Intel Foundry Direct Connect Event

By Patrick Moorhead - February 26, 2024

The Six Five team discusses Intel Foundry Direct Connect Event.

If you are interested in watching the full episode you can check it out here.

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Transcript:

Daniel Newman: All right, so Intel had a Foundry Day. This was a big one, Pat. You and I had a lot of preamble on this one. A lot of run up, there’s a lot of excitement. Pat Gelsinger did his victory lap on five and four. Had the chance to bring Gina Raimondo on stage to talk about the US, I think she called Intel a national treasure or something of that sort. And basically talked about a vote of confidence from the administration that they’re going to continue to support the company. But he also got some huge backing from Satya Nadella, which announced that it would be partnering with Intel. It was able to declare. Which, Pat, to some dissatisfaction, I think about the $15 billion lifetime value of its pipeline. A big number. But again, remember, NVIDIA grew 276 billion in a day in market cap. So I think everyone was kind of puzzled about that one. But Satya’s support and Microsoft buying in was important.

But he had to cast to everybody there. They had Synopsis there, they had Cadence there, they had Broadcom there, they had Microsoft there. I mean, there was a huge support structure. Arm, right? Rene Haas was there. And you had Sam Altman there. Now unfortunately, I wasn’t able to be in the room, so I did not get to hear what was said there and I was devastated about it. But Pat, this was a big moment for Intel in terms of a coming out around its Foundry.

Now, when I made a bull case about a week and a half ago, I wrote a bull case on MarketWatch. And one of my three items, biggest one is Foundry. Yes, the company has improved its process. It does commit itself to technology leadership over the next couple of years. That is a big challenge. Having said that, the desire to have a US-based or west based Foundry doing the leading edge with differentiation and packaging, which Intel has proven already that it has, and the packaging being perhaps more important in the long term than wafer, I know. I said it. I’ll let you weigh in on that one, Pat.

But in this overall AI boom, it seems like Intel is in a very interesting place, that it could really see some acceleration of its Foundry business. This has been the fastest growth part of its business. It’s been a bit of an encouragement point. It’s got good support from the policy makers, government around the world. The company’s expanding in Europe, it’s expanding in Israel, it’s expanding here in the US. And this was a moment for the company to celebrate that. Having said that, they also did it during a different national holiday, NVIDIA earnings day. Joke, I can’t help myself. But it was a big day, Pat, and it went all day long. So I know you got to run. I wanted to talk fast, hopefully give you at least 60 seconds to a minute, two minutes, whatever you need to weigh in on your side. And we can come back to this later, talk more about it if it makes sense.

Patrick Moorhead: Yeah, we had Intel Foundry, I guess he’s the CEO now, Stu Pann, on The Six Five. And what’s interesting is, you go back and read that interview and you read between the tea leaves, there was a lot of confidence and a, hey, you really should join us for Direct Connect Day. And they delivered. I didn’t expect a major customer announcement like Microsoft. And yeah, I got caught up in the $15 billion contract. But it ended up that that’s $15 billion so far overall lifetime value for the entire IFS business, which, by the way, is up 50% from Intel earnings day. So I think that was a pretty big deal.

Listen, three years ago I caught up with Pat Gelsinger right as he made a reentry back into Intel. And I wrote a piece that essentially said if they execute on this, this and the other, they will be back. I can’t tell you the attacks that I got on that. But here’s the deal, I was Intel’s biggest customer. I was at Compaq. I was Intel’s biggest competitor when I was at AMD. And I know this company very well and what they are capable of. I didn’t Babe Ruth it. I didn’t say they would. I said this is what they would have to do that they do it. And then that turned into five nodes in four years. And everybody said, there is no way. And by the way, I totally get it. After Intel stumbling on seven nanometer, I mean it’s like, why would you ever think that this would be possible?

Really good progress so far. That number needs to go from 15 to 50 in short order. But if I look at it, I do believe that they will do NVIDIA packaging. And not just because TSMC can’t do enough CoWoS. It’s because Intel’s packaging is really good, with things like Foveros and EMIB, and you’ll see a lot of designs that will use both. And you have MediaTek who, by the way, is taking low-end market share away from Qualcomm, which is interesting. So I do think once Intel shows up with the goods, maybe it’s after 18A, I do think Qualcomm will do something with Intel.

And what a lot of people don’t understand from Qualcomm is they have the most diversified manufacturing of any SOC provider out there. I mean, they do GF, they do Tower, they do TSMC, they do Samsung. I mean they’re all over in the support that they do. And I got to tell you, I am going to Babe Ruth Intel Foundry and say that it will be a very successful ongoing concern that ultimately could be split as a tracking stock out there. Now, people are talking about splitting the company up into two. That would be stupid because until you have full design autonomy and using all industry standard tools, which Intel doesn’t currently do, it’s about a seven-year process to do that. I know that because I saw AMD go through it when we were going from proprietary tools to Cadence and Synopsis.

Daniel Newman: Yeah, and I’ll pull together here really quick and we’ll close this baby down. But yeah, Pat, it also would be just stupid from their business model standpoint. You could see the outsider view on why they would maybe want that to happen. And of course, could it drive more dollars and support across fabless companies if there was, but that’s like SoftBank and Arm. You own 90% of it. It’s like, is it really public? It’s kind of.

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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.