When Pat Gelsinger took over as CEO of Intel in 2021, the company had \u201clost its way,\u201d he says. For Gelsinger, who was returning to the chipmaker where he\u2019d once been CTO, the plan was to invest and rebuild.<\/p>\n
Since then, he\u2019s had to add to that list of priorities the need to navigate growing geopolitical risks and snowballing competition in hot areas like artificial intelligence. In an Oct. 17 interview conducted in advance of Thursday\u2019s earnings report, Gelsinger sat down with Barron\u2019s <\/em>Andy Serwer to talk about China, Israel, the Chips Act, and more.<\/p>\n The following conversation has been edited for length and clarity.<\/p>\n Barron\u2019s:<\/strong><\/em>\u00a0Chipmakers are very much in the news\u2014Advanced Micro Devices (ticker: AMD), Arm (ARM), Nvidia (NVDA), Taiwan Semiconductor (TSM). Talk to us about exactly where Intel fits in to this competitive landscape.\u00a0<\/strong><\/p>\n Pat Gelsinger: <\/strong>Clearly I came back to Intel (INTC) over a period of time [when] Intel had lost its way, lost its leadership, lost its engineering. Or, in the words of our famous founder Andy Grove, we had lost our \u201cGrovian\u201d culture\u2014this maniac, data-driven engineering-centric view. So what have we been doing? Rebuilding the company. Two and a half years ago we began what I call the IDM 2.0 journey. Intel was the integrated design and manufacturer, now under IDM 2.0 we\u2019re going to design, manufacture, and we\u2019re going to be a foundry, or manufacturer, for other people\u2019s chips as well. So a major strategic shift.\u00a0<\/p>\n It also became a major capital cycle. We were underinvesting in factory. We are going to aggressively invest in the build-out of factories for the future. So a big capital investment. Also, a rebuilding of our technology leadership. We\u2019ve done every major transistor invention for three decades\u2014 do it again and get back to transistor and process leadership, but also rebuild the engineering disciplines. Products that the competitors fear and customers love. So all of those things and two and a half years in? I say we have a passing grade. We\u2019re rebuilding the company and also driving some pretty major shifts in the industry as well. CHIPS Act, and reshoring, and rebalancing of supply chains; this has become a major geopolitical as well as technology and business story.<\/p>\n Part of the business is the Programmable Solutions Group, which is a business you\u2019re looking to spin off. Talk to us about what that means and how that fits into the strategy.<\/strong><\/p>\n When I came back to the company, looking at the assets of the company, I said we\u2019re going to build two companies inside of one: manufacturing and foundry, and fabulous products like an AMD or So essentially I\u2019m creating two companies plus three satellite companies. We\u2019re really reshaping the entirety of the Intel entity. And I\u2019m quite excited about the progress that we\u2019re making with PSG. We\u2019ve announced that we will be separating it in the early part of next year and hope to do an IPO of it in two, three years.<\/p>\n I want to talk about your global footprint, because it\u2019s a risky world out there. You have manufacturing and fabs around the globe, including some exposure in Israel. How do you think about global risk in that context?\u00a0<\/strong><\/p>\n This has been a huge agenda in my period as CEO. The world needs balanced and resilient supply chains. And with that it\u2019s pretty straightforward. We can\u2019t have one port, as we saw in the Covid crisis, and the world stops. We can\u2019t have one island where we\u2019re dependent. I have major construction projects under way today: Ireland, Israel, Poland, Germany and the build-out in the U.S. with our Chips Act proposals in Arizona, Oregon, New Mexico and Ohio, and in Malaysia and Vietnam. Balanced across Asia, U.S. Americas and Europe. <\/p>\n We were one of the first companies in Israel. Next year will be year 50 for Intel in Israel. What an extraordinary story of them really emerging as they call it the start-up nation that they have, in leadership, technology, and numerous domains. I also have a manufacturing site there. So for us this is deeply personal. [I\u2019ve had] well over 100 visits to Israel over my career, many personal friends that I have there, business colleagues that have become lifelong, intimate friends of mine and my family. So this is very important to us, but they\u2019re operating with extraordinary resilience. And we continue to see our operations perform well even today.<\/p>\n China is another area where you have exposure, relationships, and manufacturing facilities. In this new environment where there\u2019s tension between the U.S., and chips have become a focal point, how are you thinking about that?<\/strong><\/p>\n It\u2019s clearly one of these great geopolitical overtures that has enormous implications as you think about industries broadly, but in particular, 25% or so of all semiconductors are used or consumed in China and it delivers another 25 to 30% of the supply chains of the world. So half of all semiconductors are used in or flow through China. It\u2019s not like we can decide in the U.S., let\u2019s stop doing China\u2014that\u2019s half the market! So our policies, our thoughts on this regard need to be very long-term, strategic, intentional. We can\u2019t let that just become, are we going to like or not like a particular policy in the U.S. or China or Europe. No, we must be engaged in this, it is a vital piece of the global supply chains.\u00a0<\/p>\n That said, there are concerns, and I say hey, we want to maximize exports every day of the week including China, half of the semiconductor market of the world. We want to be very thoughtful about how technologies flow and we need to be finally aligned with our allies. To me those three parts: manage the technologies, align with our allies, but maximize our export is the right long-term policy for how we treat China and this part of the world. As we look at it today, this is precarious. We haven\u2019t been operating this way for decades. All the sudden Covid caused us all to wake up and realize: Oh my we\u2019re dependent on these supply chains, how did that happen? Well, it was 30 years of policy that led us to this point.\u00a0<\/p>\n We\u2019re seeing a lot of building of chip capacity here in the United States. You mentioned several projects that you have going on, can that manufacturing really be competitive in terms of producing chips that are affordable for industry?<\/strong><\/p>\n That\u2019s a great question and that\u2019s at the heart of the Chips Act. Fundamentally if I were building that Ohio factory or any of the other ones that we\u2019ve mentioned in Asia it would be 30 to 40% less expensive. When you\u2019re putting $150 billion of capital to work, you can\u2019t be 30 to 40% uncompetitive. What the Chips and Science Act was designed to do\u2014close that gap so that we could bring this manufacturing back to America and rebuild what I would call, instead of the Rust Belt, the Silicon Heartland, bringing back manufacturing at scale and construction and technicians and the full gamut of the workforce. These manufacturing and fabrication facilities our studies have shown they generate ten jobs for every job that we create. Close the cost gap, build this momentum of energy, of investment, research, and skills creation and job creation.\u00a0<\/p>\n Generative AI, artificial intelligence, is a huge end market for chips going forward and I\u2019m wondering how Intel plays there.<\/strong><\/p>\n We get to play two ways. One is, I have my generative AI chips, and we said, build AI into everything, build it into the PCs, build it into the edge computer so that when you walk into the manufacturing or the distribution, it\u2019s doing facial recognition or being able to do security monitoring. Every application and every enterprise data center mining that data will become AI-efied. So we have components that will fit into every one of those different application areas. So build our products AI everywhere and in every product that we build.<\/p>\n But secondly, we\u2019re going to be a foundry for the chips that don\u2019t get built by Intel and I get two bites of the apple here. Because is Google going to stop building their chip to only use mine? Maybe not. Are they going to founder with us? Maybe so. So we do have opportunities to open our manufacturing and technology envelope to every company in the industry, and say, come on in we\u2019re open for business to be your foundry or your chip provider.\u00a0<\/p>\n What about the supply-demand balance when it comes to chips? Some people have suggested there\u2019s a glut now after there was a shortage during Covid.<\/strong><\/p>\n The semiconductor industry is a long lead time, capital intensive industry: the only way to run factories is 101% full. So you have demand and supply signals going up and down. We had the huge Covid surge, and as a result of those characteristics the industry has always been cyclical. I would quote Gordon Moore, he said we have supply demand balance exactly two moments in time: one moment on the way up, one moment on the way down. But today the industry is about $600 billion dollars. The estimates are that it\u2019s a trillion dollars by the end of the decade. It takes me four to five years to build a major new factory location. If I believe we\u2019re going from $600 billion to a trillion at the end of the decade, I must be making those capital investments now, even if there might be some near-term supply-demand imbalances. I am absolutely convinced this is so critical for the future. We\u2019re building for the trillion dollar industry at the end of the decade.<\/p>\n What does the labor picture right now look like for you in the U.S.?\u00a0<\/strong><\/p>\n My biggest shortage right now is actually in skilled construction workers for the factories that we\u2019re building and that\u2019s the big shortage that we face right now. I need more plumbers and electricians and concrete workers because we\u2019re building. But keeping the best workforce, particularly in technology, if you\u2019re a great engineer you are in demand. You always have been and you always will be. But as we build and rebuild manufacturing it\u2019s going to be a lot of technicians that I need to be training for.\u00a0<\/p>\n A piece of the Chips and Science Act was very much on workforce development. And this is something [with] a lot of resonance. Even on this trip, I\u2019m stopping in at Purdue, we\u2019ve seen extraordinary interest in the Midwest schools and that was really a big enthusiastic piece of our Ohio site announcement. All the Midwest schools said, hey, we\u2019re going to partner. Ohio State and Michigan State, they\u2019ve been mortal enemies for 100 years. They\u2019re partnering on workforce development. And to me this idea has really resonated: The Rust Belt is dead, the Silicon Heartland and the talent, the skills emerging to support that. <\/p>\n I want to shift gears a little bit and ask about you. You are a person of faith, a religious person, and I\u2019m wondering how that manifests itself at work or if it does it all.\u00a0<\/strong><\/p>\n Clearly I\u2019ve been very public about my faith views. I\u2019ve written a book about juggling God, family, and faith, about faith-work-life balance. Intel\u2019s been recognized as the most faith-friendly company by the U.N. for two consecutive years. It\u2019s part of who I am as a leader, but I also realize that my faith perspectives are not yours. Almost 80% of humanity puts their faith views as one of their top three priorities for their life, and if almost 80% of humanity puts it in the top three, then I need to put it in the top three as well as an employer from a diversity and inclusion perspective. I want your whole self, your ethnic views and your faith views to be accepted. Not just accepted, I want them to be reinforced and highlighted because that\u2019s when I get the whole self to the workforce.\u00a0<\/p>\n I also believe I\u2019m on a mission. I\u2019m on a calling, God put me in this job. He\u2019s prepared me for 40 years of my career to be this person leading this company at this time to rebuild the iconic Intel, to rebuild the technology industry, and fundamentally to rebuild manufacturing on Western shores. That is a calling that I think I uniquely wake up each day, and I say, you know, thank you God for giving me the skills, the training, but even more importantly the wisdom and your guidance to go do this job every day.<\/p>\n Why should investors buy or hold Intel stock?<\/strong><\/p>\n When I took the job my wife asked me two questions: How much are you going to have to work and how long are you going to have to work. On how long I said, it\u2019s not less than five years to turn around this company. So here we are two and a half years in, halfway point on that journey. We are starting to see the financials look better. The products that we\u2019ve worked on for the last two and a half years, well, they\u2019re executing better. They\u2019ve regained market share. They laid out this audacious plan to get back to technology and transistor leadership.\u00a0<\/p>\n Clearly there\u2019s been some doubt, debate, whether we could pull off this audacious plan. Two and a half years into it the green shoots are starting to become proper seedlings. The evidence is building that the greatest turnaround, but not only the greatest turnaround, the most important turnaround in the industry\u2014if not the entirety of the business world today\u2014is now taking shape. This is an opportunity. That\u2019s what I\u2019m passionate about. I think we\u2019re starting to develop real evidence that yes, in fact, we\u2019re going to pull it off. Get on in and join us.<\/p>\n
\n Nvidia
\n and TSMC. We\u2019re going to do both of those, but I also looked at the assets of the company and said, \u2018Where are we not getting the most value, most execution or shareholder return?\u2019 So we spun out Mobileye. Very successful and we did that a year ago. I announced that we had a technology equipment company, IMS, for mask writing and equipments. And so we\u2019re creating another company in that area. And Intel had acquired Altera, eightish years ago, and we underperformed with it as part of Intel so I said, we\u2019re going to set that up to again be an independent company, but continue to leverage Intel and our manufacturing capabilities.\u00a0<\/p>\n