What Trump tariffs really mean to semiconductors: Former Intel CEO

Welcome to a new episode of the Opening Bid Podcast. I'm Yahoo Finance Executive Editor, Brian Saazee. Like I always say, this is the podcast that will make you a smarter investor, period. And big news, this is our one-year anniversary of this podcast. When we started over a year ago, we were like, yeah, let's do a podcast. But 154 episodes later, I don't know how I taped all these things, but we did. They're out there on the internet. I encourage you to read all of them. One year later, we're here with 154 episodes, amazing conversations. I've learned a ton about leadership, investing, markets, about human beings, so I'm very grateful to have done this. Shout out to the Yahoo Finance team. Their work on these podcasts have been absolutely amazing. But given it is a special episode, I have to have brought you a special guest, and I have one. That is Pat Gelsinger. Pat, I didn't know how to intro you. So I figured I'd just say it's Pat Gelsinger. Pat Gelsinger, former Intel CEO, former VMware CEO, technologist, and artist. I didn't even know you were an artist. Yeah, my Rembrandt, the 8046 in the Museum of Modern Art in New York City. So, you know, all these things you have to learn about me, Saz. I'm like, let's just go with Pat, because I've talked to Pat for many years. It's good to see you. Actually, let's start on that picture behind you. What is that exactly, and what did you help create? Well, I was architect number one, was the design manager bringing the 8046 into production. And so this is signed by myself and the chip architect, John Crawford. And literally, it was installed in the Museum of Modern Art in New York when they had a series called chip art, right? You know, the artistic designs of a chip. So yeah, so an artist as well here, and what I call my Rembrandt, the 8046, which in its day was the chip. It's a, I imagine you've had some time to reflect in the past few months. Have you gone back to those days and thought about, and we're going to go to career chips and everything, but have you thought about what you've created? Because, you know, I've talked to you so much, usually on earnings days or at the World Economic Forum, we're there, short period of time, Pat, talking about numbers, but like, it's hard to take a step back and reflect in your career, I imagine. Yeah. And, you know, obviously as you're going through periods of transition like this, Sazi, you look back and, uh, you know, the 46, the 386, you know, I did 14 generations of microprocessors. Okay. That's pretty substantial. You know, USB and wifi, key interconnect, uh, that everybody uses. When my granddaughter plugs in a USB stick, she says, thank you, Papa. Right. And, uh, you know, the, uh, industry standard server that became the foundation for cloud computing and, uh, becoming a software executive at, uh, VMware. And then, uh, coming back, uh, you know, chips act and restoring, uh, semiconductors in the U S. You know, what an awesome journey for a farm boy who, uh, started at 18 years old at Intel. You know, it's been awesome. And, you know, as my wife said, uh, after the, uh, retirement from Intel, you're not done yet. So, uh, off we go on the next piece of the journey. So after that, uh, after you leaving Intel, it was December last year. How do you spend the next few months? I mean, these are, I have to tell you this, I mean, these are pressure packed situations. And I talked to you, Pat, uh, on times when, you know, earnings weren't that great and you always still came off us and the stock price probably didn't react like you wanted to. Once you were out of that pressure cooker, what do you do? Well, you know, I did a hundred meetings, Sazi. Uh, as I say, you know, different venture capitalists, uh, private equity firms, you know, government roles, uh, university, uh, roles, different operating roles I might take on. And, you know, one of the, you know, you sort of make a decision tree and you work through that one of our first decisions was, do you want to take on another seven by 24 operating role? And I've used the CEO job seven by 24, you are on everything's yours. And we decided, okay, the next one, the next phase isn't going to be an operating role. Uh, and then, uh, you know, really sort of boil up to, you know, write big checks and private equity and, you know, being able to make an impact that way. Or, uh, move into a venture capital, uh, which we've done now with Playground Global, deep tech, long tech. And then the other passion I've had, uh, throughout my career has been, uh, faith. And, uh, with the role I've, uh, uh, expanded at, uh, glue, you know, a faith tech business that just the magnitude of the faith community and how bad the technology is and being able to combine those together, right. 350,000 churches in the U S alone. So deep tech, long tech faith tech, uh, that'll be the next phase of the journey for Linda and I. Pat, did you get to take a vacation? I, I, I'm, I'm a very, I'm an extremely energetic guy, but there was a point in 2023 and 24, numerous points. I didn't know where you were next. You were traveling the world. I was trying to like follow you through your ex account. He's literally in different countries meeting with then president Biden. Have you just, have you had the time to just take a week off and just, you know, go on, drink a drink somewhere maybe, or I don't know, sip something. Well, you'll, you'll, you'll enjoy this. We took the cruise and, uh, Asia, Cambodia, Thailand, Vietnam, and you know, got some time away, some more time, all the grandkids kiss Christmas programs this year and you know, some, uh, break, but you know, I'm wired pretty aggressively as you know, a Sazi. So here we are on the, on a cruise, right? We're floating down a little river boat in the Cambodian jungles, right? A mangrove jungles. And the idea comes up me to write a children's book for my grandchildren. So I'm now working with a publisher, right? Cause even when I'm taking a vacation, I can't quite take a vacation. So we, you can look forward to a copy of the mangrove monkeys. You know, I've put all eight of my grandchildren into the monkey family and their jungle critters. So even when I'm resting, I couldn't quite rest too much. So tell me, tell me this children's book. I didn't see that one coming, Pat. Um, tell me this children's book somehow ties into semiconductors and chips. These monkeys are using chips or are they machines? Absolutely not. This is just monkeys, critters, and yeah, little monkeys. And each one of our kids has a character. Each one of the grandkids is a caricature in the monkey family. The rest of the family is, you know, uh, you know, is alligators and eagles and jaguars. And so anyway, I'll show you a copy of the mangrove monkey someday. Yeah. I, yes, I don't like that sign, sir. So you are now, so you got that out of the way you were on your cruise. You got the book idea. Now you're general partner at playground. And for those investors, not familiar, what is playground up to my, you know, according to my research has what $1.2 billion of assets under management. That's a very big number. What are they investing in and what are you up to there? Yeah. And, you know, as we were going through our a hundred meetings, a hundred days of, uh, what's next when you walk into most venture capitalists, you see a wall of tombstones as I call it, right. You know, the, the plexiglass of you too can be like an Airbnb, like a Netflix and the other wall, uh, of those, uh, IPOs. When you walk into playground, you find an engineer's playground. You're greeted by robots, right? You see the world's largest 3d printer, right? You have the world's largest free electron laser, chemical labs, et cetera, and a little playground in the middle, right? Yeah. This is truly an engineer's playground and it is deep tech, long tech. We, uh, our motto is, uh, we invest somewhere between the impossible and the improbable. Right. You know, taking those deep tech things like quantum computing that we started seven years ago, you know, next generation light sources for EUV, you know, practical robotics, uh, next generation, MRNA biomarkers, you know, deep tech, long tech, uh, activities. And, uh, I'll be the fourth general partner here and, you know, quite excited about it, as you know, I've always been, you know, a geek at heart. It's like playground, uh, sounding like a big free agent there, Pat. Um, you mentioned practical robots. Are you a big guy that is in on these robots that we're all going to have them in our house and I'm going to have a robot doing my laundry and pushing a vacuum? Well, you know, a couple of our companies, uh, are, uh, you know, like agility and, uh, you know, fabric, you know, these companies, it's not about how you replace humans. It's how you augment humans. And, you know, with that, uh, uh, warehouse, uh, configurations, automating, uh, delivery systems, and really bringing robotics into those, uh, environments. And, you know, uh, the, uh, you know, I've never been a AI is going to replace us or eat us guy. I'm always, how do we use technology to enhance human existence? And in this case, uh, we're finding extraordinary success where, uh, you bring robotics under the command of warehouse workers, for instance, and you get extraordinary efficiency, uh, the ability to augment simple things like cart movements and so on. Uh, the, uh, ability to have humanoid like robots, but are aimed at tasks, uh, in manufactured locations. And all of that, of course, is the superpower is AI. Uh, vision, you know, uh, physical AI, the ability to move and, uh, operate. So yeah, it's a pretty exciting, uh, domain. So I, let's say I come in, uh, and I have a robot startup, Pat, and I'm in that room and I have to piss you. Um, what do you, what are you looking for in terms of a human being that you would give money to? But also how do you know their slide deck? Is it a bunch of crap? Yeah. So, you know, I say two things about, uh, uh, us at Playground. The first thing is most VCs are looking for you to have had successful IPOs already. Right. We are not, we are looking for people with deep tech, you know, a better team for us to partner in would be, you know, a handful of PhDs, a professor, you know, five people who are the experts in their domain, so that's who we're looking for teams that otherwise probably wouldn't find funding, uh, wouldn't be able to get started up. And then we invest heavy early into those teams. So we're looking for, I'll say, you know, we, we love technology risk. We hate market risk. In other words, if this works, okay. The market is obvious, but it's proving it works. So we want the best people, you know, we invest heavily, we partner with them early and then grow them into a big, successful startups that everybody wants to invest in by the time they get to the C, D or E round of funding. So we're C to A, B round funders. And, you know, with that, Hey, I love these technologists and they're excited to have a guy like me on the team. Who's operated companies of scale. Who's had to walk the halls of, of Congress to get funding and to truly shape technology policy. All right. Hang with us, pal. We're going to go off for a quick break on opening day. Lots more to get to don't go anywhere. Please. A special, uh, one year episode. We'll be right back. All right. Welcome back to opening bid. Uh, as I've been saying, this is our one year episode, 154 episodes. And of course had to bring you a very special conversation. Uh, Pat Gelsinger, former Intel CEO, former VMware CEO. Uh, I didn't realize he's about to be an author children's book. Are you surprised with the, uh, surprised with that one? Looking forward to, uh, checking that one out, even though I have no kids, I'm still going to read it. Cause I, I want to see what you're up to Pat. Um, you mentioned you, you, uh, you in Congress, you know, I always saw you, uh, meeting lawmakers. Of course you met with, uh, then president Biden on the, on the chips act. I just had a conversation with treasury secretary, Scott Besson. I came away thinking, Pat, wow, um, we really need to get more chip production in this country. And we need to do it like yesterday. Like how important is this, that this gets done not only using the chips act money, but companies like an Intel and NVIDIA and AMD, which we have seen NVIDIA and AMD and of course Intel, but they really put their foothold in the U S. Yeah. And you clearly, and you know, uh, this is quite a rich, uh, topic area. Uh, Sazi and, you know, Hey, I spent four years, uh, uh, a lot of. Effort and, you know, I'll say shoe leather and, uh, you know, the political cycle to help get chips act done. And I still believe it's the most important piece of industrial policy, uh, since world war two. Right. We have to be investing, creating the manufacturing incentives, but more importantly, even the long-term R and D. So I do think that remains important. Reshoring manufacturing is a critical piece of that. However, manufacturing alone isn't enough. We need the technology here, right? And if you are still dependent on Asia to design the transistor, then you're still dependent on Asia. And in the semiconductors, R and D and manufacturing are hand in hand, uh, with each other, like few other industries are. So we need the R and D here as well. And that's why, you know, the, uh, Intel's global foundries microns are so critical. Uh, but also things like Natcast and NAP MP, we have to keep that long-term R and D. One of the companies that attracted me most to join playground was X light. And if you think about a fab, what's in the middle of fab lithography or EUV as it's called what's in the middle of lithography. Light, God said, let there be light and X light is building next generation light sources out of free electron lasers. And, you know, this is one of the companies that I believe will help us rebuild the long-term view of semiconductors, uh, here in the U S. And quite excited. We just announced that I'm now the board chair, uh, for X lights and jumping on that one, uh, quite aggressively. And, you know, we do want to see that become a centerpiece of the U S semiconductor R and D, uh, initiatives, but also that, uh, you know, we really use it to transform the economics as well as the long-term capacity of Moore's law. In the U S and then of course, you know, the two other things that we've seen this administration, you know, put, uh, more pressure on, you know, what is and, you know, having supply chains neutral means they don't move. You must create incentives for supply chains to move. And I do think tariffs as a piece of that, you know, the other is, uh, the investment fund that they've announced as well, essentially the U S sovereign wealth fund, you know, we have to be putting our financial capacity to drive the long-term build out of not just the manufacturing and R and D and the long term, uh, restoration of these engines. So all of those together, you know, I'm quite excited that, uh, yeah, I think, uh, we have the opportunity and those three pillars, the chip sack tariffs and, uh, sovereign wealth fund, I think pretend to be a powerful combination. Pat email on the topic of tariffs and the trade war, how, when you see news as we have that China is going to restrict critical earth minerals to, I would imagine the U S, um, and these things get used in semiconductors and very various other electronics. How concerned are you that what China is doing on this front and other fronts of technology could impact the U S economy in the U S market? Well, of course I'm concerned in that regard, and I've always been a free trade, uh, you know, perspective in that, uh, you know, view and, uh, opinion. You know, that said, uh, you know, rare earths, it's not the availability of the minerals. It's the refining, you know, we have enough rare earths. You know, we've allowed the refining. Some of that's been a driven by economics. Some of that's been driven by environmental policy. Yeah. We need to bring the refining back and it either needs to be on short, near short or friends short, uh, going forward. And, you know, I think as a, we're trying to see those supply chains readjusted in a more balanced way. Yeah. We also hope that's a friendlies, uh, you know, countries like Australia, you have deep, long experience in mining and refining. Hey, you know, let's get our French shoring to, uh, accelerate some of these. But we also see that some of this is just great innovation. And some of the playground companies as well are finding new, more effective ways, uh, to, uh, bring minerals to life. Uh, one of our companies is doing, uh, uh, quantum detection, uh, to be able to identify more sub earth opportunities for ores mining and, uh, reserves. So, Hey, you know, I think technology, you know, remains the way that we find our path forward. I, Pat, I dig this new version of you because I can probably, I can ask you certain things now that maybe I couldn't ask when you were Berlin again, town, this is going to be one of them. Why is an Apple making iPhones in this country? And then secondarily, will they, can they make iPhones profitably in the U S in our lifetimes? So there's, there's two different perspectives there that I think deserve, you know, one is, Hey, they have enough profits, you know, margin, et cetera, they can choose to go invest them appropriately. And the thing about supply chains is I, I call them sedimenting, right? You know, and what happens is you start to build them a certain place. And then the plastics company is built near where they are. And then the resistor company and then the display company, right? And so what happens is these other elements of the supply chain start to aggregate around the core elements of the supply chain, so they sediment into those locations and that sedimentation takes decades, right? It's not like this happens overnight, uh, you know, for, you know, even though you say, Hey, you know, let's throw down concrete, let's move equipment in, let's start building in this block, this takes decades. For these to occur. So, you know, that's why I think the, you know, the, the need for policy today, because CEOs need to stand up and make decisions that will be decades long, and that's why we can't have flip flopping of tariff policies, et cetera. You know, we just say, here's our policy objectives and then here's how we support them with the right financial inducements for those to occur. And absolutely. We can see those supply chains move. You know, and some of the things that would go back to the earlier part of the interview. You know, the primary reason supply chains moved to Asia was low cost labor. Well, as we get more and more AI driven robotic automation, right? You're able to say, Hmm, you know, I can now run a U S robot at a dollar per hour compared to $6 per hour for a low cost Asian site versus $30 per hour for a high cost U S site, Hmm. Yeah. Use the technologies to allow us to reshore, but it's going to take a while of consistent policy and investment for that reshoring to occur. But an iPhone and an iPhone made in the U S it's still would cost more than what is being made out of China. I mean, the iPhone was 900 bucks. I mean, but I couldn't, I was trying to figure out if the administration, when I talked to secretary Benson, if they would be okay with having an iPhone cost more if it's made in America. And I just couldn't figure that out. Yeah. And I, you know, there, there, there will be costs associated with bringing supply chains back. You know, again, it took decades for them, the sentimental way they don't return because you asked them to. They returned because you've created economic incentives, capital, uh, capacity to drive their return. So I think unquestionably, you're going to see.