How the Number One U.S. Semiconductor Company Stumbled

us at all the current noise. That's still like one of the bigger long term storylines that attempt to sort of supplant the US at the lead in the lead of a technological manufacturing and development. Yeah, that's right, and I think that's where a big portion of the trade war, or the Trump administration's trade war with China actually came from. And that's why we see so much of it centered around technology things like Bye Dance, TikTok and UH of

course five G and Huawei and UH. Of course we're seeing Beijing rolling out it's it's new plans for I think it's for the next twenty years or something like that.

And of course tech dominance features quite highly. Once again, absolutely but it also like it takes it takes two to tango because in addition to UH China's own endeavors to leap frog or surpassed the US in terms of technological development, there's also an another element, which is that a lot of the US companies that we sort of associate with, you know, the great heritage of US manufacturing, whether it's Boeing, g E or Intel with chips, all of them seemed to be not doing so great. So

literally going in the other direction. Yeah, so this is something that I wasn't that aware of just because I've been outside of the US for a while. But Intel seems to be struggling. So I think in the summer they said they were something like twelve months behind schedule when it comes to developing like their new next generation of chips, and the share prices come down quite a

bit since then. And it's sort of the polar opposite to what you see happening at some other chip companies like t S mc over in Taiwan for instance, they seem to be doing quite well during the pandemic, well relatively well yeah, I mean you haven't exactly right. There seems to be going in the exact opposite direction, falling further and further behind, and their stock has really been

got hammered this summer. So, like what happened is sort of an interesting question because we could talk about China's research effort, but how this company that basically invented the industry, one of the you know, to put the silicon and Silicon valley, so to how it lost its lead and ability to be one of the world pre eminent manufacturers.

Is itself pretty interesting storyline here. Yeah, absolutely, And I mean I remember during the early two thousand's Intel was this massive, massive company and it had the branding and the advertising around it and just a huge deal. So it's interesting to see it um sort of turning around this year. So we're going to talk more about Intel and what happened, and I'm very excited about our guest.

We're going to be speaking with Stacy Raskin. He's managing director Senior analyst U s Semiconductors at Bernstein Research, and notably, at a recent uh Intel conference call after one of their quarters, the company didn't call on him, leading him to a subtweet a company on Twitter, which is always fun and doesn't happen that often with analysts. So Stacy, thank you very much for joining us. Oh my pleasure. I'm glad to be here. And by the way, um, uh,

nobody knows what that tweet was about. Okay, it was a subtweet of anything. Okay, So just on the day that you didn't get called on by until during their quarterly conference call, you tweeted cowards dot dot dot. But we'll we'll all pretend that we have no idea what that was about. Maybe it was something completely unrelated to your professional career. This is one of the mysteries of the universe. We'll leave it at that. It'll be a

mystery forever. We'll just leave that. We'll just leave that tweet. Um, but it is true that you didn't get called on that part. That is true. So let's forgetting the subtweet aside or whether it's a subtweet, what were you going to ask? Like, uh, you know, if here's your chance, Stacy Raskin at Bernstein Research Europe, what would you have asked? Oh? Boy, I don't even remember what I was going to ask at this point, and I have to go back and

look at my question list. Um, I'm sure it was something pointed though, Um, it typically as I have a reputation I suppose for asking those kinds of questions. And it's not really my fault. I can't help it. My my BS detection threshold is set kind of low, and I tend to forget who I'm talking to once I get going, So I can't help it. But it doesn't always engender a lot of love. Um, but that's okay. I don't have to uh, I don't have to believe this is gonna be a good conversation. Yeah, this, this

should be a great conversation. I'm looking forward to it. Well, well, we'll see if that threshold gets hit or not. I feel like cell side analysts with low BS detector is fairly unusual, or at least we don't get to talk to many of them. Um, it goes with the territory. Can you set the scene for us, like, how bad are things at Intel at the moment? In your view, like Joe said, you're sort of noted critic of the company recently. What's going on there? How bad is it?

I mean, it's it's problematic right now. And so you know, you started out the beginning of this call talking about some of the issues they're having with manufacturing. Um It's important to note these are not new issues. So the current issues are with seven nimeal seven animeter process, and you're right. In July they disclosed further delays there. They said the process was was twelve months delayed. They said the products, I think it versus the prior road net

were six months delayed. That being said, this is not the first time they've had they've had a problem ten nnimeters, which was the prior generation manufacturing technology. And if you want, we can go into what the numbers and everything mean, but just in general, ten anners was the prior one. They had big problems with that one as well. That one was delayed for five or six years and forced them to sit on on the you know, the two

generations back, which was called fourteen animeters. They were sitting on that one for many more years than they intended. But even fourteen nnimeters was delayed a little bit when they when they originally launched it, it it was it took about a year longer than they had originally anticipated to reach sort of like fully manufacturable yields and reach full volume. So these are not new problems that Intel. These have been building over probably half a decade plus and they

finally hit a wall. So I mean that that's sort of the current state of affairs. So Tracy and I aren't technologists, but we see these terms or hear them ten men, ten nanimator, seven min nanimator. Why don't you take this moment to describe like what these means? I mean, I get it, okay, smaller and smaller chips and efficiency and all that, but talk to us a little bit

about like what we're really talking about. Yeah, But so in theory, like it used to be, like some measure of the size of the transistor there was called the gate length that at one point um. In reality, these numbers are complete in total marketing. They don't actually mean anything in isolation um, and they're not comparable from one company to another. So, for example, an Intel tenometer part is not the same as as a t SMC ten

nimet part. I'll give you an example of this, by the way, And when when t SMC went from what they purport really called twenty nimes to sixteen, they didn't shrink the transistors at all. What they did is they changed the structure of those transistors. Um. They went from what and again, I we can talk about what these terms mean. But they went from a transistor that was called a planar transistor structure to a three D or

a fin fet transistor structure. But they didn't make them any smaller, They didn't squeeze them closer together, they didn't do anything. They just went from planer to fin fet and called it sixteen no shrink, know nothing. So that's so that's that's the thing that the members themselves actually stopped really having actual meaning or more than more than a decade ago. It's been marketing ever ever since. What you can think about them though, in terms of meaning,

it is typically some measure of improved transistor density. So squeezing more and more transistors onto a given area of silicon, it is some measure of that. And with every further note, in every further transition in theory, you should be getting better performance out of these chips and and better power efficiency. This is really what Moore's law is. By the way, it's sort of these three legs in the stools. It's

better performance, better power, and lower cost. And by the way, when people talk about Moore's law dying, which is sort of the situation we're in right now. It does not mean that it's impossible to to to shrink these things to make the transistors any smaller. What it actually means is that the cost leg of that three legged stool is going out the window. So we can still do this, like engineers are smart. If there's a if there's a

business case to shrink, they'll do it. But now we have to pay for it, whereas before it we used to get it every two years for free. It was fantastic, right, But that's kind of the situation of what's going on now. So we keep comparing in this discussion Intel to uh T SMC. But my understanding is they're they're not exactly the same company, right, the business model is slightly different.

Could you maybe explain how they differ? You bet? So. There are two primary um uh semiconductor broad semic connector business models in the industry. The first is called they called an i DM or integrated device man facturer, and these are companies of both design and manufacture their own ships like Intel. Right. The issue is, you know, a leading edge semiconductor manufacturing facility can cost these days, you know,

ten billion dollars, Like it's very expensive. And if you're going to build a factory that costs that much, you better have a lot of revenue in order to put through in order to cover those costs, and most most semi conduct companies do not. And so decades ago this became clear and the supply chain atomized, it split apart, and he gave rise to what's known as the fabulous foundry model, where you have companies, um say, like an

Nvidio or a qual Colm. These are referred to as fabulous companies in the sense that they do not have fabs fab as as a semiconductor manufacturing facility. They only design chips and then they outsource the manufacturing to a company known as a foundry. This is what t SMC does,

and they're able because of this model. They can agglomerate demand together from many semiconductor companies and build up the revenue scale that is required to support them the high costs of of of manufacturing um that ordinarily all these companies would not be able to support on their own.

And so that's what t SMC does and it's it's been kind of amazing, I mean in the sense that you know, for the longest time, Intel talked about being an i DM as being an advantage because you could verily tightly couple both the process and the design together and get really good products. And I guess as long as as both of those things were on the right trajectory, that was true. The problem is now because they're their their manufacturing side has followed by the way side, it's

actually really impacting them. Not only can they not tightly couple those two things together anymore, but it interferes with the design because you designed for a specific manufacturing process. If the process isn't ready, you gotta throw that stuff out. And so the fabuless founding model, the founding model, it stuff actually seems to be growing. It's ascending now. Um it seems to have the advantage of especially because they are able to at least at this moment, to stay

on their manufacturing road map. So we can kind of think of Intel in theory as you know, designing chips all in video and also having a fab t SMC. What you're saying is it sounds like you can't really like sort of neatly divide the two and if they're having trouble on the fab side, on the foundry side, then that also bleeds through to the design side. Yeah, because you don't design in isolation, right, you have to design for a specific set There's a set of design

rules that go with a specific manufacturing process. So, for example, if I'm Intel, you know, and we'll probably get to this, but until it's talking about using outsourcing potentially in a bigger way, until cannot just take their current designs and just throw them over the wall to t SMC, they have to completely redesign them um to to correspond to t SMCS manufacturing process, and and and and and t

SMCS design. So these two things are are coupled. And if you have problems with one that causes problems with the other. Sure, Wait, could could we do of into the manufacturing problems Intel a little bit more than like what exactly is happening there and what's gone wrong? Because of course, as we mentioned in the intro, you know, Intel was supposed to be the state of the art global standard for chip making for many many years, and

now it seems like it's not. Yes, So so first I want to step back and and say, um, this stuff is very very difficult to do. So the fact that people are having problems is not in and of itself a shock. These are the most technologically advanced products that humanity has ever devised. And I don't know if either of you have ever been in in a in a in a semiconductor factory, but you can think about this. I mean, if if if I just take these nodes sizes as as gospel, which I know they're not, but

I mean, let's just just take them. You know, at at Intel's right now is delivering ten anometer products right when when they're actually doing the manufacturing and they're imprinting these these features onto the onto the wafers. I'll try to be plaistic here, but they use use a laser light to to do this. The laser right now has

a wavelength of a hundred and nine three nimes. So they're printing purportedly ten nnimeter features using a wavelength of light that's almost twenty times the size of the feature that they're trying to print. Like, I'm amazed that any of this stuff works at all. So just just to get that out of the way, like it's it's it's astonishing by the This is why one reason that I love this space, because it's it's like I'm just continually in awe of the things that that that that humanity

collectively has has been able to pull together here. But in terms of specifically what's going on it Intel. So I'll step back at fourteen nimes. Like I said, that was a minor delay. Um it was. Like I said, it took them about an extra year to yield the process. Whether when I when I say yields, that's a simple concept that is, you know what, I'm making a silicon wafer full of chips. How many of those chips are good? That percentages your yield. The more the higher yield, the

lower your costs. So that's a good thing, um. And it's the yield that determine how quickly you ran for process into production. Fourteen anometers took a little bit longer. We still don't know why, but it didn't hurt them because back then they had a genuine five plus year process leadership. So they burned a little bit of it. But it was fine. With ten n we kind of know qualitatively what was what was wrong, um until had was using multiple patterning on some of their layers for

the first time. Again, we can talk about what that is if if we need to, but they were using a specific type of of of advanced process for the first time, and it caused problems. They were using um new materials at the time, like cobalt and other things, and they were using other techniques to get a much greater density improvement that was normal with a normal node transition.

They their their transistor density transitions permillimeter squared of of silicon area typically went up by maybe two point two to two point four times. With ten anometers, it was a two point seven times improvement. So the way the company has discussed this is it was just too big of a lead and they bit off more than they could chew and it caused problems. UM, I have no

idea what's going on at seven animeters. All I know is that it is it is something that's completely different from anything they hit them at ten and seven was supposed to fix those problems attend it. It was a smaller density improvement, it was only one point seven. They're using a new lithography technique that's called EUV or Extreme multra violet lithography, that was going to replace that multi

multi patterning and fix those problems. And so they were taking steps in order to to to to learn lessons from the ten nnimeter debaucle and and and to repair. And that that's why the seven nimeter announcment came as such a shock, because they've been telling everybody, you know, for a year or seven animeters is on track, we've learned the lessons, it's gonna be good, and then they came out and just dropped the bomb on us. And this is why going forward it's so problematic, because their

credibility on this stuff is now zero. Right, so when they're telling us where we think we've got to handle on it, we think we know what's wrong. I mean, like nobody knows what to believe anymore. So many good questions. I think we're gonna have to extend this episode to about two or three hours. But in all seriousness, we saw, you know, Tracy mentioned it when they dropped this bomb this summer. Uh, the stock took quite a reaction. I mean, it was a major plunge. I don't think it's like

a really recovered very much since then. Was that because this was understood to be fundamentally different, as you describe it, than those other delays, Because there's this nobody really understand, like explain the sort of financial market reaction to this one versus the previous setbacks. They've bet, yeah, you you bet, and I need to full d A m D. I

think and do this discussion a little bit. Um. So if you go look at A m D stock versus intels, their polar opposites, right, and and and part of the reason there was a A m D is now on a trajectory and and they've come a long way am D. You know, four five years ago, the controversy on that stock was are they going bankrupt or not? And the stock bottomed out, you know, in below two dollars. That's that's kind of where it was. The stock now was you know, close to eight and it's been it's been

even higher. The reason is a A m D. Actually um uh, they had already gone fabulous back in the financial crisis. Um they had been using Global Foundries, which is as another foundry and Global Founderies back in the time from shot am B in the foot um Global Founders had problems with their process technology as well. And then A m D. I mean the business was in was in total free fall. I mean they're there, their revenues a back cut in half. They had four or

five different rounds of restructuring was pretty awful. They had a last Hail Mary effort to get a new architecture, which they're delivering now. They're on their third generation UM and that architecture was extremely successful, and they made the shift from Global Founderies to t SMC. And so now you're in a situation where where am D actually has a competitive and in some cases even superior architecture, and

they have a superior process technology. And so they've been taking share from Intel both on the client side pecs as well as in servers. Right now, the real bulls on am D. They have this vision right that A and D is gonna go And I'll make up the numbers, but I mean twenty two there were twenty three. They'll be doing two fifty or three bucks and earnings, and by five they'll be doing five or six bucks and earnings.

And and this is a duopoli market. It's them an Intel primarily, so all that would be coming at Intel's expense. But am D has been kind of a dream. And so before Intel announced these seven animeter issues, it was kind of like, well, okay, maybe am you'll get to this two or three dollar number. In a few years. But by then a Intel will be going harder and seven they'll have fix the issues. At ten they gave

am D an advantage. And at that point, like it's all over right, and and Intel is going to be back on on on the ascendancy now because of these issues with seven animeters, like with A and DNA, you you could believe whatever you want, like there's there's no pushback because you have no idea what Intel is gonna be doing at that point um, and it makes the idea of the the x C E six CPU market and PCs and service, which today is sort of like a nine ten or an eight twenty kind of market.

You know, if you wanted to believe that it could be a true duopoly, a fifty fifth or sixty market in fears, if you want to believe that, you can and that all comes if it happens at Intel's expense, and the driving force behind it is a continued loss

potentially of competitiveness on Intel's part. And with the seven animeter delay, which like I said, was was really a bomb that was dropped on people, it becomes very easy if you want to believe that sort of thing, to believe it, So this was potentially a thesis changing announcement for Intel. That's where the stock reacted like it did. So is this just I don't know? Is all of this just down to Intel doing basically a chip version of vertical integration for far too long when other companies

decided to specialize in various ways. Yeah, so again, I don't know why Intel's having this, but it's kind of amazing that they are, because they looked. Intel is a hundred and thirteen thousand employees. They spend over thirteen billion dollars a year in revenue, which which is like almost double amb's revenue. And in R and D they Intel spends that much, it's almost double ADS revenue. AD's growing. Now, I don't, I don't know what's going on, like we

we don't, We don't know why. And now, by the way, it's it's causing bigger problems because like Intel's face with a choice now and and we'll find a little bit more about this in January. Intel is now mate trying to make the decision. Are they going to outsource it

in in a greater fashion? Right? Intel sources some don't, don't get me wrong, Like in Intel's bought companies like all Terror and Mobile I that use t smc UM And for some of Intel's internal volumes, you know, maybe not CPUs, but like chip sets and peripherals and other things, they've they've used t SMC So it's not new to Intel. But I mean Intel is now talking about if they can't fix their seven anime or problems, they may have to scrap up it entirely, and and outsources that that

as well. UM And so there's a lot of unanswered questions with into right now. Like right now, I have no idea what the company looks like in three years. That's probably the biggest problem. Like if they were to come out and give us a concrete plan and give us certainty that they could execute on it, I think the stock still would have fallen, you know, as much as it, but maybe you could felt a little more comfort with buying it at the bottom. Like right now

it is. It is very easily a valued trap because again we we don't know what's going to happen in three years. They're gonna make some announcement in January. We don't know what they're gonna say. And in the meantime, the competitive problems no matter what they do, we're only gonna get worse. A and D is gonna keep taking

share on some trajectory. Apple made an announcement yesterday, so like a good chunk of I wouldn't be surprised if three quarters of Apple's notebook business goes away from until next year, which I'm not sure as in the numbers. I know you didn't want to talk so much about short term, but I still think numbers next year, I still think people are smoking crack next year. The numbers are too high. They need to come down. They may

need to come down more. So this is dangerous. You mentioned that you don't know what until it is gonna look like in three years. So how difficult does that make your job as an analyst in trying to determine, you know, an appropriate price target or a way of valuing a company where there is this much uncertainty. Well, let me let me step back, because my job as an analyst, like my favorite thing, is controversy, right, because it gives me a reason to talk to my clients.

So um, from that standpoint, this is fantastic, right, because I don't think this controversy is gonna go away at any time. In terms of sizing that I mean, I mean, look like I have to sort of like our published model right now is status quo, and like I said, we're we're decently below I think the streets too high. But one thing we can do is sort of like run out scenario analysis and like what could things look like?

We We've done some of this, and it's actually kind of interesting because you know, if you sort of step back and you say, well, what would an Intel look like if they were fablite or if they were fabulous? If I had a magic genie that just snapped her fingers and they were fabulous tomorrow with the same competitive environment as we have, it doesn't necessarily look bad. Like gross margins would be lower because they would be paying a margin to to a TSOMEC to make the chips.

At the same time, they wouldn't be having to invest nearly as much in their own factories, so you'd save cap as you'd probably save R and D because you wouldn't be paying for for research and development, for process technology development, and so the operating margins and free castles could be just as high as they are and if not higher, Like that's possible if you had a magic genie that made the transition instant. The problem is, I

don't have a magic genie. It's gonna take years. Whatever they do in the meantime, it's gonna throw more uncertainty in the road map. And I'm not sure it's appropriate to take today's competitive environment, which is already deteriorating, and apply it to that, you know, to as an overlay to that model. And today where you have, like like I said, a nine, ten or twenty model, maybe by the time they're finished, it could very easily be a

sixty forty or fifty fifty model. And so the more they talk about this, you know that it's these are these are the kinds of things that you can roll out as an analyst, and we've done that and we'll continue you to do that. Let me ask you broader question. I mean, we we started talking about, we started this conversation talking about the context of the tech trade war, some of the actions the current administration has made against

Huawei and so forth. Should this be um, you know, stepping aside from your your stock up or down hat for a second or cell side analysts had per se, but if Intel a lot ends up needing to rely on Taiwan semi to make its chips. Is that the type of issue that you know could rise should rise to some level of anxiety and DC, Yes, I absolutely think it s because you think about this right right now.

You know, broadly in the world, there are only a few companies that can do leading edge semi manufacturing anymore. It's it's Intel, Samsung and TSMC. That is it. Everybody else who has ever you know, been at the forefront of semi connector manufacturing as exitive the leading edge. That doesn't mean that other players don't make stuff. I mean, there's there's plenty of folks out there with fabs, but in terms of the bleeding edge stuff, it's only those

three companies anymore. Only one of them is US and and the U S one is having problems. And so if you think about this, like what does that mean for Taiwan. I mean they always used to say like data is the new oil. I mean, maybe semi conductors are the new oil now, and and Taiwan like if this happens, I mean already is kind of turning into potentially the most strategically important country on the face of

the earth. And it's also a hundred and fifty miles offshore from China and they kind of think they own the ground that it sits on. So yeah, I think this is potentially problematic. And and and again, like even if Intel wanted to outsource like the bulk of their leading edge to Taiwan, like, is it politically viable? Like, I don't know, you know, there's other things going on in the US now. I mean, like one of the few sort of like bipartisan initiatives that are out there

right now is um around strategic semi conductor investment. Like certainly the Chinese are doing this. I mean, semis are a big part of there have been a big part of their five year plans. Um They've already been pushing

towards self sufficiency. Everything that's going on in terms of the trade war and the sanctions and everything else is just going to drive China to push towards self sufficiency even more because we have them by the balls right now, right, I mean, if if, if if we wanted to completely cut chinas semiconductor ambitions off of the knees right now, we have the ability to do that by banning semi sales. But it's a particular banning SEMIICAP and and and and

e d A and design software sales. We're already kind of doing that to waway. If we want to do it broader like, that's it. So they have to move towards self sufficiency. And I don't know what the political viability of of having like the last bastion of like advanced US based semi eductor manufacturing being outsourced to a foreign country. I I don't know how the how that's gonna fly, like, we'll see, but it's got to certainly be on on top of mind for any of the

policymakers who are looking at this area. On that note, do you think there's a role for policy to play in I guess, helping out Intel if if you think that it's a strategically important industry for the United States, well yes and no. So so there is have always already been efforts to invest and there were there was something called the Chips for America Act, which we actually had bipartisan support UM one of the few things UM.

I think that was subsumed into the National Defense Authorization ACTUM. But there is talk of of of funding for semis now in terms of Intel's problems. Like Intel's issue right now is not having enough it is not not having enough money. They've got plenty of money, So throwing money at the problem is not going to fix it, right, But you know, could you make it easier in general

for them? I mean they're talking about things like um, you know, investments for manufacturing, UM, tax incentives, R and D incentives, dark as getting involved that, so all of that stuff would would be good. One issue I have with some of the things that have been throwing around it is I still think they were dropping the bucket. So we've seen a few things. There's already some funny Now TSMC is going to actually be building a tab in Arizona. It's a PR headline right now. It's it's like,

I can't remember twenty thousand wafers per month. Ultimately they're gonna invest like twelve billion dollars or something over eight years. I mean that that's a rounding error, frankly. And then some of the numbers we saw in some of these initiatives, there's really been no funding that's actually been um apportioned. Yet they were talking about like whatever it was twenty eight billion or thirty billion or something that over a

number of years. I personally feel like, if the US is really serious about this, we need an Apollo moment. We need like hundreds of billions of dollars. I'm not gonna if we really want to make sure that we we we have you know, the majority of manufacturing that it's rebased in the U S right now, Well, it's all moving in Asia. UM. I don't know that the

political appetite is there to invest that much money. UM, but it's but I'll take whatever we can get at this point, Like it's like whatever they want to do it to start. UM. So I think, like long stories are think dollars would would obviously would help Intel a number of other players in the US just to make easy but it won't fix that the technology problems that are potentially driving the shift. Intel us to do that on their own. MM. One of the previous guests we've

regularly had on the show Dan Wanang. He's a technology analyst at gav Kell, and he talks about how like technoledge comes in sort of two parts, or manufacturing knowledge is in two parts. One is just sort of like blueprints, which you can sort of like write down on a piece of paper, and then the other is just sort of like this like tacit sort of understanding knowledge like how to build a factory, which is not something you

just like write down on a piece of paper. There's no like guy that someone can say, oh, this is how you build a factory and just follow it. And it's something that sort of like exists in the collective knowledge of people who have been building factories for their

whole careers. So going back to the seven animator to bacle, is there something that's like identifiable where like this some sort of like knowledge or transmission of knowledge from one generation of engineers is getting degraded or lost within Intel or within US manufacturing. Is there some is there some sort of identifiable leak where these things that once used to be known and ongoing learnings and improvement is just

not happening to what it used to be. Well, so I'll talk about like um, like more general and more specifics. I mean, in general, there's always a learning curve and so like like I like, I'll make it up like I've got ten animeters done and I'm going to seven, right, seven an animeters is going to incorporate all of the issues potentially that that that the prior gen the ten had plus a whole bunch of new ones. And so the fact that they still haven't really fixed ten and

they and but they really haven't. They're ramping ten animeters right now. But it's it's it's it's impacting significantly impacting their margins, which tells you that the yields are not they have but they have to ramp it. They can't wait any longer because of the competitive situation where they and B right, so they've got a rampant even though

the yield aren't good. But if you don't completely nail like the prior note, all of those problems are gonna still pretty much exist on the on the subsequent plus all to new problems. And so that may be part of it. And there's there's always learning curves on on on this stuff, and if if you're learning curves too shallow, it it can impact UM in terms of the employees. And you asked like other issues with like knowledge changers. So yeah, I I don't know specifically what's going on

at seven. I do know that in intil had a very sizeable layoff, and I know that there were worries that they had been laying off like some of the more senior employees at the time, and there were lawsuits and you can go back and look like there was a whole bunch of stuff in the news flow around this. So I have no idea what those employees were doing.

I don't know if they would have had anything to do with like the subsequent seven enemies, I don't know, but I do know that there was talk of a potential brain grain several years back on when when they had that lay up. So who knows with with seven again, my biggest concern with seven was again they never really seemed to nail ten either, um and, and that's going to to propagate and it seems like it is. So we've discussed all these problems, um and you clearly have

some concerns about this company. How does management actually go about restoring confidence um in the business model? Like, what what should they be doing at this moment in time? Well, I mean they're they're trying, right. I mean, look, there's there's the magic solution, which is like I wake up tomorrow morning and they say, hey, we fixed it. It's all good. I guess that would solve things. Although I'm not holding my breath or something like that. They're doing

other things. I mean, so you know they're what they're doing now is they're they're trying to focus on other areas for differentiation, and so it's there. It's not necessarily just process, you know, it's process. It's also things like packaging. They're doing what's known as a chiplet architecture. Now, where I could have a single product that say we'll go into a PC someday, that is not a single monolithic

chip anymore. It's a whole bunch of little chiplets that may be made in different places, on different processes, depending on whatever is best for that particular functionality, and packaging those together in clever ways until it's got good. I P there, until they're starting to leverage that. They're also trying to leverage software and other things. And like all of these things are all important. They always were. Other players are also good at some of those other things

as well. But they're they're gonna try the best they can, you know, if process is not going to be the end all and be all and everything to to try to leverage those those other areas. And now, like I said, they're gonna have to make a call like one way or the other um in terms of what to do, do you give up on decades of of leading edge manufacturing? You know, you know, prowess and and and leadership and and bite the bullet and and and and and go

to TIS. I'm like, I don't know. I mean, they'll have to make that call, and one way the other will will know in a few years if it was the right call or not. Things are gonna be pretty high, high profile decisions. I also think tactically they need to reach personally. And again, if we're just talking about the stock for a moment um, I think they need to reset expectations. I think numbers are too I and and the problem I have right now I mentioned it once before.

I don't know what it looks like in three years. And not only am I below the street next year, but I can't tell you with with with confidence that next year represents the bottom either. And that's the biggest problem. The stock itself is hard to buy unless you feel like expectations have been sufficiently reset so they can grow

off the trough. And I don't think they're there yet, and I'm not sure so far the current management team has not shown a willingness to sort of like rip the band aid off, right, I mean they've they've they've seems like they've wanted, you know, to go in dribs and drabs, and that's usually not a good way to go for stock performance, especially when things are on the decline.

So we'll see what they do. There's the issue just that you know, especially as they don't you know, they fall behind in UM, their ability to YEA develop cutting edge foundries potentially outsource more. Is the issue just that Intel will still be Intel, or Intel will still be there and be competitive, but it's just another chip company, and there's a Video and t SMC and a m D and others, and what was once the sort of

category defining company is just there's just another player. Yeah, I mean, look, so I'm not worried about until going to zero, like it's a behemoth skill. I mean even today, go look at their numbers. They're doing almost five bucks and earnings this year and delivering I can't even remember the number, something like eighteen billion plus in free cash flow.

Right and again, even even if it's on decline, like, those are still pretty hefty numbers, right, And they they've got a Ton, They've got a hundred and thirteen thousand employees and they spend like listen, thirteen billion plus a year in r D. It's hard to believe that they're not they're not good things embedded within that right that have value. But so you have that. But but I

think you're right. I mean, if you're gonna go to a scenario where you know they're no longer differentiated on processed, where where their their destiny would at that point would now be in t SMC's hands, you know, like they're there their ability to ship would be limited by how much capacity they could get from t SM at that point,

similar to how am D is today. Right, that's a problem, um, and where they're trying to differentiate and all these things where other players are good as well, Yeah, you're you're right, it becomes you know, they're they're they no longer have that secret sauce necessarily at that point they're competing you know, on a much more even footing with lots of other players who are also very very very good. And so

you have that that that kind of a problem. I mean, you can go look at other tech comes like an IBM, for example, which you and I be, and but I used to work at IBM Research, like like way back in the days. I mean it's it's it's a great company. They've got fantastic I P and everything else. But I mean it's been a financial engineering sort of thing for

for many years. Right, they haven't grown, you know, And and and that's kind of what is they've they've they've been pulling like increasingly financial levels and sort of manufacturing earnings. And you know that that maybe a scenario like if Intel can can kind of get their mojo back, we may see something like that. Um, it won't go to zero, but you're not gonna see a ton of multiple expansion like with with with something like that either, Right, And

this is the thing with Intel right now. I mean, like the bull case on it from here is it is very cheap and maybe something will go right. It's cheap, hope, And both of those things are true. Like it is extremely cheap even on my numbers which are below it is inexpensive, and maybe something will go right. I mean that that's kind of ball, but that that is not like a hugely compelling case. You never you never sell a tech stock because it's just because it's expensive. You

never buy a tech stock just because it's cheap. I think that's where we are with Intel right now. Anything else, sort of other last thoughts Stacy that we didn't hit on that you think is sort of important for understanding this story. No, I think that covers it for Intel, Like if you if you'd like to type talk broader and Semmi's I'm happy to come back any time. By the way, well, we'll have to do it again sometimes because I do feel like that it's a fascinating subject

and I was pretty transfixed. So I really appreciate you joining us, and we'll have you bet you bet my pleasure anytime. Yeah, thanks so much. Hopefully hopefully you get to go on the next Intel call. Huh. They kind of have to let you know. Oh, I figure, like, look either either I'm gonna be first in the queue where I'm never getting on again, probably after that article. But I had no comment to the reporter, like I didn't comment on that, and I'm nothing in there was

for me. Well, thank you for commenting to us. Yeah, yeah, I know You've got any time, Tracy. We got to do more of these sort of like industry deep dives because honestly like seven n animators, ten nimators, all these issues, Like I feel like, especially when you have someone like Stacy who can explain these things, um, very clearly, I could. I could really get hooked up this stuff. Yeah, Stacy really stands out. I think, Um, he sort of makes

self side analysis sound fun, doesn't he. Like you can sense the enthusiasm and what he does. Yeah. Absolutely, And I think that, like you know, often, um, maybe what sort of gets lost uh in cell side is this sort of like focus on numbers and margins and all that stuff. And I think that he does a really good job of connecting the sort of like the hard

tech questions with the margins. So thinking about like sort of like Okay, they're ramping up ten nanometers even though the processes aren't great, so the yields are going to be lower, so the margins are going to be lower. The connecting the dots between the sort of technological debt that they have, the technological difficulties that they have with what actually falls through to the bottom line. He does

that really well. Yeah, I agree, Um, and I really I mean, having spoken to him, I now feel like I need to listen to the next Intel earnings fault just to see if they let him on or not. Yeah, No, I'm interested that too. Also like his point, Um, you know, Taiwan is the most strategically important place in the world right now if like that's where all of them you know, that's where basically all of the cutting edge semiconductor manufacturing

is happening, or a huge bulk of it. And it just feels like that story is like, we gotta talk more about it. I mean that's huge. Yeah, well not only the technological angle, but also the geopolitical angle as well. That's sort of been heating up recently too. But yeah, I agree with that. That's a good way of putting it. Um, Okay, shall we leave it there, Let's save it there. This has been another episode of the All Thoughts podcast. I'm Tracey Alloway. You can follow me on Twitter at Tracy

Alloway and I'm Joe wisn't Thal. You can follow me on Twitter at the Stalwart. Follow our guests on Twitter. Stacy Raskin he's at s Raskin. You can see him sub tweet companies or not. No one really knows exactly what he's saying, but maybe he'll do it again. Um so definitely follow him there. Follow our producer Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg head of podcast brincesca Levi at Prince just Get Today, and check out all of our podcasts at Bloomberg under the handle

at podcasts. Thanks for listening