Intel Corporation (INTC) Earnings Call Transcript & Summary

Please welcome back Tony Balow.

Welcome for those of you in the room, welcome back. And for those of you joining us online, let me be the first to welcome you to Intel's Investor Meeting for 2022. My name is Tony Balow, and I have the pleasure of running the Investor Relations team here at Intel. I'll also be your [ embassy ] for this afternoon. Before we start, let me read a relatively brief safe harbor statement. It would be a little shorter than that. Today's event includes forward-looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings at intc.com for more information on the risk factors that could cause actual results to differ materially. We will also be presenting non-GAAP financial measures during today's event. Please visit intc.com for reconciliations of these measures to GAAP measures. For those of you who couldn't join us here in San Francisco this morning, we held a series of small breakout sessions covering several of our business units, foundry, Mobileye, network and edge as well as several of our functions like technology development, software and manufacturing. For those of you online, that material as well as recordings of those presentations is posted on our Investor Relations website, intc.com, and you should be able to download it now. This afternoon session, we'll start with hearing from our CEO, Pat Gelsinger, who will cover our overview of our strategy as well as our plans for the next several years. He'll be followed by brief presentations from [ our client group ] as well as our data center and AI group with Sandra Rivera, Michelle Holthaus and JJ Johnson. We'll have a short break then. And for those of you online, you'll have an opportunity to step away as well. And after our break, we will hear from our new CFO, David Zinsner, who will present the financial outlook for the next several years as well as a full year 2022 outlook. After that, again, we saved a healthy amount of time for Q&A, and we'll do that in 2 parts again. First, we'll start with Pat and Deb on stage, and then I'll invite the rest of the executive management team up so you can ask questions of them as well. Finally, just to take a moment, I would be remiss if I didn't say thank you to everybody who has helped us get this far in the presentation as well as thank you for all of you in the room and online who have joined us here today. And with that, I'd like to welcome to the stage our CEO, Pat Gelsinger.

Thank you, Tony. And on behalf of 121,000 loyal, passionate Intel family members, it is my privilege to be representing you representing them and welcoming you to our investor conference today. And I think we have a lot more exciting stuff coming up. The morning was fabulous, but let's dive in. In 1979, as a pimply faced 18-year-old kid, as I say, I went through puberty at Intel, I started at this great company. And I had the honor to lead the team that created the [ 46 ] microprocessor to become the first-ever CTO. I joked that I learned at the feet of Grove, Moore, Noyce and really got to seep in the rich history of this iconic company. And here we are 1 year after I had the opportunity to come back and be a CEO, 30 years with the company. On 11-year CEO training mission, as I took vacation from Intel and now back for a year. And I came back to the iconic company that I was born and raised in. The iconic company that defined the technology industry but it's also so critical for our nation and the world. And today, we're going to describe how we are rebuilding this iconic company. Since my return, we have had a torrid pace. We've added a new word to the English and certainly the Intel dictionary [ torrid ]. And with our IDM 2.0 strategy that we laid out, we began this tenure with a bang. We laid out a new strategy for the company. We followed that quickly by laying out our process technology advancements, our new factory expansions in New Mexico, Malaysia and Arizona. And last month, the silicon heartland. And we've continued that torrid pace. We gave the most detailed and transparent road map update that we've ever done for our process and package technologies, a path to regain unquestioned leadership, 5 nodes, 4 years. We laid out our most dramatic set of architectural breakthroughs as we launched Alder Lake, our first hybrid core and our new graphics product line. We laid out how we're getting the geek back with our innovation conference, this revival and renewal of our commitment to developers everywhere. We also said, "Hey, we are the stewards of Moore's Law, and we're going to keep that legacy alive and well for decades to come. If anything, I feel like we're a bit ahead of schedule where I thought we'd be at the 1-year mark since I came back. But in all humility, we still got a lot of work to do. And today, we're going to show you how we will accelerate the growth of this great company, delivering a compelling strategy and creating extraordinary shareholder value. Tremendous amount of information that we're covering today, and I want you to take away 4 things. First, we're rebuilding that Grovian execution as we call it, bringing back that heart of Andy Grove, the confidence, the engineering centricity, the discipline, the competitive spirit. Second, we've got the right strategy. We've laid out the strategy. We know the path to the future. Our core technology, our leadership products, how we're driving these open platforms and industry standards. How we're building capacity at scale. Third, we're harnessing these core strengths in traditional markets, but also accelerating and disrupting new markets as well. And how Intel is the only company that has the breadth, depth of software, hardware and manufacturing at scale to execute on this strategy and how our business model has fundamental advantages and how we can invest and process technology and leverage it across all of those business models. Only Intel can do this. And finally, the next chapter of the Intel story is one of growth. And it starts today. Our plans will come to fruition overnight. But by the end of the day, I think you're all going to agree we are well on our way. We've repositioned this company and we are executing on that strategy. And the future of growth begins today. There's 3 parts to my presentation today. First, our beliefs in how the industry is going to evolve; second, our strategy; and then execution. How are we going to get it done. As we look at that, we rearchitected the company into these 6 distinct business units so that we can compete vigorously and drive growth. But it isn't just 6 random business units. They reinforce, they build on each other and reinforce each other, building on common capabilities. And we're going to cover each 1 of them today and then show you exactly how we can accomplish that double-digit growth that we described. And some of you have said, how are they ever going to do that? Well, we're going to tell you today how we're going to do that Our 4 critical beliefs, how we're shaping the future of the technology. First, we believe we're on the front end of sustained growth in semiconductors and technologies, driven by the digitization of everything. Technology is increasingly central to every aspect of humanity. And semis are needed for everything digital. We believe this is driven by what I've called the 4 technology superpowers. First, [indiscernible] everywhere, right? Ubiquitous compute. This thing called microprocessor is now Permian Pete. This thing called microprocessor is now [indiscernible] Pervasive connectivity, everyone and everything is becoming connected. And finally, making sense of it all with artificial intelligence. And those superpowers are enabling us. And as you saw in [ Raj's ] presentation this morning that is creating this opportunity, this challenge to continue to create compute opportunities where we're simulating every aspect of human existence, fully immersive digital experience, intelligent avatars, digital twins, all of these experiences. There's an insatiable demand for compute. And that insatiable demand for compute is going to require a general purpose compute like we do. but also graphics, immersion experience, I/O capabilities, accelerators. This demand is insatiable, and we believe that it's foundational and will change the structure of humanity and the semiconductor industry. And we estimate that to be a $1 trillion market by 2030, the doubling of the semiconductor industry over the next decade, and we are uniquely positioned to capitalize on that. But it isn't just that it's a larger market, it also needs more powerful compute capabilities. And this is our second belief that these technologies demand require leading-edge technologies. By the end of the decade, 50% of that demand will be for leading-edge technologies, growing 6x the rate of the industry overall. And as we've seen the shortage is also driving older nodes to more modern volume nodes as well. People are redesigning more rapidly as a result, driving towards this leading-edge capability. There's only 3 companies that have the R&D, the capital capacity to do that and only 1 in the West. And we see this sort of this wall like 10 nanometers, the angstrom era EUV technology that creates the haves and the have nots. Moore's Law is alive and well. With our RibbonFET technology, PowerVia 3D packaging, EUV High-NA, we're in a path from 100 billion transistors this year to a trillion transistors on a package by 2030. As I like to say, until the periodic table is exhausted, we are not done. And we're going to keep pushing that arc and bending physics to keep Moore's Law alive and well. We also believe that open ecosystems are more powerful than closed. They unleash innovation, democratize compute. And we have a long history as a company in this area. Personally, I helped to create USB and WiFi. I love it when my brand daughter, she plugs into USB stick, and she says, "Thank you, Papa." The things that we do enable industries, and we open compute with Xeon, we've displaced many in mainframe computers. We've created the foundations for today's cloud computers. And we're seeing similar things happen in new markets. we saw the industry move from central to decentral to centralized computing with cloud. And we believe that next swing to the edge is now underway this pendulum of the computing industry where the edge enables low-latency, high-bandwidth inference and AI at the edge. We see machine learning and deep learning, moving from proprietary today to open systems in the future, and we're committed to be that company that creates that [indiscernible] that enables these open ecosystems. Number four, the world desperately needs more geographically, resilient supply chains. Clearly, the COVID experience, what we've gone through with the semiconductor shortage has caused this rapid extraordinary disruption of every aspect of the economy, driving large portions of inflation today. And over the last 30 years, we saw that we went from 80% of semiconductor manufacturing in the West in U.S. and Europe to 80% in Asia, right? And all of a sudden, we realized that we had the drifting of our entire supply chain for the something more important to humanity, where the oil reserves are now highly concentrated and not in any way resilient. My moonshot is that by the end of this decade, the U.S. would have gone from 12% to 30%, Europe from 9% to 20%. It will have gone from 80% to 20% to 50% by the end of this decade and we've seen extraordinary tailwinds to help to reestablish this geographically balanced, more resilient supply chains for the future. A bet on Intel is a hedge against geopolitical instability in the world. And government leaders are recognizing this how vital semiconductors have become to every aspect of the economy, every aspect of national security. The world has woken up. And both the chips and the COMPETES Act in the U.S. are now headed to conference process to finish and enable this $52 billion of incentive of fuel to drive the semiconductor industry. Just last week, the EU issued their Chips Act, which is moving quickly. And we see the set of incentives and strong geopolitical support as a further tailwind for Intel. And you're going to hear from David this morning about how we see these financially helping and driving and improving our CapEx and cash flows over time. With those beliefs, our strategy then capitalizes on them, believing that, one, we're going to deliver leadership products in everything and every market that we compete in. The answer is really simple, build the best products, and that's what we're going to do. Those are powered by these core strengths, supercharged by the incredible talent that we have in this company and building on our traditional markets and businesses, but accelerated by our entry into rapid, large growing markets as well. Our business model has resilience and flexibility built into it. We have the right strategy, and we're executing today. So starting with leadership products. here's 5 really good ones that we got. When we launched Alder Lake last year, it was like, "Wow, we now have the best mobile product, the best desktop product, the best computing client that's ever been delivered over 140 customers in 30 countries with rave reviews. It crushes our chips as well as all of the competition. With Sapphire Rapids that began shipping this quarter up to 30x the performance in AI and key new features in security, a great product. Mount Evans IPU redefining the data center network and partnering with Google and cloud providers to enable this new model of computing. Ponte Vecchio, tour de force, demonstrating our leadership in packaging and GPU capabilities, enabling the 2 exaflop Aurora supercomputing. And finally, Mobileye. Isn't the car out there, pretty cool looking? Yes. I love it. I want one of those. Somebody said when we were practicing they said, "Hey, can I drive at home? I said, "No, no, no. It drives you home. But we're laying out this vision of the supervision strategy for the future. These products are leadership and our road map that we'll describe to you today only gets better. We've recommitted ourselves to being an IDM, an integrated design and manufacture, and that starts with regaining process technology leadership. In July, we said 5 nodes in 4 years. And a bunch of you looked and said, have you gone nuts? Doesn't it take 2 years per node. And we in confidence, said 5 nodes in 4 years. And we remain on or ahead of schedule against the time lines that we laid out. So how can we catch up so quickly? Well, we've made some fundamental changes. And if you heard from Ann this morning session, we've leaped forward with our embrace of EUV. We've built deep partnerships. We used to tell the equipment vendors, drop it on the shipping dock and we'll take care of it from there. Now we're deeply partnering with them. And in particular, the ASML relationship is superb. We rebuilt the leadership team. We reinvested. I whipped out my checkbook and onetime Andy Grove said to me, I thought I gave you an unlimited budget, and you still overspent it. Well, to some degree, we've given an an unlimited budget, and we said, get us on track and we've invested heavily in the equipment and the engineering to go do that. We created a parallel tic-talk development model for our teams. We've organized in the common technology teams. The [ Intel 43 ] team is separate from the Intel 20A, 18A team. So we've created this parallelism and risk reduction in our approach. And our process integration was stalled at 14 nanometers, bringing it into production, but our components research team wasn't and they kept alive and well with innovations like RibbonFET and PowerVia. And finally, we simply become more open and more engage. We're leveraging the expertise not only of the equipment industry, but the EDA industry and moving to industry standard design tools and PDKs. And those of you who might talk to industry and equipment vendors, they will resonate. This is a new intel, more open, engaged and proactive than ever before. But you don't just have to believe us, we're going to give you proof points against it. And some of those have already started to emerge Intel 7, Alder Lake, best products shipping and volume, 5 nodes, 4 years, 1 done. Meteor Lake taping out the production stepping later this year well on our way to having Intel 4 Meteor Lake. Intel 3. You hear from us this morning, huge acceleration in that, and we've accelerated our server road map to embrace and deliver using Intel 3. And in 2022, 1 of the first data points on 20A and 18A. And just to bring that home today. Let me show off, see if I can do this here. This is sort of like the Simba moment, right? [indiscernible] right? Intel 18A, Our first SRAM wafer's up here [indiscernible]. And we're processing. We're running gate all around with our RibbonFET technology, our PowerVia technology, SRAM proof points that are on or ahead of schedule to our internal as well as our foundry customers as well. Thank you. We expect these major steps forward as we go through the year with proof points that we communicate. We'll rebuild, restore your confidence. And if you weren't just a little bit excited after listening to Ann's presentation this morning, you're obviously not a geek. Foundational to leadership and process and products is then our ability to manufacture at scale. And as Kevan mentioned this morning, we are executing the largest build-out of capacity in the company's history, 24 concurrent construction projects. I joke that I have more concrete trucks working for me now than any other human on the planet. We are underway with major build-out from the company that created silicon forest to help to establish the Silicon and Silicon Valley, the Silicon Desert in Arizona, now the Silicon Heartland. And I'll tell you [indiscernible] announcement that we did in Ohio. I was expecting it to be good. I underestimated it. This idea of manufacturing heartland in the middle of our nation. I'll tell you the enthusiasm we've gotten from that across the nation has just been spectacular. And coming soon, our next mega fab location in Europe. And this public-private partnership has been extraordinary journey over the last year. And you'll hear Dave talk about some of the benefits of that as it rolls through our financials this year. And another core aspect of our manufacturing is sustainability. And as Christy spoke about in her session, our commitment to our RISE goals that we're setting the standard for sustainable manufacturing, aggressive environmental targets, renewable energy use, water reclamation, landfill conservation, advanced chemistry to minimize hazardous substances. We are the [ un-question ] leader in environmental, responsible manufacturing. We're good neighbors in our community. And just last week, [indiscernible] named us the most sustainable company in the industry. I was just like, wow, this is just over and over. We believe so deeply at what we do, but it's not only doing great things, it's doing the right thing as well. And given all of the massive supply issues that we've gone through, our manufacturing network and what Keyvan has done with the team has just been fabulous. We have customers now saying, "I only want products that run in Intel factories. I want you to build everything for me because every other supply chain is so disrupted around the world. In summary, IDM gives us scale, cost, flexibility, control over our supply chain, a business advantage that no one else can deliver at scale. We also have a rich history of embracing open. We democratize compute. We create these growth engines for the industry and these platforms become sustainable engines of growth and how do we truly unlock that $1 trillion TAM opportunity. You're going to hear this morning from Sandra -- or this afternoon from Sandra, MJ and JJ talking about that. In Greg's session, he talked about how we're democratizing AI. We also have this recognition that not only do we democratize and open compute, but we create open platforms. And things like WiFi, USB, PCI and now CXL, we drive these standards that create the platform. We've launched the [ Open Edge ], open software platform. And now we're also opening our manufacturing. And we heard from Randhir about how our strategy in IFS is fundamentally about opening wide the doors of our manufacturing engine, driving the chiplet standards in the industry. Opening for the first time ever, the x86 architecture to competitors and customers and partners alike, changing how we engage as an open manufacturing engine for the industry as well. We announced last week our $1 billion incubator program and how we're investing in and creating that fervent, vibrant, bubbling cauldron of innovation through our incubator program as well. And I'm just personally proud of Intel's role in shaping and bringing forward these foundational fundamental technologies that shape industries. And increasingly, that's built on a common end-to-end software platform that Greg described our oneAPI approach. But our software assets are one of the underappreciated competitive advantages that we've had. We have these 4 decades of hardening of the software technologies. And having run a software company, and sometimes I wonder why did God take me on an 8-year journey to come back to silicon but it was learning how to become a software executive at scale. And software is like a fine wine. It just takes time to harden those components. And we're creating these core platform capabilities and then driving them into the open source community efforts. We're the leading provider of Linux and Linux OS technology. In fact, with the 19,000 software engineers we have, I have more software engineers working for me today than when I was running a software company. It really is quite spectacular. But software is not just 1 thing. Developers are everywhere. And for us, software is key to exposing our [ HERO ] silicon features, optimizing the software to run best on Intel, but pulling that platform value up the stack. And our software strategy, if you describe it in just 2 words is move up. And what Greg described is how we're moving up the software stack. Today, about $100 million or so from software licensing subscription. In the future, Greg's agenda, a lot more. And the value of software of exposing our platform of creating and enabling an industry of developers is so critical to the future and why I was so excited to have a leader like Greg join us here on this journey, making software a competitive differentiator for Intel on this journey. At our innovation event in October, we laid out this 3-part strategy that says we're going to be open. We're going to deliver choice and we're going to create trust in the industry. Hugely positive response. I wrote an open letter to the ecosystem in October, and it's just been overwhelmingly responded to by developers. And their view of us is, wow, they need choice. They want an ecosystem champion. And they see us as a company that shapes technology as a force for good as well. And they need trust in this digital era. And we're investing in the silicon and the platform features to create these secure platform capabilities and what we do with the edge and the server and the client and the cloud and our HPC, our auto platforms. And Sandra will talk about that a little bit more when she comes up today. And since our innovation event that we had in October, the geek is back and developers have resounded and says, we are thrilled that Intel is back, driving these ecosystems and software capabilities. Now today, you've had the opportunity to meet many of my leadership team here, and we've brought in key members from the industry to help us drive fresh perspectives with Nick, Sunil, Christie, Greg, most recently, Dave and we're about to announce our new Commercial Officer as well, fresh talent coming from the industry, but also building on extraordinary and long-tenured strength inside of the company, Sandra and Michelle, Keyvan, Raja, Randhir and Amnon. This is my team, and this is the best team in the industry. We have the right people who are experts in their domain, who are committed to the mission that we are on. and we're unleashing them with the right strategy. But it's not just me, it's not just the leadership team. It's the 121,000 brilliant dedicated individuals working together in service of our customers, the mission that we are on. And there's this depth of passion around what Intel does. When I came back to the company, we were losing talent. And many of you were writing on that, the brain drain. Well, that change. And we now have brains coming back. We've hired 17,000 technical employees in '21, many joining from key competitors saying, "Wow, that's pretty cool. Let's -- let me go join them what they're working on. Many of them are returnees who are coming back and saying Intel is back, and I want to be part of that. The band is coming back together and the mojo is back. What Intel is known for this powerful culture of discipline, innovation and execution, and I call it the Grovian culture that we want. We recently refreshed our values. We've rolled them out across the organization. We've rebuilt our decision-making processes. We brought back OKRs, objectives and key results. Why do we stop doing that? We invented it. Everybody else in the Valley embraced it, and we stopped doing it, [indiscernible] doing it again. We've tied every person in the company and part of their financial rewards is based on their OKRs, and their individual execution against them. The culture is being rebuilt. The evidence is building. We are well underway. So I've shared our beliefs, our strategy. And now to the third chapter. How we've rearchitected the company for growth, how we brought these 6 distinct but reinforcing a powerful business units together, how they're going to enable us to grow in the large traditional markets but also disrupt and enter new emerging markets as well. And these emerging new markets for us, these are areas that build on technologies that we've been working on and are going to enable us to be a force. We're going to build on our core competencies and they're going to give us new opportunities to grow this company, and we're going to make it all transparent to you. We're making these reportable segments. So you get to measure them just like I do as we're building our momentum in these growth areas against these 6 business units. And we said we're going to reunite and grow the company. We're going to accelerate our revenue growth. And we said we're going to get to the low double digits. And some of you said, well, how are we going to do this? Let's just walk through that and why I'm so confident for this. we see this year's growth to be moderate. The impact of supply chain challenges. The emerging businesses are launching, but aren't yet significant. '23 and '24, we expect them to start to gain more momentum. We're getting our new capacity in place. And we're going to see traditional and some growth from our emerging businesses. And by the end of the period, '25 and '26, 10% to 12% growth rate is we're getting the full benefit of the investments as well as the size and impact of our emerging businesses as well. These markets are large, and as we have leadership products built on leadership process with at scale manufacturing, we believe we can not only grow but gaining market share and ASP. So let's walk through each of the 6 business units now to give you some view of them. And we believe none of these assumptions are heroic. And you can be confident I'm going to be driving my team to well exceed the numbers that we're about to show you. So let's start with client. Last month in our earnings call, our client business reported a record year in '21. The PC has become more essential to everyday human life than ever before. This new normal of hybrid work and education year of 15% growth in the client business. This market is now structurally larger, and we see this 1 million unit per day kind of number as a sustainable 1 for the future, and we share this with our ecosystem partners and Microsoft that yes, this is just a bigger, more important industry. Looking forward, we don't expect that kind of growth to continue. Market growth may be low single digits. But we see that we have opportunities to grow from other factors as well, a stronger and stronger road map with Tiger Lake and Alder Lake and we saw in Q4 that we're already regaining market share. This continues with Raptor Lake, Meteor Lake, Arrow Lake leadership products that allow us to have more ASP leadership in the marketplace. We've also invested in reviving the ecosystem. We have to bring excitement back to the PC, the best experience. And with Microsoft and Lenovo and Dell and Samsung and HP rebuilding that vibrant PC ecosystem. But we also see that there's key next-generation use cases like the immersive experience and metaverse that are going to keep sizzle and excitement building in the PC industry of the future. We're also expanding our share of the bill of materials and the PC [indiscernible] with WiFi graphics, 5G I/O capabilities as we grow our footprint, a larger TAM leadership products, innovations in the platform. As we've done in the last 6 years, we believe we can continue to grow this business over the horizon in the low to mid-single digits, nothing heroic, but continuing growth in our business. And MJ and JJ will describe this more in a little bit. Next up, maybe the most important for many of your eyeballs is data center and AI. And this business for us is our core Xeon server with Habana and FPGA, record unit volumes in 2021. In fact, in December, in 1 month, we shipped more server products than our nearest competitor did for the whole year. The scale of what we do is simply dramatic. We remain the supplier of choice for the data center and the cloud providers. The market remains robust, driven by an enterprise refresh and the continued growth of cloud, but they're also looking for power performance, security, privacy, workloads continue to be deployed both on-prem as well as in the cloud. And today, we're laying out our new server road map. Sapphire Rapids, the leadership platform, PCI, DDR, CXL, initial shipments beginning this quarter, compelling features in area like security and dramatic up to 30x improvements in AI. Now as we were looking and engaging with our customers, customers clearly said, we really want a different cadence to how you deliver products. We want a yearly cadence to products, and we want our platforms to be every 2 years. So we listened and we've reworked our road map to deliver this 2-year platform cadence with 1-year product cadence. So into the Sapphire Rapids platform next year will deliver an upgrade called Emerald Rapid, Socket compatible, but improving performance, feature, core count, new capabilities into that same platform. And then in '24, this is a big deal. We're doing several major things. We're first bringing out our next-generation platform, a major leap in the platform capabilities, but we're also doing exactly what we just did with Alder Lake. We have peak we just did with Alder Lake. We have [indiscernible] you're at a different scale. So we're creating a dedicated, efficient core line and a dedicated performance core line in a common platform. And as we looked at that cadence, and the great health that we were seeing from Intel 3, we said we're going to accelerate our embrace of Intel 3. And this dual track acceleration of Intel 3 gives us a very competitive product line in 2024 with Granite Rapids, Sierra Forest. And this capability allows us to meet the market needs more effectively as well as deliver unquestioned leadership product performance, a strong road map aligned to segments and meeting our customer cadence. This is about real world workloads, not a variety of synthetic benchmarks. Sometimes people give me numbers with some benchmarks that I created 30 years ago like that's a bunch of craft. That's not real-world workloads today. And we see these real-world workloads where Intel just shines, and this road map delivers against them. We see our business accelerating up to the mid-teens. We see this 2024 as an inflection point in our competitiveness. And right after me will be Sandra, and she'll go into this in a little bit more detail. We and our customers are excited about this new road map. Next up, networking and Edge. And this is our former IoTG business and some of the data center networking and some of the dedicated Xeon use cases and communications. And I specifically architected NEX, the focus and capture the transformations that are happening both in the network and at the edge. I was thrilled when Nick agreed to become the leader. Somebody who had been basically architecting many of the core network transitions for decades, now coming into lead doing this. Somewhat felt like the Andy Grove when I went to leave to go get my PhD. He said, you learn in the simulator or you can stay here and fly the jet when I started running the [indiscernible]. So Nick was learning on the simulator, teaching people how to run the simulator. Now he's running this business for us, the perfect person to lead and capture 2 seismic shifts the proliferation of programmable software-based infrastructure and the arrival of the intelligent edge. And that's exactly what we're laying out. And we've seen this occur in the data center as we move from [indiscernible] and mainframes to open systems. That's exactly what happened in the telco network, and they virtualize the core network, but now that's moving to the edge as well. And this is where the open RAN is now replacing fixed function platforms at the edge, open standardized platforms that are enabling software in 5G and workloads like AI at the edge. And we are incredibly well positioned. We've architected our product line to capture these shifts and play to the strengths in the marketplace. And we're also driving the rearchitecture of the data center network as well with our IPU product line, creating capabilities that give superior security, infrastructure tasks moved off of the CPU onto the IP and enabling at-scale cloud environments to be more efficient and get more capacity from the CPU capabilities, driving this whole shift with FlexRAN and OpenRAN, the edge, as I've said, is this next architectural challenge where the pendulum of compute has been moving between centralized and decentralized. We are uniquely positioned to capture that swing to edge-based computing, with a multigenerational software compatible platform with the standards like OpenVINO already being well accepted in the industry. And we see this business having sustainable growth in the mid-teens, growing faster than the market over the 5-year horizon that we're laying out a great, unique business for us. So if we take those 3 businesses together, what you see is that this represents about half the growth of Intel as we look to the future. Our position in client, position in data center and the strength in our networking in an edge business. And we combine that with our capabilities in software and manufacturing and developers, a great, solid business, but we're not done there. How do we then go execute on these new growth opportunities. And I am so excited about these new areas for Intel to reach into aggressively. First up is our accelerated computing and graphics business. This area has been an area that, for many years, has been growing, but we've never stepped into it. And today is a great opportunity. We're seeing insatiable demand for customer -- from customers hungry ecosystem and OEMs. I'm now getting open letters to the CEO of Intel as the only hope to fix the gaming community in the marketplace. Well, that's pretty exciting. Those are exciting customers. I like getting those kind of mails. Some of them that I get aren't quite that good. And today, we are jumping in with both feet. We can disrupt this market. We're leveraging our existing IP and software. And in many respects, we have like 70% of the software work done because we're the integrated graphics leader by far. It's like starting the giant slalom halfway down the hill, right? Our competitor is sort of -- it's just not fair. Well, business ain't fair sometimes because we have a huge set of assets in our integrated graphics, our software capabilities that we get to build upon. We're creating new capabilities in the platform called Deep Link to combine our chipsets and CPUs with our discrete products to create unique and differentiated advantages for our customers. And the response has been nothing short of extraordinary. We have 50 new mobile and desktop designs, Alchemist is shipping to customers now. We're going to see the scale from mainstream to performance segments. We're -- in these financials, we'll ship 4 million units this year and ramping rapidly as we go through the year. We've also architected this business, and I call it no wafer left behind or actually Raja coined that because we're dual designing these products to be able to leverage internal and external capacity because we will take advantage of capacity capabilities everywhere we can find them given this insatiable demand. We're also out of this business in HPC and a high-end AI. In HPC, I've been in the industry for 40 years. It's always been sort of this niche funny segment on the side. Well, what's happening is HPC and AI are [indiscernible] going from [ niche weather ] and nuclear modeling to mainstream applications as well. And again, we are well positioned to capture the demand for this with our core Xeon platforms but also with exciting new compelling tour de force products like Ponte Vecchio. And we're also taking Xeon and extending it into the space with our product line, high bandwidth memory being added to Xeon core, a dramatic step-up in performance in a software compatible way. The developer community is fired up, tremendous momentum as they get access to Xeon, HBM and Ponte Vecchio and the road map is robust. And Raja and I are both thrilled as we look out to the 2024 Falcon Shores, where we fully bring GPU and CPU into a single socket with coherent views of memory to redefine a computing model for the future. The road map is powerful. The market is exciting key addition to build on our business today, but we're doing even more. We're also launching our custom compute business, where we're taking these compute-intensive capabilities to create specific product lines where high-performance computing needs. The first of these is efficient blockchain. And we're entering that market where there's compelling opportunities to improve power performance and strong industry demand. We're going to attack new segments like infotainment, automotive systems, immersive displays and more. In '22, we expect this to be a $1 billion business and growing rapidly over the horizon to be almost $10 billion by 2026, an exciting new business area for us. Next up is Mobileye. Unquestioned leader in ADAS. And we're building on that into the AV, the autonomous vehicle segment. Last year, 40% year-on-year growth in this business. Our ADAS is now deployed in more than 100 million vehicles wow. And those vehicles are now 13 of the 15 top automotive companies. And if you were an Amnon session today, the strategy that we're laying out is comprehensive for the entire ADAS to complete AV sector. We're launching fully capable hybrid systems of both vision and radar, LiDAR. So the car out here, if we turned off all the radar, LiDAR it's a level 4 car with just vision. And if we turned off all the vision and just use RADAR LiDAR, it's a full Level 4 car, being able to drive itself. And we fuse those together for increased reliability and accuracy. But it also scales all the way to the lowest end vehicles as well, a comprehensive product line for AV. And given that installed base of ADAS, we have crowd-sourced dynamic real-time mapping. We've collected 2.5 billion road miles which are being navigated and updated in real-time real-world conditions, another major competitive advantage. We've also driven the standards in areas like responsible sensitive, safety model that allows autonomous vehicles to enter society with confidence of improving over road conditions and road drivers of today. And a road map that's very compelling, purpose-built silicon with our IQ family, 176 top specifically optimized for autonomous vehicles and ADAS. Overall, an incredible business opportunity for us. And the way we've architected this business, it's both consumer AV as well as the full robo taxi market. So you can think of this as Tesla and Waymo and our product line supports all of those use cases. Now obviously, you've heard us describe our plans to IPO this business. That's well underway. But because of that, I can't say a whole lot more about the financial characteristics of this business today. But this is an exciting way for us to unlock shareholder value for the future. And now IFS. In March, we said we're opening the doors of the Intel manufacturing network wide. We're going to become a foundry for the industry. And since then, we've seen a strong pipeline of customers all sizes, across all sorts of market segments. And today, we're running test chips for customers, about 30 different test chips that we have underway for this year. Intel 16 is well underway with customer interest. We won the RAMP-C contract to build a U.S. government trusted foundry service as well, which we're getting very positive responses from our customers and the government. And the revenue today for this existing business and packaging, Intel 16, just ramping. We just announced our automotive foundry offerings as well. So stepping into the automotive sector. We're excited about that. Today, the high-end car is 4% silicon; by 2030, 20% silicon, a 5x increase in that segment. So we're launching our automotive foundry offerings. We also announced the IFS accelerator, right? And we now have 16 partners, $1 billion partnership with our Intel Capital, and we expect steady growth as a result in these offerings. But as we start introducing exciting capabilities like Intel 3 and Intel 18A [ unquestion ] leadership and excitement from leading edge high-volume capacity customers that we believe as we get to the end of this period will drive rapid acceleration in the revenue opportunities for the IFS business. We expect that we'll have some of those first major foundational customer announcements later this year. But we're doing this through the lens of Smart Capital. And Dave, when he gets up in a little bit, we'll describe how we're sort of managing that, that we get efficient capital and ensuring the customers, the capacity corridors that they need and how we manage making sure that we do both of those, efficient use of capital while ensuring customers the capacity corridors that they need. And IFS has a range of compelling value propositions that process world-class packaging technology. We've also created the broadest set of IP of any foundry in the industry with ARM, with RISC-V and x86 and and, of course, at scale manufacturing across geos as well. But Tuesday was a pretty exciting day. On Tuesday, we announced that we're acquiring Tower Semiconductor. And we're pleased to have Russell Ellwanger, right, Russell, if you might stand up, the CEO of Tower with us today. And I'm so excited about this because we simply need more foundry DNA. We also need more foundry offerings on our menu. So we're expanding the portfolio of services and capabilities. And Tower has been the leader in what's called specialty foundry offerings for things like RF and displays and power devices. And we've seen, again, those are some of the most acute areas of shortage today in the industry. And he will also help us in building a broader set of not only diverse offerings, but of extending our geographic reach with his footprint in U.S., Europe and Japan and Israel as well. A highly complementary transaction, EPS accretive immediately, helping and strengthening us in mobile, automotive, power, computing sectors and accelerating our plan to be one of the largest foundries in the world this decade. And this just makes us even more confident in our ambition. But 1 of the things about -- and some of you have challenged me and said, "So why are you getting into the foundry business? Help me understand this. Well, IDM makes IFS better, IFS makes IDM better. When you think about that, my IFS business gets all of those TD investments, those manufacturing networks, the IP blocks that we're creating for free, billions of dollars of R&D is being made immediately available to the Intel foundry services. Wow, that is leverage. But IFS makes IDM better as well. Our foundry drives us to create more robust PDKs, better EDA tool engagements, richer IP block availability from the industry and the foundry customers are benchmarking us every single day. So I asked my teams are we being competitive IND being competitive with the technology, right? I ask my internal teams. But I also now ask our external foundry customers as well. We are benchmarking ourselves every day to guarantee we have the best manufacturing, the best cost, the best transistors, the best PDKs available in the industry every single day. IDM makes IFS better. IFS makes IDM better. But it also gives us a powerful tool to better utilize our factory network as well. Traditionally, we've ramped a factory and we go through this extraordinary, ramp it hard, get it yielding, get it all good. And just about the time the factories are running really good, we screw it up by rolling over that equipment to the next process menu, right, and roll it over super fast. So we create this natural inefficiency, right, as we move from node to node. And now with foundry, we take those factories that we struggle to ramp and then we continue running a much longer is the gravy train of the rich cash flows of mature technologies over time. I've called it the bug in the Intel business model and IFS fixes that bug as we go to the future, more efficient use of capital and more leveraged use of depreciated assets than ever before, a beautiful complement to the Intel business model of the future. And to me, this is 1 of the exciting things. So this is just that it makes it better technologically. It makes the Intel business model better, more resilient as well. So looking across our businesses, we see this robust path to double-digit growth. Our client business, steady, solid growth as we've done for 6-plus years, larger market and the products are getting better. DCAI, steadily improving our competitiveness and the new road map and beyond, that's really good. NEX, comprehensive portfolio of capabilities and a growing market, uniquely positioned growing faster than that market. and our emerging businesses and graphics, accelerated computing, auto and mobility and our foundry offerings, these are large, growing markets that we believe allow us to achieve, they overachieve. I'm a meat, beat, raise kind of guy. We've built resilience into these numbers. We don't need all of these to hit to be successful. That's the power of the portfolio. Multiple engines of growth that we have. And if you do the math of those 6 business units, it comfortably exceeds the 10% to 12%. We're confident that we have derisked that portfolio that we have laid out today. And not all of the plans. Every strategy is perfect until you hit the field of combat. You need some resilience and management of how it is. But this is an unprecedented opportunity, and I feel confident in our plan to accelerate and deliver against that double-digit growth that we have described. And we've laid out an investment strategy to get us there. And this is a little bit about how we're thinking about that. Our IDM 1.0 model requires us to invest more in capital. We have underinvested. We have critical needs, and we said we need $25 billion to $28 billion this year into that business model. Part of that is driven by what we'll just say, catching up. We do not have enough capacity. We have backlog of demand, build more capacity to satisfy the demand. Part of this is investing in our TD for the future as we've done with Ann. And finally, that we need to create some shelf space. We need some optionality out in the future. And in the smart CapEx, the shelf space is long lead time at small capital investments. And as you see, this is leverage between our IDM and our IFS business, substantial leverage in these capital investments as well. And our smart CapEx then says we're going to use capital offsets. We're going to use customer prepays. We're going to use exciting new announcements like today we're announcing with Brookfield to create more capital flexibility for us in the future. We believe our base plan that we're laying out to you is very conservative in this regard. And minimum amounts of capital offsets are built in. We have an opportunity to get much, much more. And we're targeting much higher levels to further share the risk with our customers, with our geopolitical partners, with our investment partners, giving us better margins as well as better free cash flow opportunities than what Dave is describing to you today. We do expect that this capital intensity peaks over the next couple of years and then drops off into that 25% of revenue in the subsequent years. And Dave will tease this apart a lot more in our conversation today. So bringing it all back together, we've talked about the industry trends. We've talked about our beliefs that underpin our strategy. And we've given you the business case across these 6 business areas. We've embarked on an ambitious 5-year plan that creates significant revenue growth, and we believe shareholder value over time. But some of you have said, how do I know that you're executing on this, help build my confidence. Even our greatest skeptics are now saying it's the right strategy, but how am I going to know you're executing. Well, throughout the day, we're giving you lots of proof points. And these are the ones that we've laid out for our leadership products this year, tangible milestones that you're going to be able to measure us against this year. And obviously, products like Alder Lake, check; Intel 7, check, done and a rich road map into the future. We're building our core strengths, expanding our capital network, driving the acceleration of the build-out. We're ahead of schedule in our factory projects that we have, giving you proof points on Intel 4, Intel 3, Intel 18A, Intel 20A. And we're also re-architecting the company for growth, creating new capabilities like Tower, IPOing, Mobileye, creating foundry customer proof points as well into the future. We are just being innovative in every aspect of how we use capital, how we drive our products, how we build on our core strengths and we're going to give you unprecedented transparency. Starting in April, we'll give you the visibility into the 6 business units, and you'll see how all of them are doing and how we're executing against what we told you we would do. And' '23, '24, so much more. And this business model, these investments really start to accelerate as we get into '23 and '24. So here we are on my 1-year anniversary. I'm pleased with the progress, but we got a lot to do. We're indexed to high-growth markets, but we've got a lot to do. We have deep, sustainable competitive advantages that we're building on. We've laid out a robust strategy across our 6 business units, and we have extraordinary talent as part of this company. And we've given you creative ways of how we're going to unlock shareholder value. We believe this is creating a compelling picture for shareholders to look at us. My goal is that we double, double. 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, a 4x increase in total shareholder value. 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. Thank you very much.

All right. Thank you, Pat. At this time, please join me in welcoming to the stage, the Executive Vice President and General Manager of our data center and AI Group, Sandra Rivera.

Good afternoon. I'm Sandra Rivera, and I lead Intel's data center and AI organization. I know a number of you from the years when I was building and growing the network business. Networking today is a multibillion dollar business for Intel and continue to grow under Nick's strong leadership. Over the past 8 months since I've taken this role, I've spent a lot of time with our customers, understanding their challenges, their growth plans and their market opportunities. I've also spent time examining our own challenges so that we can be better partners to our customers. And this afternoon, I'm excited to tell you about the ways that we're focusing our business to continue to grow the data center and AI business for Intel. To sum it up, my team and I are focused on 3 core pillars to accelerate our growth. First, to maintain and grow our leadership position with hardware and software solutions that our customers need when they need them. Leadership starts with Xeon. And today, Xeon powers more than 85% of the world's data center infrastructure. And customers like Amazon, Microsoft and Google continue to choose Intel Xeon for the differentiated performance and features that it offers to customers. And we fortify our Intel Xeon franchise with a leadership portfolio of products that include FPGAs, AI accelerators, GPUs as well as a rich software suite that can deliver to our customers a powerful platform for them to build up. Secondly, we will harness the ubiquity of Xeon and the x86 ecosystem to foster an open and vibrant environment for developers to innovate on. The ecosystem of OEMs and ODMs, commercial software vendors and platform solution providers built on and optimize for Xeon, lower our customers' development costs, accelerate time to market and improve overall total cost of operations. Our ecosystem and the decades of work by our partners to optimize software for Intel architecture is one of the most valued and differentiated capabilities we bring to customers. And third, we will leverage our unmatched strengths in AI and security to make pervasive across all of our products and all of the market segments. AI and security are 2 of the fastest-growing workloads, and we're going to infuse it into every aspect of technology. Our massive installed base with our built-in features of integrated AI and security put us in an ideal position to leverage these fast growth areas. I'm encouraged about the future, and I'm confident in the assets we have to accelerate our growth. Now let me drill down into the data center and AI's silicon TAM opportunity. This is a fast-growing market. Over the next 5-year horizon, it's expected to grow in the mid-teens from approximately $30 billion in 2021 to over $65 billion by 2026. You heard Pat talk about being at the forefront of an era of sustained growth, driven by the digitization of everything. And we have 3 macro data center trends that add fuel and act as tailwinds to that growth. First is the explosion of data and the insatiable demand for compute and everything from client PCs to hyperscale data centers and everything in between. IDC projects that by 2025, the world will create and replicate over 180 zettabytes of data. And to put that into perspective, in 2021, the world created and replicated 80 zettabytes of data. So you can see that we need to almost -- or more than double the compute capacity to be able to process all of that data. But it's not just the amount of data that needs to be processed. It's also the different data types from structured to unstructured, dense to sparse data. Computer architectures need to evolve to keep pace with developer demands. Our customers are hungry for solutions that deliver higher performance in their real-world workloads and developers want a consistent software stack that allows them to move across heterogeneous architectures that are required for specialized workloads like AI, graphics and video. And last, the demand for AI and security is relentless. AI is required to intelligently and efficiently process all of those zettabytes of data. and security is paramount to protecting the valuable business and personal assets and particularly in the increasingly complex threat and regulatory environment we operate in. There's a huge market opportunity in front of us, and we're approaching that market from a position of strength and closely working with our customers to capture the opportunity in front of us. Capturing that opportunity requires product leadership, and that starts with Xeon Scalable processors. Last year, we introduced into the market, Ice Lake. Our third-generation Xeon scalable processor, and it was met with high demand across all customers and market segments. In fact, in Q4 alone, we shipped more than 1 million Ice Lake CPUs, our fastest Xeon on ramping to 1 million units ever. With Ice Lake, we deliver industry-leading capabilities with integrated AI, encryption, security as well as networking features. And Ice Lake is available from all major OEMs, ODMs and cloud service providers. In fact, AWS is introduced instances based on Ice Lake, with their E2 M6i instances that deliver more than 15% gen-on-gen performance improvement and twice the networking speed. And Google's compute engine, VMs, also deliver greater than 30% gen-on-gen performance by incorporating the integrated acceleration and crypto features in Ice Lake. And next month, we will begin shipping initial SKUs of Sapphire Rapids to target customers. Sapphire raises the bar and sets a new standard in the industry for workload optimized performance. For example, in the image recognition system market, we see customers will be able to experience a more than 6x increase in their ability to process images per second using the acceleration engines built into Sapphire Rapids. And Sapphire Rapids will also lead the industry an important memory and interconnect standards. For example, PCIe, DDR5 as well as the new high-speed cache coherent interconnect CXL, a standard that Intel led on in the industry. And there is strong demand for Sapphire Rapids from every OEM to ODM, every cloud service provider and every comm service provider or designing platforms on Sapphire Rapids. And we've also secured high-profile wins with the Department of Energy. We're going to select and deploy Sapphire Rapids in their next-generation supercomputers, including the Aurora exascale system and the Crossroads supercomputer that will be available in the market in the coming years. Now I'd like to show you the type of AI performance the Sapphire Rapids can deliver as compared to a discrete GPU in a single cell genomics use case, which is an important area for medical research. So Devin, why don't you show us what we've got here on the platform.

So we're in the era of digital biology, where AI, HPC and natural science are all coming together to kind of transform the world. And classic machine learning is a significant component of these growing AI use cases where CPU continues to provide the best performance for end-to-end workflows, both on-prem and in the cloud. Now our competition showed an analysis of 1.3 million cells on their Rapids platform, which is a library suite targeted at accelerating performance for data prep and machine learning on GPU platforms. And on an A100 platform or an A100 GPU, this analysis took roughly 11 minutes. And this is presumably 30x faster than on a CPU. So what we did...

If you can wake up the system.

So we ran the same simulation analysis on software that's been optimized for CPU. And what we found is that on a single Ice Lake server processor, the same analysis completes in -- Yes. This is -- this is the wrong one. Well, on optimized software for CPU on a single Ice Lake server processor, this completes in 489 seconds compared to the 686 that it takes on an A100, which is roughly 30% faster on CPU. And that performance only gets better on Sapphire Rapids. So Sapphire Rapids platform, a single CPU completes that analysis in 370 seconds. Yes, here we'll see it. This will -- on your right, it will go up to 489 seconds on Ice Lake. Or no, this is Sapphire Rapids again. Well, that makes it roughly half the time of an A100.

Yes. I think the point is that we're delivering very performing AI workloads on a CPU that is very competitive with the discrete GPU.

Exactly.

Thank you for that, Devin. So as Devin was trying to show, our integrated AI accelerators are able to deliver almost twice the end-to-end AI performance over a discrete GPU, and we're looking forward to seeing all the scientific breakthroughs that Sapphire will be able to deliver with the integrated acceleration engines inside it. And what we are offering to our customers is the ability to have AI in their Xeon that they already have so that they don't need an additional expense and programming environment for a GPU. So now on to our road map. Today, I'm excited to announce that we are boldly expanding the Xeon road map. Our road map will put us in an even stronger leadership position by taking advantage of both our performance or P-cores as well as our efficient or E-cores. And our road map is now better aligned to customers' needs. Our next-generation product on the midline of our road map or our performance swim lane is going to be Emerald Rapids, which will be a socket-compatible CPU that will extend the benefits of Sapphire Rapids in higher performance memory, security and IO capabilities. And by being in the same platform, we're able to provide our customers an easy upgrade path. This next processor after Emerald Rapids we will then move to enhancing the efficient core road map that we're going to introduce to the market. And our efficient cores or E-cores are enhanced for the data center by delivering a higher performance, efficiency throughput for low latency or high-throughput applications. An Xeon processors using our E-cores are built to support cloud native applications. And Sierra Forest will be our first E-core product, our E-core CPU, which will be manufactured on the Intel 3 process. And it was designed with hyperscalers to ensure that we're further optimizing our TCO. Our next P-core product following Emerald Rapids will be Granite Rapids and Granite Rapids will also be manufactured on the Intel 3 process, taking advantage of the higher-performing, denser library. And Granite Rapids and Sierra Force will both be delivered in our next-generation high-performing platform, which share the same base architecture, making it easy for customers to have portability between the 2 platforms for improved ROI and making it easier for us to deploy with lower validation costs and accelerate both ours and our customers' time to market. With our new road map, we will extend our leadership in the data center with the fastest-growing workloads, which include micro services, edge computing, networking and storage. Now let me talk about our ecosystem. Intel has the world's largest data center ecosystem. And our ecosystem helps customers improve their TCO, accelerate the time-to-market and lower their development costs. There are more than 700 commercial software products developing and optimizing for Intel architecture, including Microsoft, Oracle, Red Hat, SAP and VMware and hundreds of open source communities that are writing code first and best on Intel. In fact, there are over 100 billion lines of code that have been optimized for Xeon and Intel architecture. And there are over 100 million Xeons deployed in the network and the infrastructure today. And this spans from on-prem servers running IT services to networking equipment, managing Internet traffic to cloud services running data analytics. Today, there are more than 58,000 cloud instances based on Xeon in the world. The ubiquity of Intel architecture puts our differentiated features at the fingertips of almost every developer in the world, and we will continue to invest in and collaborate with our partners to maximize productivity and deliver better value with Intel architecture. Now let's talk about solutions. The solutions we build with our partners are a key differentiator for Intel. Intel branded solutions leverage our broad portfolio of an expansive ecosystem and our in-house technical expertise to give customers a differentiated and competitive advantage. There are more than 500 industry partners designing, building and delivering solutions to better serve customers with over 700 workload optimized solutions in the market today, spanning everything from edge to cloud. IDC recently conducted a study of customers using Intel-based optimized solutions and amongst the findings for that customers were experiencing a 3-year ROI of more than 46% and we're experiencing application improvement performance of nearly 64% on average and a faster time to deployment of almost 60% on average. Now turning to workloads. AI is the fastest-growing workload and our AI strategy follows the same approach we've taken with other large technology transitions in the market. That is we lower the barriers to entry. We increased the market participation, and we accelerate the rate of innovation and time to deployment. We have built in AI into our platforms so that we can make it more available to customers. And we have a software stack that we upstream into the most popular industry libraries as well as the most popular frameworks, including TensorFlow and PyTorch. Let me walk you through the AI data flow and show you how the majority of AI data flow pipeline runs on Intel today. So the first part of the AI data flow is the data prep stage. And this is where data is loaded, cleaned and prepared before it's moved to the model training phase. And this stage is particularly important, especially when data is unstructured. For example, when building a facial recognition model, you don't want the system to be focused on nonfacial elements of the image. The next phase is the model training phase. And this is a mix of classical machine learning as well as small-to-medium complexity deep learning models. And most of these models also run on Xeon CPUs. Deep learning today runs mostly on GPUs. And these would be the high complexity models because deep learning training or high complexity, deep learning training models is a massively parallel workload. And therefore, they typically run on GPUs. But the most popular GPU runs in a closed environment. Our approach is different. Our approach is an open software approach, giving customers choice and performance in running their deep learning training models on a Xeon CPU. And lastly the inference training phase, the inference and deployment phase, which is the largest growth market in the AI data flow. And today, over 70% of AI inference runs on Xeon. And Xeon is a rapidly growing market because it's really being fueled by the build-out of edge computing, a place where Intel has a strong leadership position with Xeon. So as you can see, the majority of the AI data flow runs on Xeon. And we forecast that Intel's AI logic silicon TAM will be over $40 billion by 2026, with AI inference growing about 25% CAGR during that same time. And we will capture this market through the AI software stack based on open standards and a broad portfolio of products, including CPUs, GPUs, accelerators, all with optimized software. Our approach is a winning formula to propel the next era of AI innovations. Now on to security, another high-growth workload. With Xeon, we protect data at rest, in-flight and in use. Earlier today, Greg Lavender talked about how we are accelerating security across all segments with unique hardware features that we are building into our products. And security rooted in hardware provides the best protection for tenant data. Our Ice Lake with integrated crypto accelerators increased performance for data at rest by 3.9x over previous generation, and that can protect exabytes of stored data. Tencent secured data in-flight by over 5x in their networking platforms by using the integrated crypto acceleration features in Ice Lake. And for data in use, we fortify Xeon with an SGX feature which is a secure enclave that we create in the processor that isolates tenant data from other data, making sure that we're protecting their data in a multi-tenant environment. And SGX has fueled a new capability and service that's being offered by the world's largest cloud providers called confidential computing. We see Microsoft Azure, IBM Cloud, Alibaba Cloud, Tencent, Baidu and OVH, all using SGX to deliver confidential computing to their customers. Our security leadership is based on integrating these features into our Xeon platform and also offering it ubiquitously over that Xeon portfolio with software ecosystem from our broad customers and partners. It's an exciting time to be at Intel, and I'm thrilled to be leading the data center and AI organization. And I'm encouraged by the progress we've made over these past 8 months with our unflinching focus on execution excellence and road map leadership. We will be accelerating our growth to -- from the mid- to high single digits in revenue over the near term, and we expect to be growing revenue in the mid-teens in the longer term. Our path to growth is anchored on 3 pillars. First is to leverage our extensive leadership portfolio and deploy products at massive scale. By executing on our new road map, we will lead both in per core performance and also high throughput density performance. And we will grow in our traditional businesses and accelerate entry into new ones. And we can support customers at a scale that is unmatched in the industry. In December alone, we shipped more CPU processors to our customers than any single competitor shipped in all of 2021. And we were also able to meet key customer demands for hundreds of thousands more processors well outside of normal lead times by leveraging our IDM advantage. Second, we will expand our strength in hardware, software and solutions and unleash the power of the ecosystem and spur innovation. Our extensive work with software leaders in open source communities allows our customers to tap into the differentiated features we build into our platforms and deliver greater business value. And third, we will make AI and security pervasive across our products and all of our segments. Our multigenerational investment and ubiquity of Xeon ensure that AI and security will run on Xeon and we will continue to lead in the industry's fastest-growing workloads. There is a massive opportunity in front of us as the world's data centers evolve to keep pace with changing business models and use cases. We have an extraordinary set of hardware and software assets, technology, process technology, packaging leadership, people and capacity to capitalize on this opportunity. We invite you -- I invite you to join us on our growth journey. Thank you.

All right. Thank you, Sandra. At this point, please join me in welcoming to the stage Executive Vice President and General Manager of our Client Computing Group, Michelle Johnston.

Thanks, Tony. I'm excited to be here today, and I wanted to take a quick moment to introduce myself. I've had the privilege and the honor of working and driving the CCG strategy with our customers over the last 7 years. And that has allowed me to develop incredible transparent customer and partner relationships really built on mutual trust and feedback. And now I have this unique opportunity to bring that feedback and that strong connection back to the business unit to really further influence and accelerate the pace of innovation in CCG. As a hybrid worker myself, who's always on the road, I'm intimately aware of the essential role the PC plays in all of our lives. And in talking with our customers, we steadfastly believe that the PC will continue to rise in importance. This has and will continue to drive in curious TAM as we see the number of minutes spent on the PC and the number of PCs per household continue to increase. This fuels an insatiable appetite for new and advanced PC experiences as we interact more and more with our PCs every day. People are no longer just using their PCs for work. It's a central hub in our lives, a portal for work, life and play. Making our vision to deliver purposeful PC experiences more important than ever before. To share our vision and strategy, I'm excited to welcome our interim General Manager and Senior Vice President of CCG, Jim Johnson. Welcome, Jim.

All right. Let's dive into our client business. We're going to talk about our view of the market. And importantly, the decisions we're making to pursue that market both in road map and platform but also an ecosystem partnership and investments to deliver on experiences. So we can fulfill our assignment to deliver market and financial growth to Intel. We're coming on 6 years of consecutive growth. And in these 6 years, there's been many, many market dynamics. We've disinvested 2 businesses not meeting our expectation. And one of our customers left to their own SoC. We still grew and we will grow. How do we grow on the back of solid execution. In 3 years, 3 new core platforms on an annual cadence. Within those platforms, we deliver other product lines, WiFi, Bluetooth, not only do they deliver to the experience -- they're delivering $1.5 billion of revenue at CP-like margins. And then we bring these together with our partners and deliver platforms and experience. Our view of the market is, of course, it's more robust. It's much larger and it will continue to grow modestly. That's important because it is driving our investment strategy, both in capacity and R&D. We see the growth sustained itself because we're now growing off a larger -- a refresh off a larger installed base, that one's pretty straightforward. If you look at the increased penetration with acts like the U.S. Emergency Education Fund, we have encouraged funding to a 11 PC to student ratio in the U.S. Those actions make a difference. They're making a difference also in other parts of the world where still a 101 PC to student ratio. And then for those of us in our homes that work in our homes, we still measure the PCs per home when we believe it's going to be a PC per person in the home. Let's hit pause and hear from Panos Pune, the Chief Product Officer of Microsoft.

Thank you so much for having me today. I am excited to be part of the investor conference this year. Intel has been a critical part of the recent success of Windows 11. And together, we built this product for the hybrid world we're in, from our homes over these screens and on Teams, it's quite amazing. It's probably an understatement to say the last 2 years have had a profound effect on how each of us lives our lives. But a huge part of that effect of that change is the role the PC plays across our work, our school and home, our lives have been impacted in such a more meaningful way. We've seen behavior shift from the way we communicate to the way we shop, to the way we create, the way we watch. And those changes, they're durable. I mean they are here to stay. These are a new set of behaviors that are driving a new era of PC use. These behaviors are born out of necessity, but they've evolved into habits. Usage on Windows as a whole, has skyrocketed with people spending more minutes per day on windows than ever before. We're seeing people move from 1 family PC in their home to a PC for every person in their home. In fact, 26% of new PCs this year were either first-time buyers, just awesome to see or an additional device. We've entered the next era of the PC right now, and we believe we will see continued growth post the pandemic. That reliance on the PC for every part of our lives has inspired many people to upgrade to a more modern device and helps them take advantage of the new features and most importantly, security that comes with Windows 11. Our partnership with Intel on Windows 11, specifically Alder Lake and Intel bridge technology, bringing Android apps to Windows customers, it's played a massive role in the momentum we're seeing. And as a team, we feel an immense gratitude and pride working with you, Intel, to deliver a product that has increasingly become a part of each of our daily lives. Now as we look to the future, we'll continue to invest with Intel and all our other partners to deliver Windows experiences that enrich and inspire each of our lives. Thank you so much for having me today.

Even pre-COVID, we turned to our PC to contribute, to develop something important to us. And it's as varied as the people in this room or on the net. It can be as simple as doing your kid's soccer roster and their schedule. It could be pursuing your PhD. It could be that great project at work that you need to get that proposal bought off. But something has emerged in the last 2 years that's really important. We use it to connect. Personally, I prefer taking calls, unless I don't say phone calls, calls on my laptop. I can see the face of who I'm talking to or the faces of who I talk to, we can share content. And actually, my phone has become my companion device. And it sits on my desk next to the PC while I'm there. I'll come back to that a little later. And so our imperatives, our strategy is, first and foremost, leadership products that our customers can build their business on. Secondly, investing in and partnering in a reinvigorated open ecosystem. And then third, as we now are more remote, our content is getting delivered via the cloud. And so I get asked at this point quite a bit what about the metaverse or the immersive web. That is just another example of insatiable compute as we do a immersion or virtualization, those use cases will be developed on a rich client. They'll be consumed in rich clients. And we have some of this activity already starting with partners, and I'll share that in a second. Before I go into the products themselves, let me talk about the foundation of our road map, 2 unique foundations. First of all, breakthrough leading architectures. The hybrid architecture brought in efficient cores and performance cores to workloads. I'll show you an example. We then get to disaggregate that architecture into tiles. And what that allows us to do is each tile can be architected and designed for the needs of specific segments. And we're doing new techniques for even more ultra-low power performance on the next step of the road map. If you come down on the page, how you construct and how you build is really important. Using unique packaging technology, we can take the hybrid architecture that launched on Alder Lake and will be refreshed with Raptor Lake. And now to segregate the tiles and now the tile can also match up with the unique process node capabilities, performance-leading nodes, IOs and things like that, stable, high volume nodes that you can depend on. And so with this, we asked the question, how is it working Alder Lake, known in the market now as 12th Gen Intel core, we delivered 60 processors over 4 months, had 500 designs ready to roll, and that product is ramping incredibly fast. Secondly, when you deliver performance like this, not only do the end users value it, they pay both our customers and us for it. And so we've been seeing tech press and developers since we started launching the product, and it's just great to see the external feedback validating the architecture and the execution. Let's hit pause for the second time and get a demonstration. Hey, Chuck, go on.

So the new 8 Series processors have been delivering incredible real-world gaming experiences. And we're not talking just 1 or 2 games here. Here you can see we're playing the popular game, Hitman 3 against the best comp available in the market today. When we test is in our lab, we're showing 49% higher frame rates versus comp. And we have The Riftbreaker showing 27% higher FPS. We have Mount & Blade II: Bannerlord at 23% and Total War: Three Kingdoms at 47%. As you can see, across the board, we beat all these games versus comp that are in the market today. Now 12th generation has been a huge performance winner. But we want to continue that momentum with our next-generation product, Raptor Lake, right So it's been performing so well. Today, we're going to give you a sneak peek.

The first publicly, by the way.

Yes, very first one. Now you can see I have the Raptor Lake system here, it's a desktop system. This system features 8 performance cores and 16 efficient cores for a total of 32 threads. And you can see that here in the performance monitor right here, those all 32 threads, and have loaded this system up with many of the applications content creators use today. So 1 of those applications is Blender. So let's give those cores something to work on. So I'm going to go in here, I'm going to use Blender to...

I notice all the boxes are white showing no demand on the cores.

Yes, we're right now, they're pretty much idle. So let's kick this off. This is a very CPU intensive task. And you'll see all 32 threads, they're going to ramp up to 100%.

Which is reflected in the blue. That shows the utilization of the CPU.

Yes. So they're all ramping up to 100%, and that's fantastic. That means we're going to finish this task faster than ever before. But what if you want to work on something else at the same time Well, that's where the magic of Thread Director comes in. Let me show you. I'm going to take this rendering, and I'm going to just simply push it to the background. Now you'll notice the bottom 16 threads, those are the 16 efficient cores. They're going to stay maxed at 100%. They're working on that render in the background.

And all you did to -- move that move the workload there is hit minimize.

Yes, I hit minimize. One simple click. Now you'll notice those top 16 threads, those performance cores, they're ramping down to. They are now available for me to focus on whatever I want to focus on and they're there to deliver the performance I need. So we're going to go into after effects, also very CPU-intensive. I've got a little video clip here. So let's go into that. Now you see I've got this clip, and it's the clip I want, but there's a yellow car in the background. That car has to go. So let's minimize this. We're going to go into after effects. We're going to do a content aware fill. Now I identified that yellow car. It's going to go through every frame, see where the car is, determine what the background would be if the car wasn't there and then get rid of it. Essentially, you're erasing it from the video. That's very CPU-intensive. But if you look on those top, 16 threads, those performance scores. I still have a lot of headroom left over. I have been going Word, Excel, PowerPoint, reading my email, whatever I need to do, but the bottom 16 cores continue to focus on that rendering in the background. Now you can see it, look, I think we're almost done here. So let's go into here. Yes. The yellow car is completely gone. So again, that's the beauty of our brand-new hybrid architecture and Thread Director. We take your tasks, we divide them to the right core so you can do whatever you're working on faster and more efficient than ever before. Thank you.

Architecture matters. As you can see, Raptor Lake is the next generation of hybrid architecture. It's going to deliver up to double-digit performance increases, more cores and more threads, enhanced overclocking features in our tools for the geeks that want to crank it up all the way. We have an AI M.2 module. These are the modules that slip into the motherboard like, say, WiFi modules do. So people can start programming on AI, and I'll tell you the benefit in a minute, but it's important because this AI capability gets integrated into the package on the next generation. Packaging matters. So if I simplify all the products of Alder Lake and Raptor Lake, there's like a package for the performance, high-performance gaming and creator segments. And there's a package for the more mobile-oriented segments. With Alder Lake, because of the supply constraints in the industry, we've second sourced most of the components with our customers on Alder Lake. And if they choose, they can drop in the performance capable products or the mobile sockets right into their designs, same board layout and importantly, the same build material. So there's pragmatism in action. And as you saw, it's powered on. It's working well and will be shipping second half of this year. Then we take that architecture and we disaggregate it. And as I mentioned, we break it into tiles or design it into tiles, the designers wouldn't like me saying it that way. And this allows us to do hybrid, but we can adjust how much hybrid are in E-Cores and P-Cores based on more fine granularity to the segments. We can do lower power capable workloads. We have a next-generation graphics engine. We call it the TGP, the Tile GPU, we can bring at a discrete tile from a discrete road map into the package, and we're also integrating AI so we can do tasks that are done on the CPO at about 110 of the power. Now before I transition to the ecosystem, let's pause a third time and hear from John Solomon of Google.

Hi, everyone. This is John Solomon, and I'm the Vice President and General Manager of the ChromoS team at Google. I'm excited to be here today virtually at least to talk about the strong partnership between Intel and ChromoS. Actually, this partnership goes back to the very beginning of the development of Chromebooks here at Google, where Intel was a key partner from the start, and we've really done a lot together. And Intel has invested in this ChromoS ecosystem, both with Google, but equally importantly, with the OEM ecosystem to help them ship devices, whether it's the most accessible, affordable, sturdy, reliable products for students or highly performant latest technology devices to run enterprise operations, Intel has consistently invested in the ChromoS ecosystem, as I said, both with us and with manufacturers. And we're very grateful for that support. It's been great getting us to this point. But we're even more excited about where this partnership can go going forward. And that's what I want to talk a little bit about today. We're all leaning in to create an elevated experience and a higher performance experience with all of the security and simplicity benefits of ChromoS within Google and ChromoS, that open ecosystem is really, really important. And we share this with Intel. And so this is really -- this shared value of openness in the ecosystem is something that really helps power the partnership. So I would like to say thank you very much to Intel. It's been really from an industry perspective, pretty unique partnership, and we're looking forward to continue to build Chrome into really the best possible computing experience in a modern, cloud-centric world.

It's one thing to deliver a product, but if we want to deliver a leadership experience that meets our needs, we need to invest with our ecosystem. And this ecosystem is the only way to deliver the number of experiences and the quality of the experience is we want to deliver that no single company can. It starts with the OS. You don't get a hybrid architecture working without our Thread Director and their OS, all of these OSs moving work to where they can be best performed. That's point number one. Secondly, more than just hit minimize, if you work closely with the top software developers and creator in gaming, they can actually do much, much more in their product and architecture, which is cameras we look at each other through, the sensors that anticipate our needs, their hardware and software. So they develop to a rigorous platform specification we provide with our customers. They develop their products, and they come in every platform to 1 of our 3 open labs China, Taiwan or the U.S. and optimize their solution for Intel Architecture. And then all of this comes together with our key OEMs listed on the chart here and more where we co-architecture and develop the device and the experience. So how does this show up in the market The EVO platform is specifically specified and designed for mobile performance, whether you're on the go or you stay at home. Intelligent collaboration, video conferencing. I don't know if any of you have a dog that barks during your conference call or have kids or babies that cry that AI acceleration we put into the chip can do that at 110th of the power of general-purpose computing. Presence detection is the use of sensors anticipating and reacting to our needs. One simple example when you get up and leave your desk, the display goes off and locks your machine. And when you come back in, it sees you present, it looks for only your face and logs you on immediately. Engineered for EVO is something we started with Thunderbolt accessories and docking solutions with our OEMs to make sure every generation they seamlessly paired with no problems. At CES, we announced taking on the next challenge of Bluetooth accessories seamlessly connecting to the PC. And then the last one I'll talk about here is, remember, I'm at my desk with my companion device, the phone, sitting next to it. We are going to enable multiple devices, say, watches, phones, tablets with whatever OS they are running come on to our client with whatever OS we're running, so you can take those calls, texts and move your photos without ever leaving your machine as a first step, and they'll be shipping second half of this year in selected EVO designs. Just as importantly is our built to business platform. vPro has been a platform we've been co-designing with large enterprise and OEMs in their software applications for 15 years, initially for down the wire management and now importantly, security. In fact, we have a security engine in our silicon that can detect 85 instances of ransomware today. But we don't only sit inside our walls, let alone our firewalls anymore. So we now are working with partners that cloud deliver this capability right to your desktop or right to your notebook in your home. We announced a partnership with VMware, where we're co-selling these features as part of their Workspace ONE solution today, and they work both in the enterprise through the edge out to the client. We just signed the second phase of that agreement. We're going to co-architect and co-design features for true chip to cloud security, secure cloud -- secure client cloud delivered. Not any other pause, let me do a hand off to Michelle to summarize where we're at.

Thanks, Jim. I hope you're all feeling is inspired and confident as I am about CCG's future. With the growing market and leadership products, I am confident that we will continue to win back market segment share, and I will be driving the team to our seventh year of consecutive revenue growth. To quickly summarize why we believe this is all possible. We expect the PC to remain an essential tool people turn to, to focus, create and connect in ways that matter most to them. This will drive a sustained TAM growth. And to embrace this growth opportunity, we will continue to deliver an annual cadence of products and platforms that not only deliver new and emerging experiences but take advantage of opportunities like navigating the metaverse. We will also continue to build unrivaled partnerships within the ecosystem, many like you saw today with Microsoft and Google that leverage the best of the cloud and the client to deliver the choice and freedom that people want. There has never been a more exciting time in the PC industry, and I am thrilled to lead Intel's client business moving forward. On behalf of Jim and I, thank you. With that, we'll bring Tony back up. Thanks.

All right. Thank you, MJ. Thank you, J.J. At this point in our program, we have a short break. For those of you in the room, there's refreshments out in the hall. For those of you joining us online, we'll be back in 15 minutes. Thank you. [Break]

All right. Welcome back. If I could have you take your seats. We're getting into the home stretch of the program. The last of our presenters for today is our new CFO, David Zinsner. I need a little bit more time. Back up, Dave. All right. I don't know when the live stream cut back in, something had to happen today. We made it through most of the program. Again, we'll have one more presentation, and then we'll move into Q&A. I believe almost everybody in the room probably already knows him. I'll announce him anyway, our new CFO, David Zinsner.

So excited for the tonight show entrance and they blew it on me. All right. Well, thank you, everyone, for joining, and you're now in the home stretch here with my presentation. So I'm between you and drinks and what have you. So I will be relatively quick. Just so you know, for those of you that don't know me, which probably most of you do here and on the webcast, I've been in the semiconductor industry for 25 years. 16 of those years have been the CFO of a semiconductor company. Every one of those companies, there was some form of transformation necessary is kind of the thing I love to do and I get attracted to. And I think that Intel's transformation story, which we're really embarking on today is the most exciting one that I have ever had a chance to be a part of. So I'm just thrilled to be the CFO and just drive the 2.0 -- IDM 2.0 growth story to fruition. I look forward to working with the team as we take this journey to make Intel the premier company that it needs to be. Okay. So as far as goals in my presentation is somewhat aligned to these goals, these are the 4 goals for me. I've spent about a month here so far just deep diving and getting an understanding of the financials and the strategic road map and the product road map and how the process technology evolution will form. And so I've got actually a fair amount of confidence in how we will drive the financial part of this story. And I'm going to go through that and like I click down from probably everything you've heard so far today. Number one goal for me is to help augment the revenue growth story, but to do that in a way that we drive profitability. That's kind of the thing that really one of my mantras everywhere I go. And I believe at this point, we are structured for success in terms of this growth. And I'm going to click through some of the things that we'll do to drive that growth. Two is, obviously, gross margin expansion. I know that everyone looks at the margins in these low 50s. We have a clear path to get them back up into the mid to the high 50s in terms of gross margins, and I'll show you that aspect of things. And third is the biggest thing for me is free cash flow. And we have a very good story about how we're going to return to significant cash flow for this business. Part of that is smart capital, which I'll go into details on. Part of that is just good financial discipline. And ultimately, the goal is to drive strong shareholder return for the investors. Okay. So Pat showed you this chart or a similar chart, which is the breakdown of every one of our businesses. Every one of these markets that these businesses are going after our large markets, every one of them is growing, some more significantly than others, but they're all growth stories in and of themselves. We have strong franchises in many of these markets. We will have strong franchises in other of these markets. But you can count on me. We are going to make sure that we report to you in a transparent fashion every one of these businesses. And I get the opportunity because they're broken out the way they are to drive accountability in these businesses, make sure that they're driving the right level of profitability and the right level of return on invested capital. We're going to instill financial discipline through this company. and this will be the beginning of the segmentation that you have here. So let me walk you through a little bit on the revenue side. Okay, start with the markets. I said that the markets were large and growing, and you probably -- if you had been to any one of the sessions in the morning or you listen to the last 2 sessions this afternoon, they kind of walked you through their markets, but let me kind of aggregate it for you. These markets on a combined basis, will grow in the double digits we expect and will be north of $450 billion by 2026. So a huge market opportunity for Intel. All go kind of clockwise around just touch on them a little bit. Graphics accelerated compute. You probably heard from Raja, if you attended the meeting this morning. That's a market that's growing in the mid-teens, $100 billion TAM by 2026. The foundry business that Randhir, augmented by the acquisition of Tower. That's going to be a market that gets to $140 billion, growing in the high single digits by 2026. As Pat talked about, we can't talk a ton about the ADAS and AV market because of the impending Mobileye IPO. But rest assured, I think all of you know that follow the industry. This is an industry that's growing fast from a semiconductor perspective. we would expect a high growth rate. Coming down to network and edge, driven by 5G infrastructure build-out, driven by the digitization on the edge. We see that market growing in the low double digits to $75 billion. And data center is I think everybody knows, large market, growing in the mid-teens. We expect that to get to about $65 billion through cloud build-outs, AI workloads and so forth to $65 billion by 2026. And lastly, the compute business, obviously, already a very large business, one of our major markets. We see that growing in the low to single -- low to mid-digit single digits as a percent, getting to $90 billion by 2026. If you look at the emerging markets, those will be the markets that drive a lot of the TAM growth. But even the traditional markets, we see growing to $240 billion by 2026. So robust growth. I'd just tell you, I think in some cases, when I talk to investors more recently about our assumptions, there was some concern that we were hanging our hat on a client business growing at high single digits or low double-digit growth rate as a market. We're not -- we're expecting -- we have very conservative assumptions around the client business at low to mid-single digits. Now clicking into our business, and Pat went through a lot of the details around the growth rates. I'll just kind of reiterate a little bit where we stand. So we're -- given that we're in an investment phase and we're driving our product portfolio to leadership in areas where they still need to get there. We're building out our emerging businesses that still have to grow. We see the growth rate being in kind of the low single digits for the first couple of years, then we see that accelerating in '23 and '24 to mid- to high single digits. And then ultimately, as Pat talked about, we think -- we feel confident that we can get to a growth rate of 10% to 12% in '25 and '26. Now from my perspective, in addition to just making sure that we deliver on that growth rate, there are things I'm going to be focused on for me and for the finance department. And I just put a few examples. There's obviously more, but let's just take data center. I want to make sure that we make very focused investments that the guardrails around this business are very tight. They're focused on the areas that are going to be important to drive the growth, to drive the success in data center in the client business, it's about making sure we exploit the great franchise we have in that business, make sure that we're getting the value from customers for the leadership position we have. Pat talked about Mobileye, but mobilized an opportunity to unlock shareholder value through the IPO process. So we'll make sure we execute on that. And then in the foundry business, it's making sure that we expand but expand in a way that is thoughtful and make sure that we maintain good profitability, good discipline around our CapEx intensity and good discipline around our free cash flow aspirations. And then on to gross margins. So we talked about we are going to be in an era for the next few years where we're investing, investing to accelerate our process technology investing to make sure that we get our fabs and our shelves in a place where we can expand at the rate of demand. That takes some investment, obviously, and that will impact gross margin. So gross margins we see as being in this 51% to 53% range for the next few years, '22, '23 and '24. But I have high confidence that we can get the gross margins into the 54% to 58%. In fact, I think that the product gross margins will run higher than this. And the only thing that keeps it in this 54% to 58% is the foundry margins because the country margin is obviously even at the leading edge or in the low 50s. So that will be in the low 50s. The product margins should be above this. We see that the blend would be somewhere in the 54% to 58%. And I'll walk you through some of the things beyond just what you might think of traditionally as areas that we'll focus on. So first, we're going through an accelerated pace of process technologies. We're trying to do 5 process technology in some 4 years. When you do that, that does put pressure on the gross margins. But as we move the cadence back to a normalized cadence as we get the benefits of EUV as we get the benefits of being at the most advanced process node, that will drive an improvement in gross margins, and we expect that to be somewhere in the 100 to 200 basis points. Second is just pricing. Obviously, in some areas, we do have a leadership product in some other areas we don't. But as our product portfolio improves, not only through this year but through the next few years, we see a great opportunity to improve our pricing for the leadership products that we're producing for our customers. That's probably worth 100 to 200 basis points. And then on scale, given that we have high aspirations for growing our business and as it accelerates into the 10% to 12%, we'll get a benefit from that scale, but we'll also see improvement in mix. Some of the businesses that are emerging that we expect to see high growth from actually carry gross margins that are higher than the corporate average. That will help lift the gross margins as well, and we see that somewhere in the 100 basis points. And then lastly is the day 1 too exclusively, which is the fiscal discipline is me and my finance team really driving the operations, driving the businesses to execute to a world-class measure of cost. And I've only been here a month, but I've already seen a ton of different opportunities to do that. So I think I'm probably being conservative by guessing that it's 100 to 200 basis points, it's at least 100 to 200 basis points. If you add up all the high ends of that and roughly put us in the middle of the gross margin range, you'll actually get to a number that's higher than that. So we're going to shoot higher so that at a minimum, we're well within this 54% to 58% range. The one kind of headwind we'll have is inflation, which I'm sure everybody is conscious of if they go to the grocery store, they're conscious of inflation. We're not immune to it. But I'd say in the semiconductor space where everyone is experiencing inflation, we're actually better positioned because we're vertically integrated because more of our manufacturing is internal because we have better control over the cost in that area. That gives us a competitive advantage, a better cost advantage relative to our peers. And so we see, actually, ironically, inflation as being somewhat of an advantage for us as we progress. Okay. So now CapEx intensity. And Pat, I mentioned in his remarks that we're shooting for net capital contensity to be around 25%. Obviously, we'll be through an investment phase in the first couple of years, which will push the CapEx intensity up to about mid-30s percent of revenue. But I feel very confident that we can get this back to a net 25% in the '25, '26 time frame. Part of that is just we're going to manage that. That is the guardrail by which we will operate this business is 25% CapEx intensity. And I'm committed to make sure that we maintain the balance sheet and the P&L in a manner that we would expect. But I think there's a lot of things that will help us there. As we move back to a normalized cadence, that will help alleviate some of the pressure on CapEx intensity. As we get caught up, one of the reasons why we have this higher CapEx intensity is we have to invest in shelf space that we have been quite honestly, under investing in the last few years as we are at a point where shelf space is positioned at the right time when we need it to manage our demand, we'll be in a better place to reduce our CapEx intensity. But the most important thing, I think, for us that's in control -- that we're in control of is Smart Capital. Pat mentioned Smart Capital. I'm not sure everybody knows what Smart Capital is. So I'm going to try to define it a bit for you. So at least in my view, I see it as kind of 5 things. Number one is the shell first strategy. It's building shells in advance of necessarily when you need them, so they're ready as demand comes that you can expand your capacity. And it allows you to kind of modularly add capacity to the infrastructure. The advantage is, obviously, the shell is not all of the clean rooms expense. In fact, it's a moderate amount of the expense. And so that helps moderate our CapEx. The other benefit to that investment strategy is when we're investing in shell space we depreciate that over longer lives. We appreciate that over 20 years. So the gross margin headwind from adding shelf space is actually relatively minimal versus what you would invest -- what you would see when you invest in equipment. The second, Pat mentioned, but is government incentives. We have the chip stack in the U.S. We have an equivalent 1 in Europe. We have states that are offering incentives. We have countries within Europe that are offering incentives they're even incentives in parts of Asia. So we will take advantage of those incentives as an offset to some of our capital investment. It's good for us, obviously. But it's also good for national security reasons for countries around the world. And then it's also a great economic engine for countries that invest in semiconductors, it drives a lot of job growth. Third is just customers. Randhir likely mentioned this. I think Keyvan mentioned this, also Pat mentioned this, we will seek customer commitments as we look to expand our fab footprint in the form of prepayments. And so we've been talking to customers, I'm sure Randhir mentioned this, and I think we have good line of sight to see prepays as we start to build out, in particular, the foundry business. And then fourth is financial partners. So we just signed or agreed on a memorandum of understanding an MOU with Brookfield. For those of you that don't know Brookfield, they're the largest investor in infrastructure projects. in the country. They largely invest in energy projects and so forth, land development projects. We are developing a model kind of a first-of-a-kind model for project financing with Brookfield that will help drive more efficiency in our capital investments. We'll have more to talk about. It's kind of a framework at this point, but I think can really augment some of these other capital offsets to help our -- help drive more capital efficiency in our investments. And when I'll tell you, when we look at [ 2 ], [ 3 ] and [ 4 ], and those are the ones I would consider as the capital offsets, we think that while we've modeled at least that, that will be about 10% of our gross capital investments to drive it to a net capital number. But in reality, we are chasing [ 20 ] to [ 30 ], I think if it isn't [ 30 ], I'd be surprised. There is literally hundreds of billions of dollars available for us in these offsets. And so I'm really optimistic that we can actually do better in this regard. And then lastly, it's just utilizing third-party foundry. Obviously, those wafers come without the CapEx investment. It also allows us to be more flexible. You probably heard Raja in his presentation talk about how he was going to mix, the internal and external foundry capacity. This is going to be something that we also leverage. Also, I think Keyvan mentioned it as well as a part of his strategy. Okay. And now the one that really is dear to my hardest free cash flow. So our goal is to get free cash flow to 20% of revenue. Obviously, right now, we're in an investment phase, so it's not going to be there. But we see a clear path to getting to 20% revenue and free cash flow. Some of it is just what I talked about, it's revenue growth, it's gross margin expansion. It's leveraging the smart capital to offset some of our capital expenditures. Also, I think we have good leverage on the OpEx side. Obviously, we're at an elevated level right now. But as revenue grows at a more accelerated rate, we think we can grow expenses at a lower rate and that should bring CapEx as a percent of revenue down, which adds to our free cash flow. And then lastly, as working capital. again, I'm only been here a month, but I see a lot of opportunity in working capital. It just hasn't been something that's been a big focus. And there's a lot of dollars locked up in our working capital. And I'll give you one example. We have a very kind of lack of linearity in our shipments. It ends up driving less of our cash getting collected in the same quarter in which we ship. I think we can work on things like that, that will ultimately be pretty beneficial to our free cash flow. And from a balance sheet perspective, I think it stays pretty much as it has been. We intend to keep our leverage at a modest level. We want to maintain healthy liquidity. That's a strong cash balance augmented by our $5 billion revolver. And then lastly, just, of course, both of those will ultimately yield a very strong investment-grade rating. And we want that flexibility for -- with a strong investment-grade rating to be able to invest and do the things that we need to do at the time we had to do them regardless of what the economic situations are. So this will give us maximum flexibility to make those investments in a timely fashion. Okay. Then on capital allocation, I broke it into 3 areas. Number one, I think you probably hear this a lot, but it's invest in the business, invest in the talent, which is the #1 thing we've got to do, invest in technology, invest in infrastructure. The goal is to maximize growth at the end of the day, and this is critical for us to be successful. In addition to the organic, we will augment it with M&A., inorganic opportunities. I would just tell you that Pat and I have a very high bar as it comes to M&A. It's got to have massive strategic sense and it's got to make great financial sense and ultimately has got to deliver a very good return for shareholders. And so we'll maintain that bar in everything we do. On the flip side, I'd also tell you that M&A is not just about acquisitions. It's also about monetizing assets. We just sold a NAND business just at the beginning of January, we got $7 billion that gives us flexibility to invest in the business. We're going to take Mobileye, we're going to monetize that in the market that unlocks value for us now gives us cash now, but also allows us to ride the future valuation expansion of the Mobileye business, which is kind of a win-win for us. In terms of M&A, I just did want to mention about Tower. It's been, I think, mentioned a little bit over the course of the day. Maybe I'll just reiterate from a financial perspective. This allows us to target this $140 billion market by 2026. They are one of the leaders in the specialty foundry market. That's a $15 billion market. But more importantly, they give us all kinds of know-how in terms of how to go to customers, how to be a foundry, how to deliver what customers are expecting. And we see significant synergies, synergies in terms of helping Intel get better and synergies in helping tower get better in terms of their cost structure. So I think there's going to be a massive opportunity. The ROI on this thing is just going to be spectacular. And I should say that on day 1, it's accretive immediately, obviously, but that's pales in comparison to what the accretion we'll get as we progress once it closes. So come back to the capital allocation, so invest in the business, utilize M&A for both monetizing assets and acquiring assets. And lastly, as return to cash. We are absolutely committed to returning cash to shareholders. We intend to maintain a healthy dividend, and we intend to grow that dividend over time. You can count on us. to do that. That will be the primary way we return cash to shareholders and grow the stock further than the earnings growth. Okay. So that's kind of the prelude to the model. So I'll start with the '22 model, I'll give you a sense for that, and then we'll go into the out years. Okay. So for '22, Pat already mentioned that while the market is still very, very healthy. the supply chain challenges that everyone is dealing with is a bit of a challenge. And so that is affecting the demand a bit, but we're still going to grow. We think we'll grow to $76 billion in '22 with 52% gross margins right down the fairway from what the range we gave investors in the third quarter and the fourth quarter. We said 51% to 53%. It will be right down the middle at 52%. We are making investments on the OpEx side to drive product growth. And so that is going to elevate our OpEx, not both in terms of dollars, but also in terms of percent of revenue. And so that translates to a $3.50 EPS. Free cash flow, we expect to be slightly negative, negative $1 billion to $2 billion. Obviously, we'll be managing that tightly. And we talked about a CapEx range of somewhere in the $25 billion to $28 billion in the third and fourth quarter. We kind of locked in at $27 billion on a net basis. We have a relatively modest offset assumed in this number. And we'll obviously be looking for more. So there's a potential we can do better than this. But for now, that's the modeling assumption. And then let me talk about what I would call the investment phase, which is '22 is an investment phase but also '23 and '24. So we start to see the acceleration on revenue that I talked about mid- to high single-digit growth. gross margins remain within this 51% to 53% as we still are in this accelerated road map of process technology and capacity expansion. I do think we can start to see the start to show some leverage. So that comes down into this 28% to 30% that I have here. Net CapEx intensity that I mentioned before will be up in this mid-30s as a percent of revenue, and I would expect free cash flow to be roughly neutral. And then we transition to the long-term model. So now growth is really accelerating. It's 10% to 12%. We'll get to the margins that I want to get to, which is in the 54% to 58%. OpEx continues to show leverage down to 25% to 27%. CapEx intensity comes back to a more normalized range of 25%. And that should drive free cash flow, somewhere in the 20% of revenue, which by industry standards, would be a spectacular number really drives really great ROIC. I think if we deliver on this, which we feel confident, I deliver on the first part of what Pat's double-double was. He wanted to double the earnings, double the multiple. I deliver on this double the earnings for sure with this model. So that will be our goal to do that. Okay. So back to the end of Pat's path. It was ironic. Pat said it was his 1-year anniversary. It's actually my 1-month anniversary today, too. So that was somewhat ironic. I think Pat delivered these messages very well. We're in very high-growth markets, as I've shown. We have competitive advantages with this IDM 2.0 strategy that no one else in the industry has. This is absolutely the strategy that will make us successful. There is an investment period to make it successful, but the outcome is significant, both in terms of P&L and in terms of shareholder value creation. Pat touched on this leadership and culture. But just from an outside person coming in, it's real. I mean he is driving real accountability across the organization, and we have real kind of processes for that, that if you get a chance to talk to Christie, our Head of HR, she can go into it. But it's different than what Intel has been managed to in the past. And I just think the leadership team is an a manning leadership team. And we're coming up with ways to to unlock shareholder value for everyone. But more importantly, I think for me, it's about making sure we do all these things and are always conscious of the P&L always conscious of the cash flow, making sure that we deliver on the shareholder return aspirations that we all have collectively, both internally and externally. I'd just tell you 1 other thing is I went through these models, again, having only been here a month. It may be easier for me to say this, but those are the models we're absolutely committed to but I'm shooting for higher than this. So as Pat, I think, said, get on the bus or get on the train or whatever you sit, but get on and come aboard because this is going to be an amazing story. And with that, I will turn it back over to Tony.

All right. Thanks. All right. We're going to move into the Q&A part of the agenda at this point. I'm going to give the as a little bit of opportunity to move some chairs out. So let me explain a bit how this will work. We're going to have some runners with mics sitting in each one of the alleys. So just go ahead and raise your hand, and they'll run a mic over to you. They will hand you the mic. And then when you're done, you could just hand it back. We're going to wipe down all the mics to make sure it's COVID safe. Because we're trying to get through a number of questions, I would ask that you ask only one question and then you pass the mic back and we'll try to get through as many as we can. We'll go through this about 25 minutes or so, at which point we'll bring out the rest of the executive leadership team and then we'll go through sort of the end of the hour. With that, I'll invite Pat to come back on stage.

That's good.

All right. So I'm trying to see with -- do we have someone with a let's go -- why don't we just start down here in front. Brook?

Vivek Arya from Bank of America. Thank you for the presentation. Just wanted to clarify if the road map for Granite Rapids is the same as what you had committed to last year. But my question, that is that in the PC market, how risky is it to assume that PCs, which are kind of at a cyclical kind of back to their prior peaks can stay at this [ 350 million ] and maybe even grow from here. And then within that, there is also emerging competition from ARM, and I say that because PCs are such a big part, right, of not just your sales, but your fab utilization. So how much have you kind of tested the model to what happens in the PC market goes from [ 350 million ] to [ 325 million ] or [ 300 million ] units or if ARM takes a bigger share of that?

So on the first one, we did change the road map, as we said, on the server road map, right, with the Sapphire, Emerald into that platform. So Granite Rapids is now a product that's on Intel 3, a new microarchitectural core going into it. So it's a higher performance product in '24. So we've changed the road map. We've made it stronger, hit this cadence as we described, and we added Cra-Forest, right, a product that's in that same platform but with the efficient core. So it's a different road map than we were before. And we've literally in preparation for today, just taking all of our major customers through it, and they're very happy about the changes that we've made. So good response to the customers. On the PC market question, it's one that we get asked a lot. We probe a lot. We're -- I'll say the amount of time that we spent on that exact question right in our market surveys, working with IDC analysts, et cetera, working with our ecosystem partners as well. We are confident -- first, we're confident in those market numbers. And there's nothing amazing here, right? You go look at refresh rates, you got to look at penetration rates, you go consider the continuing expansion in various some markets going forward, there is nothing heroic in those numbers. And that's why we use the language a structurally larger market. And just one example is Windows 11 is going to drive a major corporate refresh cycle that we're overdue on a corporate refresh cycle and new security capabilities are required for Windows 11. So we just keep testing that. And that's part of the reason we have panels talk as well because they're seeing the same thing, and we've done a lot of validation of that with customers. Now that said, we do have other risks here that we're looking at like the ARM market and that's been super low end, right? And largely, the only reason that we've seen that emerge because the compatible PC marketplace we just don't go down that low. Supply constraints have allowed that low market to sort of exist and bubble around. And we have to deliver better products, right? Because if the product is better, people don't want to go through the painful work of creating new software releases and all of the other challenges of the issues that along a long tenured software ecosystem brings to the PC space overall. So we have to be competitive. We're well on track to do that. And the road map that we've laid out, the strength that we've seen in Alder Lake. If anything, we're more confident today than we -- if we were having this discussion 30 days ago. We were just gaining momentum. The IDC results showed us gaining share in Q4 and the market robustness has been constrained by supply chain issues, right? It's not demand. It's been supply chain issues. Otherwise, this number would be more like [ 3 70 ]or [ 3 80 ] as opposed to the [ 3 50 ] that we showed.

All right. In fact, that was like a question and a half, so I'm going to ask everybody to kind of round down a little bit. So Kim?

It's Matt Ramsay from Cowen. Thank you, Pat, for making your team available for so much information today. I wanted to touch on a couple of points on gross margin, and Dave, you can definitely chime in on this as well. We're starting at 52% in March, and that's kind of the near-term range. I guess there's some concern that as you roll out these nodes more quickly that there'll be some pressures that will take margins below that level, and you guys have expressed some confidence that you'll stay above [ 50 ]. So maybe in your month at the company, you could give your perspective on really being the floor and what upward pressures would counteract some of those downward ones? And the second little point is I saw in the long-term expansion of margins, you had talked about ASP expansion. There's been a concern, I guess, that Intel might protect share and absolute on pricing. And it sounds like you guys are talking about ASPs expanding. So if you could talk about that, that would be great.

Okay. Before I let Dave comment, part of it is, and I just want to emphasize what he said at the end of this presentation. This is how we're going to manage the business. right? We have a lot of levers in how we manage the business, how we go drive our product teams, how we go, create cost structures, how we go drive yield. There's a lot of levers inside of it. And I'll just say, this is how we're going to manage the business, right? And you say, hey, there's going to be other headwinds. There's always frequent headwinds, right? If you don't want to have don't get out of bed tomorrow morning, right? That's our job to manage the business to what we think is a conservative set of financial parameters and guardrails that we have laid out. And everything that we've done over the last year is we're a meat beat raise kind of culture that we are building. We're executing on the environment that we have laid out. Now I'll let Dave give details, but Dave is telling me what I need to do.

Yes. So I was going to say the same thing. I mean, part of it is we're just going to manage that level. The one other thing with this year is we are going to see product launches as we progress through the year. We're pretty excited about those product launches and what those product launches will deliver in terms of updrafts to the gross margins, that will also help. I'd also tell you that we -- the biggest cost factor -- one of the biggest cost factors that we have in terms of margin pressure when you're accelerating your process technology is this like new start-up costs that we have. We had a step up in '21. We're having a step up in '22, but '22 step-up is largely kind of flattish. And in fact, it's flattish for the next several years. So we'll be able -- and part of this is the TikTok approach that we're doing that it allows us to kind of more evenly spread that start-up cost, which will also help. And then a lot of it is, as Pat said, it's just us rolling up our sleeves and managing the business to that level of margins. on the pricing thing, which can I answer for it even though we by late in the principle too. Yes. On the pricing side, look, it's really not about taking a price and we're going to jump that up. It's really coming out with world-class products, leadership products that deliver something really important to customers. And when you do that, customers, I value that I pay for that. And that's the -- that's the assumption that we're making and the confidence we have is that we will deliver on this product road map and that begets better pricing over time.

All right. Great. Thank you. So we've had a question and a half and a concatenated question. We'll keep trying, so I'll go back to Ben here.

It's Ross Seymore from Deutsche Bank. I'll just make an 8-part question for you. So I want to ask about the competitive landscape. What you've launched in Alder Lake has done a great job of reversing market share loss going to market share gains the server side has been a little bit of a different story, especially on the cloud side, results from some of your competitors recently were much stronger than you guys in that cloud market. So given how you've reworked the road map today, can you talk about any changes in when you would hit competitive parity and take a leadership position in that given Emerald and Granite pushout? And why are you skipping the Intel 4 node completely?

So I don't know if that's a 5-part question, but -- so Sapphire is a leadership product, okay? And I'll say it again and again and again, right? It is the best product in the market that we're ramping this year. It has the best power performance, right, key features and security and AI, right? It is not as good of a part as we would want. I will certainly grant that, but it's the best product in the marketplace, period. We do expect to see AMD respond right, with our part. So the next couple of years are going to be a bit to and fro. And that's what I've said before. It's not like we have the unquestioned leadership as we have in the client where I said, AMD is in the rearview mirror, right? We never see ourselves falling behind again. Here, it's going to be a much more competitive market for the next couple of years. And we're executing against our road map gives us better competitive tools. The gap in these competitive things has substantially reduced over what it has been the last couple of years, but we don't have that defined unquestioned leadership until the 24 products come. right? And with that, we chose to accelerate our embrace of Intel 3 because it produces a better product. Customers in the server space don't want the same cadence that you can tolerate in the client space, they want this more predictable cadence, right, of platforms and products. It's a much longer adoption qualification cycle associated with it. So we align the Granite timing, take advantage of Intel 3, create a better product. And we're moving from Intel 4 to Intel 3 gives us about 18% of process technology. We're also getting a new P core, new performance core inside of that, that's another 10% to 12% on top of it. So we've created a little bit later, much better product that aligns with our customer cadence. So that's exactly why we've done it. And we've also created the split road map that gives us the efficient cores with Sierra Forest. And that really hits that cloud market. And since we have both P and E cores in our portfolio, our competitors only up on, we get both. We're now optimizing for the 2 segments much more effectively. So as we would say, hey, it's going to be challenging through '22, '23. But when we get to the 24 products, unquestioned leadership and that's what Sandra has said, that we'll be accelerating our growth rate over that period of time. And as you go think about that, this is still a nicely growing business over the next couple of years. And then as we look at what we're doing with AXG and NEX, respectively, in those market segments. Overall, we're bringing a lot of capabilities to a marketplace that in these other areas growing very nicely in this area, getting more competitive. And that's before we talk about security, software, and many of the other things that we talked about.

All right. Ken?

Dave, thanks for hosting this very, very informative. This is for you, Dave, right in your wheelhouse. Welcome back to the stage. The question is really on return on invested capital. And not capital allocation to shareholders, capital allocation internally. When you're looking at investing in IFS versus IDM. And I didn't get a good sense and maybe I should have pro better in the sessions. But kind of what's the decision making? What is it dependent on? What are the milestones that you are looking for you and Pat are looking for and you're saying, "All right, this is the investment going into IFS, this is going into IDN". And then how much of the capacity is fungible. So this kind of -- those were my I don't know, one and a quarter question.

Yes. No, that wasn't one and a quarter. That was at least 4.

Okay. So maybe I'll start. I'm sure Pat will want to come over the top on this one. We do have ROIC measures obviously. I didn't mention it in here, but if you get -- if we get to the higher end of our range here, the ROIC that, that delivers is like north of 15%, probably likely 20% ROIC. And I would tell you that internally, that's roughly in the range of what we're going to want to see, and we're probably going to want to be shooting higher in certain cases to make sure that ultimately we get to those levels of ROIC. We want to deliver economic value relative to our weighted average cost of capital, which is more in the kind of high single digits as a percent of revenue. So we're making those decisions all the time. But I would tell you as it relates to the foundry business, for example, we just have a belief more than anything, that, that is a business that we should be in that we -- as Pat mentioned, IFS benefits from IDM, IDM benefits from IFS. And so we have a belief in that, that almost transcends ROIC. It's a meta-level strategic decision that we're going to make. I would say more than anything, as we're looking at capital allocations in that regard, it's about demand. And it's methodically building out capacity as we see demand, whether it's in the product side or in the foundry side, what is it that we're seeing. And some of that kind of feed of information is going to come from customers coming to us with prepayments, wanting to secure significant capacity, that's the trigger for us to know that, that's a good investment. I think if you can -- at any time that you can deliver margins that are north of 50%, chances are the ROIC is not going to be a big issue for you in terms of in terms of delivering to not only the company's ROIC metrics, but also to shareholder return ultimately.

Remember, there's 3 levers that we talked about inside of our IFS investments, right? One is leveraging depreciated assets, right? And we're extending life of fully depreciated fabs and capabilities. That's always been the sweet spot for foundry margins. And we are going to have a lot of capacity that we're going to be able to leverage, extend life of equipment Second was the unique capital offsets that we're going to expect to see that go into that as well, right? We're saying that we're going to be in a position, whether those are customer prepays other government offsets, right? So we see a lot of opportunity to leverage what they've talked about in terms of smart capital there. And finally, as we go look at that business as well, it is highly leveraged. When we run 18A, maybe a slightly different recipe for some foundry customers. But generally, it's going to be 18A and then what's next and so go so this is going to leverage the R&D investments in a very powerful way. And that's what I was describing in my comments, the IP libraries that we create for our internal designs, get better monetize the R&D efforts, TV efforts, packaging efforts. This is a powerful leverage to further augment the unique assets that Intel brings to the table here. And that's why we said IFS makes IDM better. IDM makes IFS better. And if you look at the TAM charts that David showed, that was the biggest number on the page, this is a great opportunity for us. And finally, right? And I'll make the point again, as I did in my comments, a major investment in Intel today is a hedge against the massive geopolitical environment of the world. The world wants more distributed, more resilient supply chains for the long term, and we're definitely going to lean into that very powerful tailwind.

Now if you're asking about the milestones, by the way, of course, we will -- in everything we do, we're going to be monitoring how we're doing and obviously, as we get further along and have better information, we'll make course corrections and modifications along the way. That clearly will be part of our model, no doubt.

Just remember, as you get your question, please say your name and what firm you're from as well. Brook?

John Pitzer with Credit Suisse. Pat, thanks for all the information today you and your team put together. I think many of us out here have an easier time underwriting the TAMs you put out there then your ability to actually go in and exploit kind of the growth opportunities. And the one dynamic I would like you to talk about, and we've talked about in the past, is this idea within the data center and accelerated compute general purpose compute versus sort of semi-custom and ASICs. And what role do you see semi-custom and ASICs playing? How big a part of the market do you think that will become? And can you now participate in that market with IFS in a way perhaps that you didn't? And I'd be curious as you answered the question because everyone has a sick part question. It's interesting that you guys are now willing to license out x86, and we've never seen an RM x86 benchmark, except with either Intel, AMD and a third party, what's been the reception to sort of the x86 potential licensing?

The -- as we look at the -- let me start at the back of that question, right, because I think it will help to inform the whole question we are engaging particularly with our largest customers, our cloud customers, I'd say probably a full 1/3 of our foundry pipeline is interested in x86. So we're seeing a very robust interest in what that can mean as we start to bring together our IP with their particularly the big cloud customers, but much, much broader than that as well. So as we think about that then as we sort of reflect back, this just reinforces the strategic shift that we are now saying we are much less religious about which architecture is appropriate for which portion of the marketplace. That said, there is no confusion that an x86 socket is by far the best margin thing, the longest tail, trillion lines of code running this thing. That is the best thing for everybody us and the customers because reoptimizing software stack is a terribly hard, long, painful process. But the other thing, and if I point out just one thing, John, from our discussion today, we described Falcon Shores and Raja's presentation. And it steps like that, that makes this even more pointed that we're now saying in a memory-centric architecture, we're going to open up a coherent view for the software programmer of GPUs and CPUs in an almost seamless fashion, right across that. And we're going to have optimized accelerators, other ASICs. If you look inside of Sapphire Rapids, we already have a number of special purpose accelerators as part of it as well. And again, we're not confused. And x86 line of code is the best thing that we can possibly do, but we're also going to open our canvas of innovation with our customers to take on more of these other workloads because in the in this insatiable demand for computing, hey, we've seen systolic arrays are very important for AI functions, clearly in the networking space, specialized security other I/O hardware is more capable. So we are going to be embracing those more effectively. And the combination of IFS opening the doors, our IP and customers' IP gives us more flexibility, the embodiment of x86 plus GPU plus arm plus Risk 5, plus our broader set of portfolios, and we're tying all of that together with one software architecture with one API. So that combination of things, I think, is a very powerful one that just positions us for strategic capacity as Intel never had before and differentiates us from anybody else in the industry by a wide margin.

Ken's go back to Seth room, Tim?

Chris Caso from Raymond James. The question is about the degree of flexibility that you have with the spending in the event that market conditions should change. Better, worse as you go forward. And given that the spending that you're doing is really based on road map and getting the technology as opposed to just simply building out capacity. Does that limit the amount of flexibility that you have such that if market conditions could soften '23, '24 that you'd run a risk of margin erosion or more importantly, free cash flow burn.

We're going to manage it. So we're definitely going to manage it. Those are kind of guardrails for by which we'll manage the business. But we have other levers. It doesn't have to be turn it all off, it could be go more aggressively in the smart capital arena. It can be find partners. It can be manage our third-party foundry relationships a little bit more. So we have a lot of levers actually to manage this beyond just, hey, let's just turn off the spicket. But we will manage to this mid-30s as a percent of revenue in the early years, down to the 25% as we progress into the '25 and '26 period.

But the other thing I'd add on top of it, I'd just say, boy, we have so many people approaching us about building more capacity, right? I mean -- and it is everywhere, right? And that's why I say, boy, $500 billion to $1 trillion, hey, are there going to be some bumps along there always are in the semiconductor industry. at that point. But there is so much demand across -- whether it's cloud customers, whether it's at edge and 5G customers, whether it's a new consumer experiences, we're discussing with one of the cloud customers today that we're not like close to their demand were half of what they want to do by their 24 build-out, right? And we're just saying, boy, how do we go catch up with this. And that's before we started to talk about the tower opportunities that we're just adding to the portfolio. So I realize the it of the question, but every comment that we get from our customers and the engagement with the market just says, we are so far away from that. Maybe that's a question in '27 or '28, but I just don't see it in the next several years.

Ben?

Tim Arcuri at UBS. Thanks. So I had a question on IFS. And that's obviously one of the key levers to the growth out in 2025, '26. And -- but on a separate slide, you show that you're not going to start taking tools for IFS until 2025. So that seems a little late to then have IFS become a big revenue driver out in 2025, '26. So does that imply that you're going to co-mingle some of the foundry business inside your own fabs? And if so, then if I'm a customer, I'm going to think maybe skeptically about that because I think you want to separate those 2 businesses.

Yes. Separating the 2 businesses only makes sense when you get to a significant scale. What customer -- customers -- at some point, they're going to say which fab and those kind of things. But the key question is, are we going to commit capacity corridors, right, just saying, boy, what's the way for commitments that we have at different points of time. So the early days here. It's not like we're setting equipment on this side of the fab to run or setting up fab modules. It's highly co-mingled in the early days. And by the way, that's the way customers would want it, all right, at that point because they're making early decisions. They don't want to have to necessarily make long-term commitments before we started to build some test chips, some momentum in the market with them as well. And as you think about that over time, obviously, we'll accelerate our plans if we get bigger customer prepays, bigger customer commitments, higher volume customers come into it. So we've committed a small amount of dedicated capacity and a small amount of smart CapEx for customer offsets for that business. We would certainly hope that we're taking both of those up over that horizon, and we're well above in terms of the revenue forecast that we built in that are still modest for IFS, the capital commitments that we've built into this plan, which are still modest, but also the customer prepays and other capital offsets, which are still modest. Hopefully, all 3 of those rise well above the plan, but we accomplished the 10% to 12% with a very modest set of assumptions around the growth of IFS over this period of time.

Okay. So we're going to transition a little bit here. So if I could ask Pat and Dave to stand up, I'll have them move the rest of the chairs out. We'll take one more question here while standing. Kenji?

Gus Richard, Northland. Simple question. Pat, you've hired some great people, and they don't look money-motivated. What's the sales pitch? How are you getting these people on the door? Is it just the mission impossible? Any color there would be really helpful.

People -- and as I commented, we are in a mission. There's almost an irrational commitment to this commitment of Intel as this foundational technology company for Silicon Valley, for the industry, for the world. And this team that we're assembling , I'd like to call it my 5-year team, right, where we are kumbaya, coming together, because we are going on mission together to restore the most iconic company in the industry to deliver against just an extraordinary set of opportunities in front of us to launch new disruptive businesses for the future, and that's a journey that is unleashing incredible energy of the 120,000 people we have inside of the company but this leadership team as well as seeing that opportunity and that passion. Now when you translate that, hey, we got to take care of our people, right? We got to compensate them well, but great talent shows up because they believe in the mission. And then they say, I want to work on the hardest problems. And then I want to work with the best people, and I want to have a culture and an environment that I want to be part of. And then, oh, yes, I want to be compensated as well. But it's in that order. And what we are assembling is a team that believes in this mission that Intel is the company that can deliver technologies that improve the lives of every single person in the planet. That's the mission that we're on, and we have a unique set of assets to accomplish it.

Pat, Dave, you can take a seat. I'll now invite the rest of the management team to join us on stage.

Pat and I forget where we're supposed to...

We made it easy for you.

Oh wait, I think we do.

Okay. Great. We'll run this in the same way. I'll kind of go back and forth across the audience. I'll try to also moderate and send the question to the right person. Brook, do you have one on this side?

Louis Miscioscia, Daiwa Capital Markets. Pat, dialing in on something you just said a second ago. 2025 is still sort of out there. I guess, originally, maybe I thought that revenue for IFS would start to come in sooner. So I realize that it takes a while to build plants and it takes a while to do semiconductor things, just like software. But do you want to accelerate IFS? And if so, what are the limiting factors?

Yes, I'll start, but we should ask Randhir on that one as well. I'll just say, "Hey, we're building a nice portfolio.

What's that?

You didn't really answer it.

Okay. We're building a nice portfolio of business on Intel 16, on the packaging, on Intel 3. So it's just nicely building over time. But as we get out to Intel 3 and then Intel 18 in particular, these become whale customers, right? And that's where there's a lot of variability in how rapidly that revenue ramps out in the '25, '26 time frame. We haven't landed those customers at the scale that we see as possible so we haven't built that into the plan or we'd be way over these numbers as well. And as we said, we expect some of those decisions to be made this year, right? Because if you look at the time line for those big 18A for major customers coming in a big way, they have to make their design commitments late this year. So we feel everything is sort of coherent in what we've put together. Randhir, maybe you can comment a little bit more on some of the biggest customer activities here.

I think we have 5 customer wins. They range from high-performance compute to mobile and to automotive. They range from the Intel 16 node all the way to Intel 18A. And the timing for this is early, but as I said in my presentations, this year, we have 30 test chips that we are driving for our customers. And we see in the '22 will be a defined year where we'll start planning for the '24-'25 horizon in terms of our capacity ramps.

Tim, anyone from the side of the room?

Jerome Ramel of BNP Paribas. Maybe a question for Sandra. Looking at Habana. Do you see traction being AWS for Gaudi?

Yes, indeed. In fact, let me talk first about how well it's going with AWS. As I mentioned, they launched last year, the EC2 DL1 instance based on Habana, and we're delivering for customers a better time to market in terms of training their models and also an almost 40%, or in some cases, up to 40% better price performance. And we are going to be introducing to the market a little later this year, I won't say when yet, the next generation of Habana, and we expect that to also be deployed on other hyperscale cloud customers. But in terms of the additional wins that we have, we actually have a supercomputer win with San Diego Labs that has been deployed, and we have a number of enterprise customers that are also adopting Habana. They've not been public about it, so we haven't talked about it, but there have been a lot -- there has been a lot of interest with this idea that we could have an open software platform for Intel-based products across the whole spectrum of both Xeon with additional AI accelerators built in with our GPU PanAbecio, that Raj is delivering to the market and then with the Habana Gaudi portfolio.

From this side?

Srini Pajjuri from SMBC Nikko Securities. I have more of a short-term question on the data center business, Pat. In your guidance for $76 billion, what sort of growth are you assuming for this year? And also if you can walk us through what you expect the market share dynamics are going to be? Obviously, you have Sapphire shipping. And when do you think sapphire will have an impact potentially kind of slowing down? Or whatever your expectation is when do you think that will come into play in terms of your market share dynamics?

Yes. Sandra, do you want to, part of that?

Yes. So as I discussed, we are beginning to ship Sapphire at the end of this quarter, next month, and we would expect Sapphire to continue to ramp throughout the rest of this year and then, of course, well into next year. I think that sometimes the market doesn't fully comprehend the fact that customers ship products for a long time. They have the products that we've deployed. As I mentioned, Ice Lake has ramped to 1 million units in Q4, lots and lots of demand for Ice Lake. Sapphire comes in. We expect to ramp to continue throughout the year. And then that will continue throughout next year as we then introduce MREP's asset so compatible refresh of Sapphire Rapids for customers and an easy upgrade in the same platform for them. So we're going to continue to see Sapphire particularly growing in those highly differentiated workloads, AI and security. And Sapphire will provide that broad portfolio of capabilities in terms of enterprise networking, data center and edge use cases. So we continue with Ice Lake, Sapphire Emerald, and you'll see that multi-generational ramp across our products in the next couple of years as we get to 2024 with those CR 4s and with Granite Rapids.

And just to tie it together, the 76 does not assume heroic assumptions on the part of any of the 6 businesses that you saw, right. As I say, we're comfortable in that. We do believe we're growing a little bit slower than the market in the data center for this year. And obviously, the road map that Sandra has laid out, we believe that we're doing better as the road map gets stronger over that horizon. But it is a growth business that's adding into the 76 over this year, but in a modest way.

All right, Kenji?

It's Joe Moore from Morgan Stanley. I've been asking you a variance of this all morning in the sessions. But where is Intel today from the capabilities of running a foundry business? You've talked about the process being in very good shape. But in terms of the broader organizational structure that you need to support foundry customers and the pricing and the manufacturing flexibility, where are you with that? And how can Tower help you with that?

Randhir, do you want to start on that one?

Yes, I can. Thank you. We have, in the last 11 months, built a very strong organization. We have more than 60 experts that came with foundry experience. They are part of my management team, making decisions and interacting with the customers. Our customers, who we engage with, made the comments that this is the best foundry engagement experience they are having. So we were very, very aware of this. And one of the first thing at said is let's make sure that we build our core capability, focus on getting the organization setup. And secondly, as we close on the Tower acquisition, we will have about 6,000 experts who will be joining our foundry team. So I think I look at the time and where we are in terms of growing our capability, we feel pretty strongly about it.

And if I just add a little bit, Joe, to it, while sometimes you describe M&A as tech and talent acquisitions, this is a tech and talent acquisition, in some ways, because we're adding a bunch of technology to our portfolio and a whole lot of talent to answer that exact question because we do believe we need more foundry DNA. So it's an important part of what led us to this conclusion. But we also bought a great business, $1.5 billion business that we think that we can grow rapidly from it. We believe we can expand the margins of it. Our supply chains are going to benefit this. Our manufacturing capacity is going to benefit this. And Tower not only helps grow our foundry business, but we're all ready. And I'll say from the customer perspective, in the 48 hours since we have announced this, I'll say we've been somewhat overwhelmed by the amount of customer inbounds that we've already gotten about adding this to the Intel portfolio. So we see it as tech, we see it as talent as a great business and one that we can grow in a very meaningful way over the horizon. We're quite excited about it.

Brook?

Chris Daneley from Citigroup. And Pat, thanks for rolling everybody out here. It's like the Intel Brady Bunch up on stage.

My team.

So a philosophical question. So you came out last year right out of the chute. It was, we're going to manufacture here. We're not going to TSMC. We're going to get back to basics. We're going to fix manufacturing. It was like this back to basics, Pat. And then in October, you announced, hey, we're going to be a growth company. It was like back to basics Pat, when to make it rain Pat. I guess you guys have this pretty big manufacturing crisis. Why not fix the manufacturing crisis first or at least get to parity before going after all these growth opportunities? I just appreciate your sort of thought process there.

Yes. And I do think there's an aspect to that of walking and chewing gum at the same time, where we have to fix the foundation, right? We have to get the execution. We have to get the manufacturing. We're on path on the process technology. But even if we just like build on the last question, how long will it take a foundry customer to come into our factories? It's a 3-year process if it's on a leading-edge node. You have to start those engagements somewhat presumptively, right, way ahead of time to start building out some of those revenue streams if they're going to materialize in '25 and '26. This is a long cycle. You make these bets long and the conviction that you bring to those decisions because they don't move around that fast. This is a long development cycles, long product cycles as well. We also fundamentally believe that Intel is not just a manufacturing company. We deeply believe in the technology and the manufacturing, but we're also a world-class product company as well. And with that, areas like Raja's business, as we've talked about, extraordinary opportunities that we've already been -- where's other areas, right, that we've been working on for several years. This is Raja unleashed into a market that is begging us to come in. It's products that we've been working on for a while, and we're now unleashing those capabilities. We have the Mobileye business. We're unleashing the Mobileye business. Unquestionably, the AV transition is underway. This should be foolish of, us from a shareholder perspective, to not do what we've laid out in that area of the business. We've been working in the area of networking for quite a while, but we've never assembled those assets in a way, and now we have a world-class leader and Nick to go drive a fundamental network transition. Think where we were 3 years ago on networking, right? We're worried about Huawei and what's going to happen in the world. That's gone. It is an open FlexRAN-based architecture that Intel created. Of course, this is something we must do in this period of time. So as we look at all of those, you sort of say, wow, are we doing too much? Well, I'd say, in many of these cases, these build on each other, and that's the point to these business units, they build on each other. They reinforce each other. They benefit each other, and we believe that we're trying to carefully manage that right balance of the right strategy with the right execution disciplines, with the right organizational structure, we believe we're well on the way to do exactly that, fix the foundations, launch growth businesses, and we're going to show you the proof points this year that, that is happening at scale in Intel and for the industry.

Let's go back over this side of the room. Tim?

Pierre Ferragu, New Street Research. I think someone at Intel, I'm not sure I didn't check like the primary source, but one day, someone at Intel said something along the lines of strategies, capacity, and the way I've always understood that is very simple, almost brutal, which is that if you have your capacity and if you have more capacity than your competitors, excess capacity, you have access to very, very small -- very, very low marginal cost, and that gives you a lot of competitive power to push back on your competitors. And so my question is, is that the way you understand it? And do you intend to play on that? And within your guidance and the -- the rail guard you have in your economic model, do you have room for that?

Keyvan? Keyvan, why don't you -- Keyvan start and then Dave.

Well, we live by that comment of capacity is strategy, because when Pat says we're going to grow via culture, that's the first lesson. [indiscernible], which was, look, one thing is the product leadership. The other one is you get your technology leadership. You have the product leadership, but you don't have capacity. And that's exactly what we are doing. We are building the foundation, which is essentially the smart capital that both Pat and Dave laid out. And that starts with having the shelf space, which is a smaller portion of the total investment. The lion's share of that capital investment is really for the equipment and that comes a little bit later, right? That's when we have all the capacity triggers. But what our strategy is precisely, let's make sure that as we are marching forward with this leadership road map, that we have the capacity to serve all of our customers all around the world, both the IDM as well as IFS. So we are not going to be limited by capacity, and that's my job to make sure my friends here are not going to come and say, Keyvan, we have the customer, we have the leadership, where is the capacity? That better not happen.

So I'd just add, Keyvan and I are, first of all, locked arms on what we're going to do. We are confident in our model that this is the right model to deliver, the right level of capacity for what we're going to see in terms of demand. And we're going to leverage the heck out of this smart capital strategy, quite honestly. And I'll go back to my original comment, which is that the middle bar of those, which are capital offsets, we've only planned 10% in the model. We're shooting for 20% to 30%. I have high confidence we're going to do much better than 10% for sure. So that also gives me and it gets Keyvan some room to work in to make sure that we're not caught flat-footed in terms of capacity.

Ben, did I see one on the side?

Yes. This -- Pat, earlier you were talking about N3 N4 cadence. And to paraphrase Henry Ford, He -- in the good old days, you can have any cadence you want as long as it was in [ Tom's ] cadence. And it sounds like -- and did I hear you correctly that it sounded like you're going to begin to modify cadence based upon different customer needs in different segments? And if so, does that basically mean IDM 2.0 is fundamentally more customer-centric than IDM 1.0?

So I'll ask Ann to jump on this as well. I mean obviously, what Ann described, it's a more modular view of how we do process technologies. Clearly, foundry has created, I'll say, a broader portfolio that we're trying to operate against with this as well. And we've seen some of these capabilities actually in the product world than what we're describing as well. As we open up 3D packaging, we have different tiles on different process technologies to create more optimized product costs and future capabilities. It is in a hybrid, disaggregated world. We have more flexibility through packaging, and we're also creating, as Ann talked about, the modular PDKs. We have more flexibility in the process technology recipes as well. So all of these taken together, we're going to be far more customer oriented in our technology development, both internally and for our foundry customers as well. So Ann, if you...

Thanks, Pat. And Dan, one of the things that I've done, I spoke earlier this morning around our TikTok-like model in terms of development. Our single major change will be in the Tik and the next step will be in the Tok. So the Tiks are every 2 years and the Toks are every 2 years. So we are maintaining key cadence in that, while we're delivering the flexibility to enable both our foundry customers as well as internal customers.

Kenji? One from that side. If you don't have anything, we can move back to the other 2 or.

It's Matt Ramsay from Cowen. Thanks for letting me jump back in. This question is for Pat and for Greg. You talked a little bit today and in our sessions this morning about more directly monetizing software. Maybe you could talk about how that fits in the in the 5-year model that Dave presented, and if you have any targets there, that would be helpful. Thanks.

Yes. Greg, do you want to start and I'll pile in on that?

Yes. First, thanks for asking a software question and making me feel validated. So I talked in my sessions that right now, we sort of book a deal over north of $100 million in software revenue, and that's without us really trying to sell it. So I think we have a great opportunity to actually -- as I said, go to the top of the stack and pull through the value that Andrew talked about and Pat talked about from the hardware capabilities we provide, particularly in the security and AI area, right, and deliver more of a trusted computing platform and the SaaS services that we need to achieve that leveraging literally, I mean, tens of thousands of engineers' worth and decades' worth of investments in the open source ecosystem that the cloud vendors are currently monetizing. So we can do the same thing. So I think Pat has given me some guidance on sort of like walk, crawl, run -- I'm sorry, crawl-walk-run before we get to the full path. But this year, I'm going to increase that to about $150 million, but we think we can do more over time.

And we also see it, Matt, as this critical differentiator for essentially every business that we're in. If you look at Mobileye, let's say, set of tops with a highly optimized software stack on top of it. And that's what's creating that very differentiated platform experience. We just acquired Screenovate into our client business that are driving the ecosystem experience for the PC, and we're going to monetize that software, right? Nick has a very large set of engineering and software associated with the stack that we have for our FlexRAN offerings as well. And those are going to be licensed software capabilities. Sandra has started to create a SaaS model for some of our features that are being pulled through in the cloud area. And Endgame, we just acquired to start having SaaS services associated with cloud gaming environments that we're hosting in a cloud environment. So you get these examples across every business that we're going to begin layering in differentiated software that pulls through our platform value and create SaaS service revenue on top of it. And I'm going to be holding Greg accountable to drive an overall SaaS and software strategy for the company. And again, on the $150 million, it's not much, right, at that level for a company our size. We're going to grow it rapidly, but we're going to pull through platform differentiation, right, which is going to have very disproportional business benefit even though the near-term revenues are rather small.

Mark, did I see one on this side?

Bob O'Donnell with Technolysis Research. Another software-related question, so Greg, you can feel better, but also for Raja and Pat. In the past, Intel has talked a lot recently, in fact, in particular, around XPU. And of course, 1 API is strategically essential to do multiple XPU types of things. You didn't talk a lot about that today. And I'm kind of curious if that represents some sort of shift because theoretically, 1 API drives the ability to have multiple chips in each of these different devices. So curious to hear a little bit more about how you're each thinking about that element.

Greg, I'll start there because I did cover that in my session -- in my 2 sessions. So -- we continue to invest in the One API system ecosystem. It's a collection of technologies, 1 DNN for deep neural networks, 1 MKL for our accelerated math [indiscernible] libraries, primarily for Xeon, but also working with Ponte Vecchio and our whole graphics portfolio because the value that we've done is that all that technology, and by the way, we pushed out 1 API 2022 in December with over 900 new features, over 42 different technologies. So we've ceded all of that within the -- for example, just the AIML ecosystem, Piper Tensor Flow, Onyx from Microsoft. I mean, all the major paddle, all the major AI systems, we've already plugged in all the One API accelerator technology. And in Q3 alone, we had 8 million downloads of Tensor Flow with the Intel accelerated libraries from the One API ecosystem. And so our strategy there, besides having a compiler that you can get and use, in fact, it's now our compiler from 1 API is now available on the Microsoft Visual Studio marketplace, you can do a one-click download and install and replace the Microsoft compiler in that ecosystem and get better performance, for example, on Alder Lake, if you use it to compile your game software. So we've made all these investments and we ceded the ecosystem. Now the value of that is as we deliver new hardware, those systems are already primed ready and optimized for acceleration. We may have to do some additional tweaks to accommodate new accelerators or new hardware features to get peak performance. But by having that One API ecosystem broadly deployed and embedded in every critical workload, not just AIML that anybody wants to run, including open JDK for Java within the Python ecosystem, we've just got ubiquitous acceleration across all of our platforms, and that's really the value of that technology. So a lot of work has been done over the last 2 years to seed it into the ecosystems that everybody else is using. I read 1 report. There's 24 million to 25 million developers in the world. And IDC reported that 20 million of those developers are leveraging and utilizing Intel-accelerated technology and many of them don't even know it.

Maybe since our networking guy might feel otherwise not loved as well. XPU question. Maybe just talk a little bit about IPU as well.

Yes. So the IPU, our infrastructure processing unit that we introduced last year, is really used for those who are building large data centers in order for them to run the infrastructure code that runs the data center inside that IPU on a sort of a separate isolated set, of course, so that the tenant workloads don't bring down the infrastructure. Now this is a really critical piece for how data centers are going to be built in the future. And we really want to be able to open up that ecosystem, right? So in order to be able to do that with the first introduced cloud scale commercial offering of a component like this that's really going to transform the way that they built. We wanted to make sure that, that was open. So in order to do that, we're opening up software and getting behind an open source ecosystem called IPDK, the infrastructure programming developer kit. And by getting behind that, we're going to help drive an open ecosystem so that our customers don't get locked into a single solution. We just think that serves the industry better in the long run and sort of plays into our strength at Intel.

All right. I think we have time for one more question. So Vivek, one question. Vivek?

Actually, I had a somewhat -- just a financial question. So I think, Dave, you gave us net CapEx and gross margins based on some net depreciation based on some unknown level of incentives from the [indiscernible].

What are you saying?

So I was hoping, right, if you could give us what is the gross CapEx? What is the depreciation? And what level of government incentives are you assuming? And will there be any restrictions if you take those government incentives?

Yes. I did give you -- so yes, that is a net CapEx number. The growth I gave you also though that implied in our model was a 10% offset. But that was more than just government. That was government partners and financial partners. So those 3 combined were 10%. That's what we assume. So you can kind of back into the gross number that you get in every quarter or in every year. I mean, yet to be determined exactly what gets written into the rules around restrictions. So early to say, but typically, there comes with some form of restrictions, but it's things that we can generally operate within the guides of...

Yes. I'll just add. I mean, we're very closely involved in U.S., EU chips. We pick if you look at those, in particular, and we're very comfortable with the provisions that are being associated with those funding offsets. So we don't think it comes with any concerns in our ability to go execute our business. And the reason we focus on net CapEx is because that's what's going to flow through to depreciation, right? So in that sense, we think we're giving you the right number, the pure number so that you can look at the business of what the real impact on our depreciated assets will be and how it will affect margins over time. So that's the right number to look at. And we'll, of course, be updating as we hope to well achieve. And as you said, we've committed about 10% in the business, a very low number compared to what we see out there. We're hoping to achieve 20% to 30%, which is going to drive a much lower CapEx implication, much lower depreciation over time. So all of those things will flow through in a very positive way through the entirety of the business case that Dave laid out.

And the other thing, when you're -- when you're modeling depreciation, just keep in mind, when we're doing that CapEx, there is -- while less than the equipment cost, there is an amount of that CapEx, a percentage of that is depreciated over a fairly long life. It's like 20 years. So it has less of an impact in any 1 year in terms of the depreciation.

All right, Pat, do you want to close this out?

I do. Thank you. So first thing, thank you for joining us. And we appreciate that you spend the time to learn more about our business. We have started this business. And as I described, right, the turnaround train is leaving the station. We are well underway at the 1-year mark. We have accomplished a tremendous amount, but we also, in humility, realize we have to rebuild your confidence. And I hope in the course of today that you have seen the strategy is taking shape. The execution is building against it. Our commitment to leadership but also transparency so that you get to see the business that we're building and understand the business units, the implications. We've given you guardrails we're going to manage the business against. And I have the honor of being the CEO of the world's greatest technology company and being the leader of the world's greatest technology leadership team who gets to participate with 121,000 people that are on mission for this company. And we just hope that you see the opportunity to join the turnaround train of Intel because we're going incredible places together. Thank you for joining us today.