Intel needs a ‘hero customer’ to turn things around

00:00 Speaker A

Intel sharing plans to reduce the labor force by approximately 20% by the end of the year and reduce operating costs. Stacy Rasgon is Bernstein Senior General Manager and Senior Analyst. Stacy, UM, now join us, in a market performance exhibitions, $ 21 price target. Um, and you said you reacted here in your note, the gain was not actually bad, but was the gain important? It’s like an important thing for investors when it comes to Intel right now?

00:48 Stacy Rasgon

Yes. And the numbers do not mean that I am not even pressure, who cares about the numbers? Right? Question, you know, strategy and what will they do? And you know, is the process road map any good or not? And will Foundry be the customers and a solid or solid document? Important questions like these. And last night we got some color, and this is part of the reason why stock makes it so bad today. General numbers such as good. In fact, in the quarter Aaa was a good hit, they missed the gains, but there were a one -time fees. Income guidance was quite robust. UM, again, the earnings margins were a little lower, but I mean, who cares? The biggest problem around them was the process road map. UM, especially new generation processes. I will throw some numbers, but nominally they call their processes after the size of the transistors. The next ramp is called 18a.

02:38 Speaker A

Right.

02:39 Stacy Rasgon

The previous CEO Pat Gelsinger has an effective bet on the company, isn’t it? Now it turns out like 18a, not 14a, it’s the next prediction that will potentially save them. UM is a knot that they will build around and they are not completely confident. And so they actually put some risk factors, new ones in their applications and talked to us about the call. Basically, they said we couldn’t afford to develop 14a only for us. We need external customers, and if we can’t get external customers, we may need to stop developing on our advanced process node. So, this node development and ramp, and frankly, they didn’t seem to be incredibly confident in their ability to come to my mind, the call in the stock is quite simple. Can they get a hero customer on this knot, which has no process yet? They can get a hero customer like the next 12 to 18 months, a customer to make this node applicable? And if they can, maybe there’s a story here. And if they can’t, then it’s a problem.

04:27 Speaker A

Yes. And now there is no basis to make this decision in one way or another, and therefore stock is sold quite sharply today. Yes, so I

04:39 Stacy Rasgon

There was a definite change in the town.

04:41 Speaker A

Yes. I know there is a little closer for people who are not so sinking, as if you look at the numbers here, this company’s annual sales have fallen like 20 billion dollars in the last few years. So we saw it shrinking. Yes. UM, what is the place of Intel in the semiconductor universe? What role does he play?

05:17 Stacy Rasgon

Yes. So let me talk about his products and let me talk like the future, right? Thus, the products they sell are mostly PCs for servers and chips for chips. And for the PCs, the chips are good, but you know that they are s on the PCs, that is, we are in the evening, but we are in the evening position, but we know that this market is really growing and lost their share. And then in the data center, I mean, they were destroyed. There is some kind of share loss. They lose their share in the chips they make to their rivals like AMD. The architecture of both is called X86. The X86 CPUs and servers lose their share in another architecture called ARM. And you have large customers like hyper scales that start to form their chips. And then the CPUs in the data center generally lose players like NVIDIA to the GPUs, right? And that’s why none of this really has an answer. And again, therefore, data center revenues have collapsed in the last few years. Therefore, in terms of the products they sell, they are definitely less relevant than they are, and now there are many larger, um and still growing competitors.

06:55 Speaker A

Yes. UM, now in the future, that is, look, people worry, look, Intel, a great geopolitical and strategic, um, uh, uh, effort, this view, we need this view that we need intel.

07:24 Stacy Rasgon

And I think it’s true, but only except for Intel’s efforts. In fact, they delay their big structures in Ohio. They cut off their Capex, cut their heads, and for example, you have competitors like TSMC who build a large amount of capacity here and on the right.

07:50 Stacy Rasgon

The longer the longer the Intel waits and the longer to ramp these things, the more capacity in the United States is built by other players, perhaps if we need them less in time. And now they are basically they say, you know, if we can, and by the way, if we are smart, you cannot build these factories without any customer. That was the problem of Pat Gelsinger. This did not work for his strategy. But I mean, now, if we don’t get customer basically, we may need to give up, and it puts some kind of putting on TSMC even more. But the longer they wait, maybe you can make the claim that we need less. But I don’t know, I think again, this kind of duality and this uncertainty, that it is weighed on it.