52,800 --> 00:22:54,800
Speaker 1: still think people are smoking crack next year. The numbers

439
00:22:54,840 --> 00:22:56,520
Speaker 1: are too high. They need to come down. They may

440
00:22:56,520 --> 00:23:00,159
Speaker 1: need to come down more. So this is dangerous. You

441
00:23:00,240 --> 00:23:01,920
Speaker 1: mentioned that you don't know what until it is gonna

442
00:23:02,000 --> 00:23:05,520
Speaker 1: look like in three years. So how difficult does that

443
00:23:05,640 --> 00:23:08,840
Speaker 1: make your job as an analyst in trying to determine,

444
00:23:08,920 --> 00:23:11,720
Speaker 1: you know, an appropriate price target or a way of

445
00:23:11,800 --> 00:23:15,720
Speaker 1: valuing a company where there is this much uncertainty. Well,

446
00:23:16,400 --> 00:23:17,919
Speaker 1: let me let me step back, because my job as

447
00:23:17,920 --> 00:23:20,920
Speaker 1: an analyst, like my favorite thing, is controversy, right, because

448
00:23:21,000 --> 00:23:23,000
Speaker 1: it gives me a reason to talk to my clients.

449
00:23:23,200 --> 00:23:27,760
Speaker 1: So um, from that standpoint, this is fantastic, right, because

450
00:23:28,040 --> 00:23:29,959
Speaker 1: I don't think this controversy is gonna go away at

451
00:23:29,960 --> 00:23:32,520
Speaker 1: any time. In terms of sizing that I mean, I mean,

452
00:23:32,640 --> 00:23:34,760
Speaker 1: look like I have to sort of like our published

453
00:23:34,800 --> 00:23:38,640
Speaker 1: model right now is status quo, and like I said,

454
00:23:38,680 --> 00:23:40,880
Speaker 1: we're we're decently below I think the streets too high.

455
00:23:41,080 --> 00:23:42,600
Speaker 1: But one thing we can do is sort of like

456
00:23:42,680 --> 00:23:45,080
Speaker 1: run out scenario analysis and like what could things look like?

457
00:23:45,200 --> 00:23:47,640
Speaker 1: We We've done some of this, and it's actually kind

458
00:23:47,680 --> 00:23:49,880
Speaker 1: of interesting because you know, if you sort of step

459
00:23:50,000 --> 00:23:51,680
Speaker 1: back and you say, well, what would an Intel look

460
00:23:51,720 --> 00:23:54,080
Speaker 1: like if they were fablite or if they were fabulous?

461
00:23:54,600 --> 00:23:57,159
Speaker 1: If I had a magic genie that just snapped her

462
00:23:57,200 --> 00:24:01,760
Speaker 1: fingers and they were fabulous tomorrow with the same competitive

463
00:24:01,840 --> 00:24:04,399
Speaker 1: environment as we have, it doesn't necessarily look bad. Like

464
00:24:04,480 --> 00:24:07,320
Speaker 1: gross margins would be lower because they would be paying

465
00:24:07,359 --> 00:24:09,600
Speaker 1: a margin to to a TSOMEC to make the chips.

466
00:24:10,200 --> 00:24:12,080
Speaker 1: At the same time, they wouldn't be having to invest

467
00:24:12,200 --> 00:24:13,920
Speaker 1: nearly as much in their own factories, so you'd save

468
00:24:14,000 --> 00:24:16,520
Speaker 1: cap as you'd probably save R and D because you

469
00:24:16,560 --> 00:24:19,399
Speaker 1: wouldn't be paying for for research and development, for process

470
00:24:19,440 --> 00:24:22,800
Speaker 1: technology development, and so the operating margins and free castles

471
00:24:22,840 --> 00:24:24,159
Speaker 1: could be just as high as they are and if

472
00:24:24,280 --> 00:24:27,080
Speaker 1: not higher, Like that's possible if you had a magic

473
00:24:27,200 --> 00:24:30,159
Speaker 1: genie that made the transition instant. The problem is, I

474
00:24:30,240 --> 00:24:33,280
Speaker 1: don't have a magic genie. It's gonna take years. Whatever

475
00:24:33,359 --> 00:24:36,000
Speaker 1: they do in the meantime, it's gonna throw more uncertainty

476
00:24:36,000 --> 00:24:37,640
Speaker 1: in the road map. And I'm not sure it's appropriate

477
00:24:37,720 --> 00:24:41,359
Speaker 1: to take today's competitive environment, which is already deteriorating, and

478
00:24:41,440 --> 00:24:43,959
Speaker 1: apply it to that, you know, to as an overlay

479
00:24:43,960 --> 00:24:46,040
Speaker 1: to that model. And today where you have, like like

480
00:24:46,080 --> 00:24:48,760
Speaker 1: I said, a nine, ten or twenty model, maybe by

481
00:24:48,760 --> 00:24:50,639
Speaker 1: the time they're finished, it could very easily be a

482
00:24:50,720 --> 00:24:53,680
Speaker 1: sixty forty or fifty fifty model. And so the more

483
00:24:53,760 --> 00:24:56,199
Speaker 1: they talk about this, you know that it's these are

484
00:24:56,280 --> 00:24:57,679
Speaker 1: these are the kinds of things that you can roll

485
00:24:57,720 --> 00:24:59,680
Speaker 1: out as an analyst, and we've done that and we'll

486
00:24:59,680 --> 00:25:04,399
Speaker 1: continue you to do that. Let me ask you broader question.

487
00:25:04,520 --> 00:25:07,359
Speaker 1: I mean, we we started talking about, we started this

488
00:25:07,440 --> 00:25:11,080
Speaker 1: conversation talking about the context of the tech trade war,

489
00:25:12,000 --> 00:25:14,800
Speaker 1: some of the actions the current administration has made against

490
00:25:15,119 --> 00:25:19,800
Speaker 1: Huawei and so forth. Should this be um, you know,

491
00:25:19,920 --> 00:25:22,800
Speaker 1: stepping aside from your your stock up or down hat

492
00:25:23,000 --> 00:25:25,680
Speaker 1: for a second or cell side analysts had per se,

493
00:25:25,840 --> 00:25:30,359
Speaker 1: but if Intel a lot ends up needing to rely

494
00:25:30,600 --> 00:25:34,240
Speaker 1: on Taiwan semi to make its chips. Is that the

495
00:25:34,359 --> 00:25:38,200
Speaker 1: type of issue that you know could rise should rise

496
00:25:38,280 --> 00:25:42,080
Speaker 1: to some level of anxiety and DC, Yes, I absolutely

497
00:25:42,160 --> 00:25:44,720
Speaker 1: think it s because you think about this right right now.

498
00:25:45,680 --> 00:25:47,560
Speaker 1: You know, broadly in the world, there are only a

499
00:25:47,640 --> 00:25:50,879
Speaker 1: few companies that can do leading edge semi manufacturing anymore.

500
00:25:50,880 --> 00:25:55,680
Speaker 1: It's it's Intel, Samsung and TSMC. That is it. Everybody

501
00:25:55,800 --> 00:25:58,640
Speaker 1: else who has ever you know, been at the forefront

502
00:25:58,640 --> 00:26:01,520
Speaker 1: of semi connector manufacturing as exitive the leading edge. That

503
00:26:01,640 --> 00:26:03,359
Speaker 1: doesn't mean that other players don't make stuff. I mean,

504
00:26:03,400 --> 00:26:05,080
Speaker 1: there's there's plenty of folks out there with fabs, but

505
00:26:05,119 --> 00:26:07,320
Speaker 1: in terms of the bleeding edge stuff, it's only those

506
00:26:07,359 --> 00:26:10,879
Speaker 1: three companies anymore. Only one of them is US and

507
00:26:11,080 --> 00:26:13,639
Speaker 1: and the U S one is having problems. And so

508
00:26:13,720 --> 00:26:15,560
Speaker 1: if you think about this, like what does that mean

509
00:26:15,680 --> 00:26:18,840
Speaker 1: for Taiwan. I mean they always used to say like

510
00:26:18,960 --> 00:26:20,880
Speaker 1: data is the new oil. I mean, maybe semi conductors

511
00:26:20,920 --> 00:26:24,800
Speaker 1: are the new oil now, and and Taiwan like if

512
00:26:24,840 --> 00:26:26,680
Speaker 1: this happens, I mean already is kind of turning into

513
00:26:26,760 --> 00:26:29,920
Speaker 1: potentially the most strategically important country on the face of

514
00:26:29,960 --> 00:26:33,200
Speaker 1: the earth. And it's also a hundred and fifty miles

515
00:26:33,240 --> 00:26:35,160
Speaker 1: offshore from China and they kind of think they own

516
00:26:35,200 --> 00:26:38,480
Speaker 1: the ground that it sits on. So yeah, I think

517
00:26:39,000 --> 00:26:41,520
Speaker 1: this is potentially problematic. And and and again, like even

518
00:26:41,560 --> 00:26:43,560
Speaker 1: if Intel wanted to outsource like the bulk of their

519
00:26:43,640 --> 00:26:46,800
Speaker 1: leading edge to Taiwan, like, is it politically viable? Like,

520
00:26:46,880 --> 00:26:49,560
Speaker 1: I don't know, you know, there's other things going on

521
00:26:49,680 --> 00:26:51,280
Speaker 1: in the US now. I mean, like one of the

522
00:26:51,400 --> 00:26:54,359
Speaker 1: few sort of like bipartisan initiatives that are out there

523
00:26:54,400 --> 00:26:58,359
Speaker 1: right now is um around strategic semi conductor investment. Like

524
00:26:58,440 --> 00:27:00,399
Speaker 1: certainly the Chinese are doing this. I mean, semis are

525
00:27:00,400 --> 00:27:01,679
Speaker 1: a big part of there have been a big part

526
00:27:01,720 --> 00:27:04,520
Speaker 1: of their five year plans. Um They've already been pushing

527
00:27:04,520 --> 00:27:07,600
Speaker 1: towards self sufficiency. Everything that's going on in terms of

528
00:27:07,640 --> 00:27:09,840
Speaker 1: the trade war and the sanctions and everything else is

529
00:27:09,920 --> 00:27:12,879
Speaker 1: just going to drive China to push towards self sufficiency

530
00:27:13,080 --> 00:27:16,000
Speaker 1: even more because we have them by the balls right now, right,

531
00:27:16,080 --> 00:27:18,600
Speaker 1: I mean, if if, if if we wanted to completely

532
00:27:18,680 --> 00:27:21,320
Speaker 1: cut chinas semiconductor ambitions off of the knees right now,

533
00:27:21,400 --> 00:27:24,359
Speaker 1: we have the ability to do that by banning semi sales.

534
00:27:24,400 --> 00:27:26,720
Speaker 1: But it's a particular banning SEMIICAP and and and and

535
00:27:26,840 --> 00:27:29,359
Speaker 1: e d A and design software sales. We're already kind

536
00:27:29,400 --> 00:27:30,639
Speaker 1: of doing that to waway. If we want to do

537
00:27:30,680 --> 00:27:32,879
Speaker 1: it broader like, that's it. So they have to move

538
00:27:32,920 --> 00:27:35,840
Speaker 1: towards self sufficiency. And I don't know what the political

539
00:27:35,960 --> 00:27:39,920
Speaker 1: viability of of having like the last bastion of like

540
00:27:40,240 --> 00:27:43,840
Speaker 1: advanced US based semi eductor manufacturing being outsourced to a

541
00:27:43,840 --> 00:27:45,480
Speaker 1: foreign country. I I don't know how the how that's

542
00:27:45,480 --> 00:27:47,359
Speaker 1: gonna fly, like, we'll see, but it's got to certainly

543
00:27:47,400 --> 00:27:49,720
Speaker 1: be on on top of mind for any of the

544
00:27:49,760 --> 00:27:54,400
Speaker 1: policymakers who are looking at this area. On that note,

545
00:27:54,560 --> 00:27:58,080
Speaker 1: do you think there's a role for policy to play

546
00:27:58,320 --> 00:28:01,640
Speaker 1: in I guess, helping out Intel if if you think

547
00:28:01,680 --> 00:28:04,960
Speaker 1: that it's a strategically important industry for the United States,

548
00:28:05,560 --> 00:28:08,520
Speaker 1: well yes and no. So so there is have always

549
00:28:08,560 --> 00:28:11,720
Speaker 1: already been efforts to invest and there were there was

550
00:28:11,760 --> 00:28:13,920
Speaker 1: something called the Chips for America Act, which we actually

551
00:28:13,920 --> 00:28:17,000
Speaker 1: had bipartisan support UM one of the few things UM.

552
00:28:17,040 --> 00:28:21,000
Speaker 1: I think that was subsumed into the National Defense Authorization ACTUM.

553
00:28:21,040 --> 00:28:24,320
Speaker 1: But there is talk of of of funding for semis

554
00:28:24,359 --> 00:28:27,159
Speaker 1: now in terms of Intel's problems. Like Intel's issue right

555
00:28:27,200 --> 00:28:29,800
Speaker 1: now is not having enough it is not not having

556
00:28:29,920 --> 00:28:33,400
Speaker 1: enough money. They've got plenty of money, So throwing money

557
00:28:33,560 --> 00:28:36,520
Speaker 1: at the problem is not going to fix it, right,

558
00:28:36,720 --> 00:28:39,920
Speaker 1: But you know, could you make it easier in general

559
00:28:40,040 --> 00:28:42,000
Speaker 1: for them? I mean they're talking about things like um,

560
00:28:42,200 --> 00:28:46,960
Speaker 1: you know, investments for manufacturing, UM, tax incentives, R and

561
00:28:47,040 --> 00:28:49,400
Speaker 1: D incentives, dark as getting involved that, so all of

562
00:28:49,480 --> 00:28:51,720
Speaker 1: that stuff would would be good. One issue I have

563
00:28:51,880 --> 00:28:53,200
Speaker 1: with some of the things that have been throwing around

564
00:28:53,200 --> 00:28:54,800
Speaker 1: it is I still think they were dropping the bucket.

565
00:28:54,960 --> 00:28:57,920
Speaker 1: So we've seen a few things. There's already some funny

566
00:28:57,920 --> 00:29:00,200
Speaker 1: Now TSMC is going to actually be building a tab

567
00:29:00,240 --> 00:29:03,680
Speaker 1: in Arizona. It's a PR headline right now. It's it's like,

568
00:29:04,360 --> 00:29:08,120
Speaker 1: I can't remember twenty thousand wafers per month. Ultimately they're

569
00:29:08,120 --> 00:29:10,800
Speaker 1: gonna invest like twelve billion dollars or something over eight years.

570
00:29:10,840 --> 00:29:13,480
Speaker 1: I mean that that's a rounding error, frankly. And then

571
00:29:13,520 --> 00:29:15,760
Speaker 1: some of the numbers we saw in some of these initiatives,

572
00:29:15,760 --> 00:29:18,400
Speaker 1: there's really been no funding that's actually been um apportioned.

573
00:29:18,480 --> 00:29:20,920
Speaker 1: Yet they were talking about like whatever it was twenty

574
00:29:20,960 --> 00:29:23,000
Speaker 1: eight billion or thirty billion or something that over a

575
00:29:23,040 --> 00:29:25,080
Speaker 1: number of years. I personally feel like, if the US

576
00:29:25,200 --> 00:29:27,760
Speaker 1: is really serious about this, we need an Apollo moment.

577
00:29:27,840 --> 00:29:30,040
Speaker 1: We need like hundreds of billions of dollars. I'm not

578
00:29:30,160 --> 00:29:32,880
Speaker 1: gonna if we really want to make sure that we

579
00:29:33,080 --> 00:29:35,760
Speaker 1: we we have you know, the majority of manufacturing that

580
00:29:35,920 --> 00:29:37,480
Speaker 1: it's rebased in the U S right now, Well, it's

581
00:29:37,480 --> 00:29:40,000
Speaker 1: all moving in Asia. UM. I don't know that the

582
00:29:40,080 --> 00:29:44,719
Speaker 1: political appetite is there to invest that much money. UM,

583
00:29:44,800 --> 00:29:46,560
Speaker 1: but it's but I'll take whatever we can get at

584
00:29:46,600 --> 00:29:48,320
Speaker 1: this point, Like it's like whatever they want to do

585
00:29:48,400 --> 00:29:51,160
Speaker 1: it to start. UM. So I think, like long stories

586
00:29:51,160 --> 00:29:53,480
Speaker 1: are think dollars would would obviously would help Intel a

587
00:29:53,560 --> 00:29:55,840
Speaker 1: number of other players in the US just to make

588
00:29:55,880 --> 00:29:58,400
Speaker 1: easy but it won't fix that the technology problems that

589
00:29:58,480 --> 00:30:01,160
Speaker 1: are potentially driving the shift. Intel us to do that

590
00:30:01,200 --> 00:30:18,640
Speaker 1: on their own. MM. One of the previous guests we've

591
00:30:18,680 --> 00:30:23,640
Speaker 1: regularly had on the show Dan Wanang. He's a technology

592
00:30:23,720 --> 00:30:25,800
Speaker 1: analyst at gav Kell, and he talks about how like

593
00:30:26,360 --> 00:30:30,320
Speaker 1: technoledge comes in sort of two parts, or manufacturing knowledge

594
00:30:30,360 --> 00:30:32,880
Speaker 1: is in two parts. One is just sort of like blueprints,

595
00:30:32,960 --> 00:30:34,960
Speaker 1: which you can sort of like write down on a

596
00:30:35,000 --> 00:30:37,520
Speaker 1: piece of paper, and then the other is just sort

597
00:30:37,560 --> 00:30:40,880
Speaker 1: of like this like tacit sort of understanding knowledge like

598
00:30:41,240 --> 00:30:43,760
Speaker 1: how to build a factory, which is not something you

599
00:30:43,920 --> 00:30:46,120
Speaker 1: just like write down on a piece of paper. There's

600
00:30:46,160 --> 00:30:47,800
Speaker 1: no like guy that someone can say, oh, this is

601
00:30:47,880 --> 00:30:49,640
Speaker 1: how you build a factory and just follow it. And

602
00:30:49,720 --> 00:30:51,920
Speaker 1: it's something that sort of like exists in the collective

603
00:30:51,960 --> 00:30:55,600
Speaker 1: knowledge of people who have been building factories for their

604
00:30:55,680 --> 00:30:59,560
Speaker 1: whole careers. So going back to the seven animator to bacle,

605
00:31:00,520 --> 00:31:04,360
Speaker 1: is there something that's like identifiable where like this some

606
00:31:04,520 --> 00:31:08,440
Speaker 1: sort of like knowledge or transmission of knowledge from one

607
00:31:08,520 --> 00:31:14,080
Speaker 1: generation of engineers is getting degraded or lost within Intel

608
00:31:14,200 --> 00:31:17,400
Speaker 1: or within US manufacturing. Is there some is there some

609
00:31:17,480 --> 00:31:20,880
Speaker 1: sort of identifiable leak where these things that once used

610
00:31:20,880 --> 00:31:24,000
Speaker 1: to be known and ongoing learnings and improvement is just

611
00:31:24,120 --> 00:31:26,400
Speaker 1: not happening to what it used to be. Well, so

612
00:31:26,560 --> 00:31:29,920
Speaker 1: I'll talk about like um, like more general and more specifics.

613
00:31:29,960 --> 00:31:33,240
Speaker 1: I mean, in general, there's always a learning curve and

614
00:31:33,320 --> 00:31:35,520
Speaker 1: so like like I like, I'll make it up like

615
00:31:35,640 --> 00:31:38,959
Speaker 1: I've got ten animeters done and I'm going to seven, right,

616
00:31:39,400 --> 00:31:42,000
Speaker 1: seven an animeters is going to incorporate all of the

617
00:31:42,120 --> 00:31:44,600
Speaker 1: issues potentially that that that the prior gen the ten

618
00:31:44,720 --> 00:31:48,480
Speaker 1: had plus a whole bunch of new ones. And so

619
00:31:48,600 --> 00:31:50,920
Speaker 1: the fact that they still haven't really fixed ten and

620
00:31:50,960 --> 00:31:53,959
Speaker 1: they and but they really haven't. They're ramping ten animeters

621
00:31:54,040 --> 00:31:57,920
Speaker 1: right now. But it's it's it's it's impacting significantly impacting

622
00:31:57,920 --> 00:31:59,800
Speaker 1: their margins, which tells you that the yields are not

623
00:32:00,240 --> 00:32:01,880
Speaker 1: they have but they have to ramp it. They can't

624
00:32:01,880 --> 00:32:04,080
Speaker 1: wait any longer because of the competitive situation where they

625
00:32:04,160 --> 00:32:07,040
Speaker 1: and B right, so they've got a rampant even though

626
00:32:07,080 --> 00:32:10,240
Speaker 1: the yield aren't good. But if you don't completely nail

627
00:32:10,480 --> 00:32:12,880
Speaker 1: like the prior note, all of those problems are gonna

628
00:32:12,920 --> 00:32:15,360
Speaker 1: still pretty much exist on the on the subsequent plus

629
00:32:15,400 --> 00:32:18,160
Speaker 1: all to new problems. And so that may be part

630
00:32:18,240 --> 00:32:20,160
Speaker 1: of it. And there's there's always learning curves on on

631
00:32:20,320 --> 00:32:22,400
Speaker 1: on this stuff, and if if you're learning curves too shallow,

632
00:32:22,440 --> 00:32:25,120
Speaker 1: it it can impact UM in terms of the employees.

633
00:32:25,120 --> 00:32:27,760
Speaker 1: And you asked like other issues with like knowledge changers.

634
00:32:27,760 --> 00:32:29,720
Speaker 1: So yeah, I I don't know specifically what's going on

635
00:32:29,800 --> 00:32:32,920
Speaker 1: at seven. I do know that in intil had a

636
00:32:33,040 --> 00:32:37,360
Speaker 1: very sizeable layoff, and I know that there were worries

637
00:32:37,560 --> 00:32:39,480
Speaker 1: that they had been laying off like some of the

638
00:32:39,600 --> 00:32:43,320
Speaker 1: more senior employees at the time, and there were lawsuits

639
00:32:43,360 --> 00:32:44,560
Speaker 1: and you can go back and look like there was

640
00:32:44,560 --> 00:32:46,160
Speaker 1: a whole bunch of stuff in the news flow around this.

641
00:32:46,680 --> 00:32:48,880
Speaker 1: So I have no idea what those employees were doing.

642
00:32:49,080 --> 00:32:50,720
Speaker 1: I don't know if they would have had anything to

643
00:32:50,760 --> 00:32:52,920
Speaker 1: do with like the subsequent seven enemies, I don't know,

644
00:32:53,280 --> 00:32:55,160
Speaker 1: but I do know that there was talk of a

645
00:32:55,200 --> 00:32:58,360
Speaker 1: potential brain grain several years back on when when they

646
00:32:58,400 --> 00:33:02,200
Speaker 1: had that lay up. So who knows with with seven again,

647
00:33:02,400 --> 00:33:05,280
Speaker 1: my biggest concern with seven was again they never really

648
00:33:05,360 --> 00:33:08,320
Speaker 1: seemed to nail ten either, um and, and that's going

649
00:33:08,440 --> 00:33:11,200
Speaker 1: to to propagate and it seems like it is. So

650
00:33:12,600 --> 00:33:16,200
Speaker 1: we've discussed all these problems, um and you clearly have

651
00:33:16,880 --> 00:33:21,120
Speaker 1: some concerns about this company. How does management actually go

652
00:33:21,360 --> 00:33:26,280
Speaker 1: about restoring confidence um in the business model? Like, what

653
00:33:26,480 --> 00:33:29,840
Speaker 1: what should they be doing at this moment in time? Well,

654
00:33:29,960 --> 00:33:31,880
Speaker 1: I mean they're they're trying, right. I mean, look, there's

655
00:33:31,920 --> 00:33:34,120
Speaker 1: there's the magic solution, which is like I wake up

656
00:33:34,160 --> 00:33:36,280
Speaker 1: tomorrow morning and they say, hey, we fixed it. It's

657
00:33:36,280 --> 00:33:39,000
Speaker 1: all good. I guess that would solve things. Although I'm

658
00:33:39,040 --> 00:33:41,440
Speaker 1: not holding my breath or something like that. They're doing

659
00:33:41,480 --> 00:33:43,720
Speaker 1: other things. I mean, so you know they're what they're

660
00:33:43,720 --> 00:33:45,600
Speaker 1: doing now is they're they're trying to focus on other

661
00:33:45,680 --> 00:33:49,040
Speaker 1: areas for differentiation, and so it's there. It's not necessarily

662
00:33:49,120 --> 00:33:52,520
Speaker 1: just process, you know, it's process. It's also things like packaging.

663
00:33:53,080 --> 00:33:55,880
Speaker 1: They're doing what's known as a chiplet architecture. Now, where

664
00:33:56,120 --> 00:33:58,040
Speaker 1: I could have a single product that say we'll go

665
00:33:58,120 --> 00:34:01,400
Speaker 1: into a PC someday, that is not a single monolithic

666
00:34:01,480 --> 00:34:03,480
Speaker 1: chip anymore. It's a whole bunch of little chiplets that

667
00:34:03,600 --> 00:34:07,880
Speaker 1: may be made in different places, on different processes, depending

668
00:34:07,920 --> 00:34:11,719
Speaker 1: on whatever is best for that particular functionality, and packaging

669
00:34:11,800 --> 00:34:13,759
Speaker 1: those together in clever ways until it's got good. I

670
00:34:13,840 --> 00:34:16,239
Speaker 1: P there, until they're starting to leverage that. They're also

671
00:34:16,320 --> 00:34:19,000
Speaker 1: trying to leverage software and other things. And like all

672
00:34:19,040 --> 00:34:21,480
Speaker 1: of these things are all important. They always were. Other

673
00:34:21,520 --> 00:34:23,480
Speaker 1: players are also good at some of those other things

674
00:34:23,520 --> 00:34:25,359
Speaker 1: as well. But they're they're gonna try the best they can,

675
00:34:26,200 --> 00:34:27,800
Speaker 1: you know, if process is not going to be the

676
00:34:27,880 --> 00:34:29,440
Speaker 1: end all and be all and everything to to try

677
00:34:29,480 --> 00:34:32,120
Speaker 1: to leverage those those other areas. And now, like I said,

678
00:34:32,280 --> 00:34:34,200
Speaker 1: they're gonna have to make a call like one way

679
00:34:34,320 --> 00:34:36,640
Speaker 1: or the other um in terms of what to do,

680
00:34:36,800 --> 00:34:41,080
Speaker 1: do you give up on decades of of leading edge manufacturing?

681
00:34:41,200 --> 00:34:44,120
Speaker 1: You know, you know, prowess and and and leadership and

682
00:34:44,320 --> 00:34:46,360
Speaker 1: and bite the bullet and and and and and go

683
00:34:46,480 --> 00:34:48,239
Speaker 1: to TIS. I'm like, I don't know. I mean, they'll

684
00:34:48,280 --> 00:34:49,640
Speaker 1: have to make that call, and one way the other

685
00:34:50,120 --> 00:34:51,880
Speaker 1: will will know in a few years if it was

686
00:34:51,920 --> 00:34:53,640
Speaker 1: the right call or not. Things are gonna be pretty high,

687
00:34:53,680 --> 00:34:56,759
Speaker 1: high profile decisions. I also think tactically they need to

688
00:34:56,800 --> 00:34:58,759
Speaker 1: reach personally. And again, if we're just talking about the

689
00:34:58,760 --> 00:35:01,120
Speaker 1: stock for a moment um, I think they need to

690
00:35:01,160 --> 00:35:03,320
Speaker 1: reset expectations. I think numbers are too I and and

691
00:35:03,360 --> 00:35:05,319
Speaker 1: the problem I have right now I mentioned it once before.

692
00:35:05,320 --> 00:35:06,759
Speaker 1: I don't know what it looks like in three years.

693
00:35:07,480 --> 00:35:09,319
Speaker 1: And not only am I below the street next year,

694
00:35:09,360 --> 00:35:12,040
Speaker 1: but I can't tell you with with with confidence that

695
00:35:12,120 --> 00:35:15,520
Speaker 1: next year represents the bottom either. And that's the biggest problem.

696
00:35:15,560 --> 00:35:19,000
Speaker 1: The stock itself is hard to buy unless you feel

697
00:35:19,040 --> 00:35:22,439
Speaker 1: like expectations have been sufficiently reset so they can grow

698
00:35:22,480 --> 00:35:24,480
Speaker 1: off the trough. And I don't think they're there yet,

699
00:35:24,520 --> 00:35:27,239
Speaker 1: and I'm not sure so far the current management team

700
00:35:27,239 --> 00:35:30,239
Speaker 1: has not shown a willingness to sort of like rip

701
00:35:30,280 --> 00:35:32,120
Speaker 1: the band aid off, right, I mean they've they've they've

702
00:35:32,200 --> 00:35:34,640
Speaker 1: seems like they've wanted, you know, to go in dribs

703
00:35:34,680 --> 00:35:37,160
Speaker 1: and drabs, and that's usually not a good way to

704
00:35:37,239 --> 00:35:39,880
Speaker 1: go for stock performance, especially when things are on the decline.

705
00:35:40,400 --> 00:35:44,239
Speaker 1: So we'll see what they do. There's the issue just

706
00:35:44,400 --> 00:35:49,120
Speaker 1: that you know, especially as they don't you know, they

707
00:35:49,200 --> 00:35:53,560
Speaker 1: fall behind in UM, their ability to YEA develop cutting

708
00:35:53,600 --> 00:35:57,440
Speaker 1: edge foundries potentially outsource more. Is the issue just that

709
00:35:57,880 --> 00:36:01,040
Speaker 1: Intel will still be Intel, or Intel will still be

710
00:36:01,160 --> 00:36:04,080
Speaker 1: there and be competitive, but it's just another chip company,

711
00:36:04,120 --> 00:36:06,759
Speaker 1: and there's a Video and t SMC and a m

712
00:36:06,840 --> 00:36:09,080
Speaker 1: D and others, and what was once the sort of

713
00:36:09,160 --> 00:36:13,120
Speaker 1: category defining company is just there's just another player. Yeah,

714
00:36:13,120 --> 00:36:14,920
Speaker 1: I mean, look, so I'm not worried about until going

715
00:36:14,960 --> 00:36:18,280
Speaker 1: to zero, like it's a behemoth skill. I mean even today,

716
00:36:18,320 --> 00:36:20,160
Speaker 1: go look at their numbers. They're doing almost five bucks

717
00:36:20,200 --> 00:36:22,200
Speaker 1: and earnings this year and delivering I can't even remember

718
00:36:22,200 --> 00:36:24,680
Speaker 1: the number, something like eighteen billion plus in free cash flow.

719
00:36:25,800 --> 00:36:28,000
Speaker 1: Right and again, even even if it's on decline, like,

720
00:36:28,080 --> 00:36:31,279
Speaker 1: those are still pretty hefty numbers, right, And they they've

721
00:36:31,320 --> 00:36:33,320
Speaker 1: got a Ton, They've got a hundred and thirteen thousand

722
00:36:33,360 --> 00:36:36,360
Speaker 1: employees and they spend like listen, thirteen billion plus a

723
00:36:36,400 --> 00:36:37,759
Speaker 1: year in r D. It's hard to believe that they're

724
00:36:37,800 --> 00:36:41,120
Speaker 1: not they're not good things embedded within that right that

725
00:36:41,280 --> 00:36:43,680
Speaker 1: have value. But so you have that. But but I

726
00:36:43,719 --> 00:36:45,239
Speaker 1: think you're right. I mean, if you're gonna go to

727
00:36:45,320 --> 00:36:48,560
Speaker 1: a scenario where you know they're no longer differentiated on processed,

728
00:36:49,239 --> 00:36:52,279
Speaker 1: where where their their destiny would at that point would

729
00:36:52,280 --> 00:36:54,279
Speaker 1: now be in t SMC's hands, you know, like they're

730
00:36:54,360 --> 00:36:57,719
Speaker 1: there their ability to ship would be limited by how

731
00:36:57,840 --> 00:36:59,960
Speaker 1: much capacity they could get from t SM at that point,

732
00:37:00,000 --> 00:37:02,920
Speaker 1: similar to how am D is today. Right, that's a problem, um,

733
00:37:02,960 --> 00:37:05,160
Speaker 1: and where they're trying to differentiate and all these things

734
00:37:05,200 --> 00:37:07,160
Speaker 1: where other players are good as well, Yeah, you're you're right,

735
00:37:07,239 --> 00:37:09,920
Speaker 1: it becomes you know, they're they're they no longer have

736
00:37:10,080 --> 00:37:12,800
Speaker 1: that secret sauce necessarily at that point they're competing you know,

737
00:37:12,840 --> 00:37:14,719
Speaker 1: on a much more even footing with lots of other

738
00:37:14,760 --> 00:37:17,759
Speaker 1: players who are also very very very good. And so

739
00:37:17,920 --> 00:37:19,880
Speaker 1: you have that that that kind of a problem. I mean,

740
00:37:19,920 --> 00:37:21,800
Speaker 1: you can go look at other tech comes like an IBM,

741
00:37:21,880 --> 00:37:24,160
Speaker 1: for example, which you and I be, and but I

742
00:37:24,480 --> 00:37:26,440
Speaker 1: used to work at IBM Research, like like way back

743
00:37:26,480 --> 00:37:28,560
Speaker 1: in the days. I mean it's it's it's a great company.

744
00:37:28,560 --> 00:37:30,719
Speaker 1: They've got fantastic I P and everything else. But I

745
00:37:30,800 --> 00:37:32,920
Speaker 1: mean it's been a financial engineering sort of thing for

746
00:37:33,080 --> 00:37:36,040
Speaker 1: for many years. Right, they haven't grown, you know, And

747
00:37:36,239 --> 00:37:37,960
Speaker 1: and and that's kind of what is they've they've they've

748
00:37:38,000 --> 00:37:41,400
Speaker 1: been pulling like increasingly financial levels and sort of manufacturing earnings.

749
00:37:41,480 --> 00:37:44,279
Speaker 1: And you know that that maybe a scenario like if

750
00:37:44,360 --> 00:37:46,279
Speaker 1: Intel can can kind of get their mojo back, we

751
00:37:46,400 --> 00:37:49,000
Speaker 1: may see something like that. Um, it won't go to zero,

752
00:37:49,480 --> 00:37:51,440
Speaker 1: but you're not gonna see a ton of multiple expansion

753
00:37:51,480 --> 00:37:53,759
Speaker 1: like with with with something like that either, Right, And

754
00:37:54,360 --> 00:37:55,799
Speaker 1: this is the thing with Intel right now. I mean,

755
00:37:55,880 --> 00:37:58,000
Speaker 1: like the bull case on it from here is it

756
00:37:58,160 --> 00:38:01,719
Speaker 1: is very cheap and maybe something will go right. It's cheap, hope,

757
00:38:02,040 --> 00:38:03,560
Speaker 1: And both of those things are true. Like it is

758
00:38:03,600 --> 00:38:06,520
Speaker 1: extremely cheap even on my numbers which are below it

759
00:38:06,880 --> 00:38:10,160
Speaker 1: is inexpensive, and maybe something will go right. I mean

760
00:38:10,200 --> 00:38:11,800
Speaker 1: that that's kind of ball, but that that is not

761
00:38:12,000 --> 00:38:15,959
Speaker 1: like a hugely compelling case. You never you never sell

762
00:38:16,040 --> 00:38:18,279
Speaker 1: a tech stock because it's just because it's expensive. You

763
00:38:18,360 --> 00:38:21,120
Speaker 1: never buy a tech stock just because it's cheap. I

764
00:38:21,200 --> 00:38:24,680
Speaker 1: think that's where we are with Intel right now. Anything else,

765
00:38:24,760 --> 00:38:28,279
Speaker 1: sort of other last thoughts Stacy that we didn't hit

766
00:38:28,320 --> 00:38:30,400
Speaker 1: on that you think is sort of important for understanding

767
00:38:30,520 --> 00:38:33,000
Speaker 1: this story. No, I think that covers it for Intel,

768
00:38:33,040 --> 00:38:34,720
Speaker 1: Like if you if you'd like to type talk broader

769
00:38:34,800 --> 00:38:36,600
Speaker 1: and Semmi's I'm happy to come back any time. By

770
00:38:36,640 --> 00:38:39,480
Speaker 1: the way, well, we'll have to do it again sometimes

771
00:38:39,480 --> 00:38:43,120
Speaker 1: because I do feel like that it's a fascinating subject

772
00:38:43,280 --> 00:38:46,920
Speaker 1: and I was pretty transfixed. So I really appreciate you

773
00:38:47,000 --> 00:38:49,320
Speaker 1: joining us, and we'll have you bet you bet my

774
00:38:49,360 --> 00:38:53,680
Speaker 1: pleasure anytime. Yeah, thanks so much. Hopefully hopefully you get

775
00:38:53,719 --> 00:38:56,480
Speaker 1: to go on the next Intel call. Huh. They kind

776
00:38:56,480 --> 00:38:58,719
Speaker 1: of have to let you know. Oh, I figure, like,

777
00:38:58,880 --> 00:39:00,800
Speaker 1: look either either I'm gonna be first in the queue

778
00:39:00,800 --> 00:39:03,200
Speaker 1: where I'm never getting on again, probably after that article.

779
00:39:04,000 --> 00:39:07,080
Speaker 1: But I had no comment to the reporter, like I

780
00:39:07,120 --> 00:39:08,920
Speaker 1: didn't comment on that, and I'm nothing in there was

781
00:39:09,080 --> 00:39:13,279
Speaker 1: for me. Well, thank you for commenting to us. Yeah, yeah,

782
00:39:13,320 --> 00:39:28,560
Speaker 1: I know You've got any time, Tracy. We got to

783
00:39:28,640 --> 00:39:32,280
Speaker 1: do more of these sort of like industry deep dives

784
00:39:32,440 --> 00:39:37,040
Speaker 1: because honestly like seven n animators, ten nimators, all these issues,

785
00:39:37,120 --> 00:39:39,480
Speaker 1: Like I feel like, especially when you have someone like

786
00:39:39,560 --> 00:39:43,080
Speaker 1: Stacy who can explain these things, um, very clearly, I could.

787
00:39:43,120 --> 00:39:45,600
Speaker 1: I could really get hooked up this stuff. Yeah, Stacy

788
00:39:45,880 --> 00:39:48,560
Speaker 1: really stands out. I think, Um, he sort of makes

789
00:39:48,600 --> 00:39:52,440
Speaker 1: self side analysis sound fun, doesn't he. Like you can

790
00:39:52,560 --> 00:39:56,640
Speaker 1: sense the enthusiasm and what he does. Yeah. Absolutely, And

791
00:39:56,760 --> 00:40:00,800
Speaker 1: I think that, like you know, often, um, maybe what

792
00:40:01,080 --> 00:40:03,680
Speaker 1: sort of gets lost uh in cell side is this

793
00:40:03,760 --> 00:40:08,120
Speaker 1: sort of like focus on numbers and margins and all

794
00:40:08,200 --> 00:40:10,319
Speaker 1: that stuff. And I think that he does a really

795
00:40:10,400 --> 00:40:14,080
Speaker 1: good job of connecting the sort of like the hard

796
00:40:14,200 --> 00:40:18,120
Speaker 1: tech questions with the margins. So thinking about like sort

797
00:40:18,160 --> 00:40:21,520
Speaker 1: of like Okay, they're ramping up ten nanometers even though

798
00:40:21,560 --> 00:40:24,040
Speaker 1: the processes aren't great, so the yields are going to

799
00:40:24,120 --> 00:40:26,360
Speaker 1: be lower, so the margins are going to be lower.

800
00:40:26,800 --> 00:40:30,600
Speaker 1: The connecting the dots between the sort of technological debt

801
00:40:30,960 --> 00:40:33,719
Speaker 1: that they have, the technological difficulties that they have with

802
00:40:34,000 --> 00:40:36,319
Speaker 1: what actually falls through to the bottom line. He does

803
00:40:36,400 --> 00:40:39,120
Speaker 1: that really well. Yeah, I agree, Um, and I really

804
00:40:39,360 --> 00:40:42,600
Speaker 1: I mean, having spoken to him, I now feel like

805
00:40:42,719 --> 00:40:45,719
Speaker 1: I need to listen to the next Intel earnings fault

806
00:40:45,800 --> 00:40:48,239
Speaker 1: just to see if they let him on or not. Yeah, No,

807
00:40:48,360 --> 00:40:52,320
Speaker 1: I'm interested that too. Also like his point, Um, you know,

808
00:40:52,680 --> 00:40:56,399
Speaker 1: Taiwan is the most strategically important place in the world

809
00:40:56,520 --> 00:41:00,560
Speaker 1: right now if like that's where all of them you know,

810
00:41:00,680 --> 00:41:03,719
Speaker 1: that's where basically all of the cutting edge semiconductor manufacturing

811
00:41:03,920 --> 00:41:06,360
Speaker 1: is happening, or a huge bulk of it. And it

812
00:41:06,480 --> 00:41:09,239
Speaker 1: just feels like that story is like, we gotta talk

813
00:41:09,320 --> 00:41:11,759
Speaker 1: more about it. I mean that's huge. Yeah, well not

814
00:41:11,920 --> 00:41:15,680
Speaker 1: only the technological angle, but also the geopolitical angle as well.

815
00:41:15,960 --> 00:41:18,799
Speaker 1: That's sort of been heating up recently too. But yeah,

816
00:41:18,800 --> 00:41:22,280
Speaker 1: I agree with that. That's a good way of putting it. Um, Okay,

817
00:41:22,320 --> 00:41:25,560
Speaker 1: shall we leave it there, Let's save it there. This

818
00:41:25,760 --> 00:41:28,920
Speaker 1: has been another episode of the All Thoughts podcast. I'm

819
00:41:29,000 --> 00:41:31,760
Speaker 1: Tracey Alloway. You can follow me on Twitter at Tracy

820
00:41:31,840 --> 00:41:35,960
Speaker 1: Alloway and I'm Joe wisn't Thal. You can follow me

821
00:41:36,120 --> 00:41:39,400
Speaker 1: on Twitter at the Stalwart. Follow our guests on Twitter.

822
00:41:39,480 --> 00:41:43,399
Speaker 1: Stacy Raskin he's at s Raskin. You can see him

823
00:41:43,960 --> 00:41:47,080
Speaker 1: sub tweet companies or not. No one really knows exactly

824
00:41:47,120 --> 00:41:50,359
Speaker 1: what he's saying, but maybe he'll do it again. Um

825
00:41:50,560 --> 00:41:54,360
Speaker 1: so definitely follow him there. Follow our producer Laura Carlson.

826
00:41:54,560 --> 00:41:57,840
Speaker 1: She's at Laura M. Carlson. Follow the Bloomberg head of

827
00:41:57,880 --> 00:42:01,600
Speaker 1: podcast brincesca Levi at Prince just Get Today, and check

828
00:42:01,600 --> 00:42:04,440
Speaker 1: out all of our podcasts at Bloomberg under the handle

829
00:42:04,880 --> 00:42:06,680
Speaker 1: at podcasts. Thanks for listening