Intel’s plans for a manufacturing turnaround

Intel needs the government’s help to catch up

To catch up with other manufacturers that have seized on Intel’s weakness, the company’s executives outlined a multibillion, multiyear strategy at its Thursday shareholder meeting in San Francisco.

From the shareholder meeting, you wouldn’t know Intel has been suffering for years. Lattes with its corporate logo stenciled into the foam were available to order, and executives finished the day with investors at the 39th floor of a posh downtown San Francisco hotel with expansive views of the Bay Bridge.

• "I want to double the earnings of this company and double the multiple of this company as you build confidence in what we're doing," CEO Pat Gelsinger said Thursday. "The Intel turnaround train is leaving the station, and I hope you all get on board. It's an ambitious goal but I am confident Intel's best days are in front of us."
• The plan includes an effort to double down on its manufacturing business, which now includes the $5.4 billion acquisition of Tower Semiconductor.
• Intel executives also said big goals include remaking its chips to once again become dominant and entering new markets for graphics processors and other chips that are currently ruled by Nvidia and AMD.
• But the actual train tracks ahead are still being built, and the company could be in for a rough ride at times.
• After Intel outlined its strategy for the next five years, the company disclosed that it was delaying the first server chip it planned to make with its most advanced manufacturing process, which it has struggled with for years.

Intel is running up against another problem, too: Chip manufacturing is measured in sums of cash numbering in the hundreds of billions of dollars.

• According to a lesser-known observation from Intel co-founder Gordon Moore, the company — and, for that matter, every other chip manufacturer on the planet — will be unable to afford the equipment needed to make chips, as the costs increase exponentially above revenue.
• The plans Intel outlined at the shareholder meeting are going to cost $85 billion over the next three years, according to Jefferies chip analyst Mark Lipacis.
• That sum is the equivalent cost of constructing roughly half of the NFL’s 32 teams a brand new stadium like the one recently built to house the Super-Bowl-winning Los Angeles Rams.
• Beyond that impressive amount of cash, Intel did not offer up a forecast for its spending plans beyond this year, saying only that its profit will be hurt in the short term as a part of its effort to return to its past glory.

Intel has also enlisted help to foot the bill. That includes the U.S. and EU governments, as well as Brookfield, one of the largest asset managers in the world, for the real estate.

• More than two-thirds of Intel’s bill for expanding its manufacturing capacity is from buying the thousands of complex tools needed to print chips.
• The current generation of extreme ultraviolet lithography tools cost roughly $180 million per machine.
• The next generation of high-numerical aperture EUV machines, though, cost double the amount. Each factory requires several EUV machines, depending on how big a manufacturing facility is.
• "This is where governments are stepping in," Intel Chief Global Operations Officer Keyvan Esfarjani said. "It’s not just grants, it's the infrastructure … To preserve the industry, we need to make sure this goes beyond just Intel."

— Max A. Cherney (email | twitter)

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The Pentagon is on an enterprise AI buying spree

Millions of dollars have begun flowing to enterprise AI tech providers as part of a $249 million blanket purchase agreement by the Defense Department.

Arthur, which tracks the performance of AI, checking for bias and accuracy problems in computer vision and natural-language processing models, announced a deal with the Pentagon this week. Cloud AI providers DataRobot and Veritone, as well as no-code computer vision company CrowdAI, have also scored deals as part of the military’s massive AI buy.

Companies working with the Pentagon to provide AI and related tech have drawn their fair share of scrutiny in recent years, of course. (Remember Google’s Project Maven scandal?) But with the Defense Department opening a new office dedicated to advancing the use of AI throughout the military, there’s likely much more to come.

Coming next week

Next week the earnings calls continue with NetApp, Autodesk, VMWare and Dell all sharing results.

NetApp will release third-quarter earnings on Wednesday.

Autodesk will announce fourth-quarter results on Thursday.

VMware is scheduled to report fourth-quarter earnings on Thursday.

Around the enterprise

Salesforce’s NFT cloud is getting pushbackfrom more than 400 employees over environmental and fraud concerns.

A MESSAGE FROM DATAIKU

Dataiku is the only AI platform that connects data and doers, enabling anyone to transform data into real business results — from the mundane to the moonshot. Because AI can do so much, but there's no soul in the machine, only in front of it. Without you, it's just data.

Learn more