Intel CEO on Semiconductors, Chips Act and Geopolitics ｜ WSJ Tech News Briefing

This is your tech news briefing for Tuesday, October 25th. I'm Zoe Thomas for The Wall Street Journal. The chip industry is in a period of transition. Intel, which reports earnings later this week, has been hit hard by a recent softening of demand for semiconductors. But the company has also had some recent wins, including the passage of the bipartisan CHIPS Act. That'll pour about $52 billion into expanding domestic production of chips. And Intel is betting big on US production, with plans to build foundries in Ohio and Arizona, as Western companies look to break their reliance on Asian supply chains. Intel CEO Patrick Gelsinger kicked off our TechLive conference yesterday, speaking about this and more with WSJ editor Thorold Barker. Here are highlights from their conversation. Hello, everybody. And Pat, welcome to TechLive. Thanks very much for coming to be our first speaker. We've got a lot of ground to cover. So for the last few years, we've read endlessly about the shortage of chips in the world and not being able to get enough for cars and other things. That seems to have now flipped into a different situation where there's an excess of chips and prices have come down and you've had some pretty tough earnings. You've been in the industry a long time. Is this a chip cycle, or is this an economic recession that you're looking at? Well, obviously, chips are super important to the planet. It's why we saw the CHIPS Act, why we saw all this discussion around chips broadly. And the expectation is by the end of the decade, the chips industry approximately doubles. Today, about $600 billion. By the end of the decade, $1.1 trillion in that view. So you clearly have a growing industry long term. So fundamentally, we have a long-term growth cycle in front of us, and we have near-term wild cycles. Obviously, the COVID-induced cycle where sort of overnight, we saw supply chains disrupted. So supply decreased by 5-ish percent on an industry that typically is growing by 5% per year, 5%, 6% per year, and demand went to 25% per year. So all of a sudden, you see this huge acceleration in demand, decrease in supply, disruptions in supply chains, and I'll just say the overstimulation of the economies around the world. And clearly, that was most accentuated in the semiconductor industry. Well, now we're catching up. You've seen the economy slow down around the world, supply chains for the first time. So it really is one of those cycles, but it's against the backdrop where the industry's going to double this decade. So we have to keep building those long-term factory build-outs, even though we have to make near-term adjustments and price variations, and dealing with Shanghai port shutdowns and so on. It's been a pretty dramatic year and a half. So you've been in Washington a lot, helping to push through the CHIPS Act. How reliant is Intel now on subsidy going forward? First, let's contextualize the CHIPS Act. We have the U.S. CHIPS Act and the EU CHIPS Act. If we were building manufacturing in Asia, the expectations and SIA estimates say it'd be 30% or 40% cheaper if we were building in Asia. Supply chains are now firmly consolidated there. It is simply economically uncompetitive to build in U.S. or Europe. And that's why we saw the industry move from 80-20 in 1990 in U.S. and Europe to 20-80 today. It's been a dramatic shift over the last 30 years. So the CHIPS Act was balancing, essentially leveling that playing field. So your strategy would still have been the same in terms of both the design and the production of CHIPS. You'd have just been doing it somewhere else. Absolutely. It has to be competitive. When you're moving that level of investment, it's got to be competitive. So a lot of this is about China. Can you talk a little bit about what your view is on the latest rules out of the Biden administration to stop technology transfer, both in terms of the technology itself and the people doing that? What is your take on this? Is this a good thing? I think it was inevitable. This view of how something so critical to every industry, every business, and are we going to be able to continue to have leadership on those technologies. Part of the reason I've been such an advocate for many of these policies, I viewed this geopolitically as inevitable. That's why the rebalancing of supply chains was so critical. Are we going to have the supply chains that we need for our autos, for our AI, for our national security, for our game consoles, for our PCs? But when you were lobbying for the CHIPS Act, were you also pushing for this? No. But you're welcoming of it. Yeah. I clearly expected this to be the case. It's part of the reason that I've always used the phrase, geographically balanced, resilient supply chains. Taiwan plays such a critical role for the technology supply chains, but it's precarious. Even the Taiwanese vendors believe deeply they need their supply chains to become more balanced. I view this very inevitable as we look to the future. Given that, none of the policies that are being put in place now, I don't think any of us should be surprised by that. Just quickly, what is the gap like now between Chinese capability and Western capability? Today, the most advanced in China is about 14 nanometers. Today, we're doing 7 nanometers, about to do 4. TSMC in Taiwan is about to start their 3 production. We're racing to have our sub-2 nanometers by 2025. The policies that you've seen are basically to maintain or increase that gap between where China is and where US or European capabilities would be. Great. Thank you very much, Pat. All right. That's it for today's tech news briefing. Tech Live continues tomorrow. For live coverage of the event, visit our website, wsj.com. And journal subscribers can get a complimentary online pass at wsj.com slash tech live. I'm Zoe Thomas for The Wall Street Journal. Thanks for listening.