Intel CEO Gelsinger on Massive New Hub Chip Shortage

Talk to us about this spending and whether or not the government will be able to line up alongside you and put their money to work, too. Today was a great day and really was an honor to be with the president, Secretary Raimondo, Senators Portman and Senators Brown. And there really is, I'll say, enthusiasm for this project and right now I'm here in Ohio with the governor and the state legislator leaders, the Ohio state leader, and they're just thrilled to see this project coming to life. But as the question asks, will we get the CHIPS Act done? And I'll tell you, today's announcement clearly is just breathing a bit of energy and momentum, enthusiasm across the legislators and President Biden and Secretary of Commerce Raimondo were just adamant that we're going to get this done, right? The senators and congressional leaders, good bipartisan, good bicameral support. So we're optimistic. And clearly, as I communicated today, you know, we're assuming we get this done because we want to make this project go bigger, faster, and we're putting our chips on the table already. Pun intended. Well, let's talk a little bit more about the project specifically, Pat, and specifically what you want to produce out of this plan. Is this going to primarily be chips for your own business or is this going to be more centered around the foundry business and external customers? Yeah, it's going to be both. And what we said today is we're announcing two fab modules. It's a large location, a thousand acres, because I'd hope to build out a full eight fabs or more on this location. And if we do that full project, it would be a hundred billion over the course of the decade or so. So a massive project, initially 3,000 jobs, 7,000 construction workers, supply chain, et cetera. I mean, this is just fabulous. And the products will be our most leading edge chips. So as we said, this will be the angstrom era when we're going to two nanometers and below into the angstrom era. So it'll be the most advanced chips, potentially the largest manufacturing location in the world. We'll use its output for our internal products, but also for those of the foundry customers as well. So it's going to cover both. And clearly we're expecting as industries like the auto segment, which are very prevalent here in Ohio, you know, as they do more AV advanced five and six G connectivity infotainment, you know, they're increasing the use of leading edge chips as well. So we do expect that it's going to satisfy a full range of industries, our products, foundry customers, and be a massive kick for making this, as we called it today, the Silicon Heartland, not just Silicon Valley. Today begins the Silicon Heartland. So talk to us, why the Heartland? When you think about some of the economic incentives that were offered from Ohio, why Ohio? Yeah. And we looked at 35 to 40 sites, many, many different states across the nation, you know, some of them are looking for, you know, a large flat location like we found here, one with great energy and, you know, the ability to have strong support from the local government labor costs, but more important than labor talent. And here we are. And we had the president of Ohio state university join us. But many of essentially all of the Midwest universities are within just a couple of hours of the location that we've picked here. So it's quite central. And of course, Ohio came forward very aggressively with support and economic benefits to really make this competitive. And that's what I've said for the U.S. Chips Act. It's not that we're looking for handouts. We're looking to be competitive on U.S. manufacturing with U.S. IP on U.S. soil to allow us to compete, to reestablish a globally balanced and resilient supply chain. And I think today's step forward was a huge step in that direction. Talk to us about how quickly the U.S. can regain that, how quickly you think these supply chain issues have been such a headache for your industry, for all of the supply chains that you then have to serve the auto industry and many other. When can that be finalized? How quickly in a long term sustained manner will we see growth? Yeah, you know, today's announcement, you know, we're just hopefully later this year we said we want to have shovels in the ground and this factory won't come online until 2025. And obviously for all the consumers of chips, it's like, wow, that's a long way out. It takes a long time to build such an advanced manufacturing location. And that's part of the problem of the near-term shortages that we're facing. It just takes a long time to build these very advanced, sophisticated facilities to expand the semiconductor supply. Now, the industry has done a great job. We've gone from maybe 4 or 5 percent growth to almost 20 percent growth last year. However, we still expect that through 2023 that we're still going to be facing supply shortages. We just can't ramp up fast enough to this global surge in demand and COVID interrupted supply chains and it caused work from home. You know, everybody needs a PC now at home, not just one. You know, mom, dad, the kids, everybody needs one. And we've seen this across industries. And through this year into next year, we'll still be fighting to overcome the shortages. For our audiences out there on TV, radio, and YouTube, we are in conversation right now with the CEO of Intel, Pat Gelsinger. Pat, I'm curious about just the change in strategy for Intel. Obviously, you're relatively new in the job as CEO. Your predecessor, Bob Swan, had actually entertained the idea of actually doing away with a lot of the in-house manufacturing that Intel does, even outsourcing a lot of that. Your strategy is clearly taking the company in a different direction. And I'm curious from a profitability standpoint, a cost basis standpoint, and also a competitive standpoint versus, you know, TSMC and some of the other folks that are in the same business. How is this strategy going to match up with that? Yeah, you know, there's really three companies, two in Asia, TSMC and Samsung, and Intel in the U.S. that can manufacture at these leading edge technologies, as I say, going into the Angstrom era. And when I came into the company, was interviewing for the job with the board, I said, boy, if you want to break the company in two, I'm not the guy. You know, my strategy is we are going to build and we're going to build aggressively our capabilities, but also become a foundry for the industry. And the margins of the foundry business are good. And I believe if we have leading technology capacity like this, we're going to be very effectively competing. But it's also more important than that. It isn't just an Intel statement. This is an industry and a United States statement as well. You know, we believe that this is more important to humanity than, as I've said, where the oil reserves are. You know, every aspect of your lives is becoming more digital. Everything digital runs on semiconductors. We need this for our economy. We need it for our supply chains. We need it for our national security. And Intel is really the company that can step into this. We've said decisively and with today's announcement, we're going to step into this aggressively. We're going to build in America and Europe, be a major supplier of our products, but open the doors wide to become a foundry. And we believe that we have the technology, the opportunity to do so at scale competitively. And today, the Silicon Heartland begins. Where is the future end market? You said for PC or smartphone users hearing that the new, one of the new facilities won't be up until 2025 seems like a long time away. We could also be shifting the market. And I'm curious that end market on a 5G, you even mentioned a 6G. What is that next generation look like? Yeah, you know, the factory that we're announcing today, 2025, but we're just about to open a new factory in Oregon. We're already well underway in our Arizona factories. We have builds in Israel and Ireland going on as well. So we're rapidly expanding capacity. And those will be coming online over the next couple of years. And it really is servicing a very wide range of markets. It's everything from PCs to cloud providers to 5G and edge solutions, also enabling high performance AI. Increasingly, we're finding more of our chips into the automotive sector, industrial sector. You know, as I've said, cars are becoming computers with tires. Today, about 4% of the bill of materials of the car is semiconductors. By 2030, that's expected to go 5X that to 20%. So, you know, they're becoming, you know, the most advanced infotainment, autonomous driving, electric vehicles, all of these are driving this explosion. And this investment is to cover a broad range of market segments. It will be, you know, our most leading edge technologies, potentially the largest manufacturing location for semiconductors in the world, right here in the Silicon Heartland. Pat, talk to the people who say people have just brought their ordering forward. They've panicked. They're worried that they're short of supply right now. The people have been stuck at home, bought all the pieces that they possibly need. How sustainable is the demand that you speak of that has ramped up to 20% over the next few years? Yeah, you know, we do think that there's a step up in the industry. And we analyze this very, very carefully, both in the PC segment, the cloud segment, but in a broader set of areas as well, such as graphics and, you know, this network edge build out with 5G as that becomes deployed. You know, but you're seeing this in every aspect of human life, even, you know, the development of the vaccine, right? It was run on computers, right? You know, essentially the RNA sequencing is done on computers. Every aspect of healthcare is becoming more digital. Every aspect of our human experience, our social experience. You know, we don't think that work from work is the returning. It's work from anywhere going forward. So we do see this as a new model of work that is more productive for the future. We see education becoming less and less about where you are, but it is about what you're able to participate in. So all of these changes, we don't see this demand decaying back post COVID. We see it being a sustained acceleration of the digital experiences. And that's why, you know, our corporate statement and our vision is, is that we will produce technologies that improve the lives of every person on the planet. That's what we're about. And we see no end of that digital demand.