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Intel's AI Chip Plan: Amazon Pact, German Plant Delay

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Bloomberg Sep 16 21:10 · 16.8k Views

Intel and AWS will coinvest in a custom semiconductor for artificial intelligence computing – what’s known as a fabric chip – in a “multiyear, multibillion-dollar framework,” according to a statement. Intel also is postponing new factories in Germany and Poland.

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  • 00:00 And Ian, I do want to start off with this idea of separating that boundary business into what you say in the story is a wholly owned subsidiary that could maybe even have more distance between it and Intel.
  • 00:11 Explain that to me.
  • 00:13 Yeah.
  • 00:13 I mean, if you are a a
  • 00:15 prospective customer of this, if you're going to give it your crown jewels, your manufacturing,
  • 00:20 you don't, you might be a competitor.
  • 00:22 So you want to see some kind of separation here.
  • 00:24 And this is Intel acknowledging that reality that if you want NVIDIA,
  • 00:28 if you want
  • 00:30 AMD is a customer, you've got to show them that there's a gap between that and your product division and that they can trust you.
  • 00:37 And this is what's going on here.
  • 00:39 Is that really what was holding some customers back or was it actually
  • 00:42 what they're making?
  • 00:44 Well, what Pat Gelsinger said when I I spoke to him was like, look, we had to have world class manufacturing again.
  • 00:50 We didn't.
  • 00:51 We've absolutely spent a fortune rushing through these various stages
  • 00:55 to get ourselves to that level.
  • 00:57 Now we're in a position where we can say to our customers, hey,
  • 01:01 come and use us.
  • 01:02 We're just as good, if not better than everybody else.
  • 01:05 So when we talk about the idea that
  • 01:07 some of the other projects,
  • 01:09 including that those plants in Germany, Poland, and even the one in Malaysia,
  • 01:13 are, I guess, let's just say, being put on ice for lack of a better turn here, Ian,
  • 01:17 should we read more into that?
  • 01:18 Is this the idea of just refocusing on the US basically doing one thing and doing one thing well rather than trying to spread itself?
  • 01:24 Then
  • 01:26 this is financial reality imposing itself.
  • 01:30 Pat has
  • 01:31 produce this spending plan, this massive expansion, expansion plan that's just no longer supported by the current business levels.
  • 01:39 He's acknowledging that.
  • 01:40 He's saying, look, me and the board, we, you know, and he just told me that now
  • 01:43 we went and had a really close look at what we're doing and we've realigned ourselves with
  • 01:48 this new reality.
  • 01:49 In the future, we can open these back up and we can expand into them and that would be the plan.
  • 01:54 But for now, we're going to preserve cash
  • 01:57 to spend on what we really need to spend and what we really need to do.
  • 02:00 So the agreement that they're working with Amazon for products and wafers, like,
  • 02:04 is that a big deal?
  • 02:05 What?
  • 02:05 What does that mean for Intel?
  • 02:07 I mean, this is the headline.
  • 02:08 This is what Intel has needed all along.
  • 02:11 It needs companies like Amazon, one of the biggest spenders on data center
  • 02:16 chips, to come out and say, OK, yeah, you're good enough.
  • 02:18 We'll use
  • 02:19 you.
  • 02:19 We don't know the exact details.
  • 02:21 The fabric chip
  • 02:23 is kind of a networking chip.
  • 02:24 So that's probably not the mainstream
  • 02:26 kind of chip that Intel would hope to be making millions and millions of for a company at Amazon.
  • 02:31 But guess what?
  • 02:31 It's a start and it's a good start.
  • 02:33 And for Intel, if you're an Intel
  • 02:35 kind of skeptic, you wanted to be seeing these kind of big names associated with that foundry effort
  • 02:41 and now they've got one of them.
  • 02:42 So that that obviously helps.
  • 02:44 We'll see how it pans out, but it really helps
  • 02:47 give us a sense here about the partnership with Amazon.
  • 02:50 Obviously, this is I think what a lot of investors are sort of latching onto here.
  • 02:55 Would this have happened if they didn't have a partner of that size and scope?
  • 02:59 I mean, this is a very complicated situation.
  • 03:02 In the past, Amazon used to buy exclusively pretty much from Intel.
  • 03:06 Over time it decided to make its own stuff to design its own chips, which were a partial
  • 03:11 replacement of what Intel sells.
  • 03:12 It had TSMC
  • 03:14 build those chips.
  • 03:15 Now it's saying, hey, some of those things that kind of replace your stuff,
  • 03:19 we're going to have you make for us.
  • 03:20 So that's a partial return of business to Intel.
  • 03:23 And that's really what Intel is trying to do,
  • 03:26 to say, hey, if you're not going to buy our stuff, maybe we can make your stuff.
  • 03:29 And that keeps us in the game.
  • 03:30 And that's, again,
  • 03:32 underlines, you know, what that effort is about.
  • 03:34 And Amazon is giving them at least a glimmer of hope in that effort.