Intel Chief Wants U.S. Government To “Show Up With The Money!”

Ramish Zafar
During recording of the “Intel Unleashed: Engineering the Future” webcast, Intel CEO Pat Gelsinger highlights "Ponte Vecchio," Intel's first exascale graphics processing unit. During the webcast on March 23, 2021, Gelsinger outlines the company’s path forward to manufacture, design and deliver leadership products and create long-term value for stakeholders. (Credit: Walden Kirsch/Intel Corporation)

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Intel Corporation's chief executive officer Mr. Patrick Gelsinger made an appearance at the World Economic Forum held in Davos, Switzerland, this week. The conference was the first time the event was held in person since the coronavirus pandemic, and Mr. Gelsinger's interview with CNN's Julia Chatterley covered a wide variety of topics ranging from the multi-billion dollar U.S. CHIPS Act to the vulnerability of the global semiconductor supply chain to geopolitical tensions.

Intel Chief Asserts That Chips Are Now More Important Than Oil

The conversation started with Chatterley asking the Intel chief about the need to balance the short-term cost cutting decisions (read: layoffs) with the long-term strategic decision-making crucial for regaining semiconductor process node leadership and expanding product.

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Mr. Gelsinger replied by commenting on the tricky balancing act and the need to prevent short-term economic cycles from dominating long-term decisions. According to him:

Well you know, it's a tough economic environment in the near term. You know COVID in China, Ukraine and energy in Europe. Inflation in the U.S. You look across at it and where's the good news? where's the growth market? You can't find it anywhere. So on the one hand hey we're having to make some austerity moves to manage costs in that environment but at the same time, right, we need to make long-term investments. Three-quarter economic cycles cannot dictate five and six-year capital investment cycles. That's the wrong time zone. And hey, if I believe semiconductors doubles this decade, I gotta make those investments now. You invest in a downturn.

So, we're, as I said in my last earnings call, it's hitting the brakes and hitting the gas at the same time. And you know doing that in this tough economic cycle, you know it's a challenge to be a CEO these days. And obviously, as you said, some help from your known governments, we believe strongly in the public-private partnership benefits of the U.S. CHIPS Act. And we haven't quite seen the money yet [LAUGHS]. Cause it's now in Commerce's hands to do the final rulemaking for us to apply against those grants. We expect we'll see them this year, but hey, I'm investing, please show up with the money! Because we're assuming that those help us make these massive investments.

Intel's Ocotillo campus (pictured above) houses its Fab 42 which manufactures processors on the company's 10nm process node. Intel has committed to a $20 billion investment to build two new facilities in the Ocotillo campus. Image: Intel Corporation

The CNN anchor then asked him if he would have cut down more costs if there was no talk of government funding. Mr. Gelsinger replied that the measures are part of Intel's transformation, and the weak environment has accelerated the difficult decisions.

The executive outlined that:

You know the cost-cutting is largely driven by the economic cycle right. And you know that's the thing that we're having the right signs for our business and at the same time, and obviously, I'm almost two years now as a CEO, we took over this as a period of rebuilding the company and then restructuring and then some ways I sort of say hey this is causing us to do some of the things that we needed to do anyway; just a little bit faster right. And you know good companies survive tough cycles, great companies get better because of them. And you know I'm viewing this as hey this is just going to accelerate our transformation as a company and I'm not backing one bit on those long-term investments because you know, hey, this is for the second half of the decade. And a couple of quarters of tough economic picture, you know that can't set a decade-long strategy. You gotta invest into this cycle. We need the partnership with governments, and of course, that's rebalancing the geographically balanced resilient supply chain. If we've learned one thing through the COVID crisis, in this multi-year journey that we've been on is, we need resilience in our supply chains.

Intel chief Mr. Patrick Gelsinger during a press conference in Malaysia in December 2021. Image: AP

The conversation then shifted to the recent localization of global semiconductor supply chains, where countries focus on moving chip production inside their borders. The Intel executive favors these changes, as he believes they will balance the chip manufacturing industry and promote competitiveness.

He elaborated:

A little bit of competition, okay that's fine. But the real message is geographically balanced. And you know, if we were in the U.S. and Europe in 1990, 80% of semiconductors were manufactured there. Today, 80% are manufactured in Asia, and few varied locations with extremely high concentration. This isn't okay! Right. We've said, boy, the U.S. never voted to get rid of the industry, but the Asian governments voted to get the industry. And everything about the U.S. CHIPS Act and the EU Chips Act is balancing, leveling that playing field so that good investment decisions can be made. You know and as we say, hey if you're gonna plunk $20 billion into Ohio, huge commitments on our part. They take five years until we get the first penny of revenue! I better be competitive with the world markets when I start producing or that's not good for Ohio, not good for the U.S., and not good for us. They must be competitive. And that's everything that the CHIPS Act is about. Its creating a level playing field to allow us to compete in the global markets. And the U.S. making the most significant industrial policy statement since World War 2. Right. We just think this is profound, and we're just thrilled we played a part in getting that done.

The proximity of Taiwan with China, the fact that the Taiwan Semiconductor Manufacturing Company (TSMC) is the world's largest contract chip manufacturer and the bulk of its chipmaking plants are located in Taiwan and the tensions between China and Taiwan are a hot topic in the industry right now.

Mr. Gelsinger has previously stated that these call for more subsidies in America, and when asked by Chatterley on his recent comments saying Taiwan's role in global technology was "precarious," the executive explained:

You know, right now you have so much of the companies, the supply chains etc going there. And as we've said, boy, you know, when you have so much concentration in one location, it's not good for anybody. Small things become big things when that's the case. We need these geographically balanced resilient supply chains. And we have so many, you know Taiwan is really the tech hub right. We think of Silicon Valley that way but Taiwan is such as jewel, an emerald of innovation, and now we need to have this balance. You know even those companies say boy I need more balance in my supply chain.

Finally, the conversation concluded with the CEO stating that chips really are more important than oil these days, when he commented on the need for communication and its importance for Intel's role as a global company.

According to Mr. Gelsinger:

Where the oil reserves are defined geopolitics for the last five decades. Where the technology supply chains are and where semiconductors are built is more important for the next five decades.

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