Intel Corporation (INTC) Earnings Call Transcript & Summary

Statements in this presentation that refer to future plans or expectations are forward-looking statements. These statements are based on current expectations and involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. For more information on the factors that could cause actual results to differ materially, see our most recent earnings release and SEC filings at www.intc.com. [Presentation]

Please welcome to the stage, Chief Executive Officer, Lip-Bu Tan.

Well, good afternoon. Thank you so much for coming to Vision 2025. And I would thank all the sponsor that we have. And also, we have a great line of workshop speakers, and hopefully, you'll get something out of it during the trip. Well, first of all, I want to really are grateful for your presence and also your support. I'm excited to lead Intel at this defining moment in our history. It has been my 14 days, very short time, since I joined the company, and thank you for your support. And this is not a long time, but long enough for me to have some clear observations and plan to go forward. And this is a perfect place to share them with all of you. My #1 priority since my first day on the job has been spending time with customers. I have trusted relationships and friendships with many of the customers over the decades. Because of our relationship and my humility, they give me very honest feedback. It is very clear from the early conversation, we have a lot of hard work ahead. There are areas we have fallen short of your expectation. I will put together strong teams to correct the past mistakes and starting to earn your trust. My motto is very simple: Under promise and over deliver. That has been my trademark. I will not be satisfied until we delight all of you. I have been spending time also with our technical teams. Many of the architects, engineers, I personally reach out. Under my leadership, Intel will be an engineering-focused company. One of my top priorities is to retain and recruit top talent engineering and that empower innovation and growth. I believe Intel has lost some of these talents over the years. I want to create a culture of innovation, empowerment. Our ambition is ultimately create the best products and become the best foundry over the years, and it will require us to unleash the power of our engineers. Before I talk some of the way I think we can do that, let me share a little bit on my background. I was born in Malaysia, Johor and moved to Singapore and grown up in Singapore. I did my undergrad studies in physics, actually quantum physics at Nanyang Technology University, and I served a few years as trustee, and I also advise in the school. Then I moved to U.S., and I received my graduate degree in nuclear engineering at MIT, nuclear engineering. And so it's an interesting background. And my education give me a deep understanding of how to solve hard technical problems through engineering design. After Three Mile Island accident have happened, I decided not to finish my PhD even though I finished all my courses. Instead, I moved to San Francisco. My mom was very worried about me, asked my brothers and sister, they are all professor in university, how I drop out the school. And -- but at least my brother came by and visit and replied to my mom, he's okay. And I fall in love with Silicon Valley, Silicon Valley. I founded Walden International, group of venture funds. When I started, it only managed $3 million and only a few family/friends invest with me. And over the years, I built a $5 billion under management. It's a name inspired by a thinker, a poet and a philosophy I admire, Henry David Thoreau. How many of them you read the book? And it's amazing book. One of my favorite quote he has is, "Rather than love than money and fame, give me the truth." That really speaks to me all my life because I always want to have my customer, my team, my partner, my wife to give me the truth. Likewise, they also expect me to give the truth. Then we can together fix problem and move forward as a team. I also admire him because he's a contrarian. And if you visit his cabin, how he built is a beautiful handcraft, and I would stay there for almost half an hour to look at every corner how he built to the detail. And that is the craftsmanship. A lot of our business is about building craftsmanship. It's more science, actually more art than science. You need to have the style. As a venture capitalist, I always work to find a hidden opportunity where others were not looking. When semiconductor were not popular 20 years ago, I doubled down. I still remember, I visit 2 Tier 1 venture capital firm that I respect and admire. When I set that meeting, they all come in the conference room. After I talk about semiconductor, half of the team just left. And the other half is sympathetic, try to listen to me. And then to the end, there's only 2 guy left in the room. They ask me in a whisper, do you have Software as a Service or AI start-up that we can talk about. So it's not very popular. I took a contrarian long-term view that even my investor asking me, are you crazy? And all the Tier 1 venture firm already thought that is a sunset industry. Even some of the professor in the university that thought it's a sunset industry. I decided to double down being a contrarian. And it really paid off and include -- I invest a lot in the semiconductor. And then some of them like the high-speed connectivity like Cradl, like Astera Labs and then now in the photonics in Celestial.ai and some of the cooling technology that is badly needed. And then some of this processor is a lot of high power and how do you bring the power down with microfluidic cooling, and that's something that is really exciting to me. And some of the infrastructure, you have to move to photonics, and I call it the photonic fabric platform and some new material, CMOS getting to a level that I think you need some new material, gallium nitride, silicon carbide and indium phosphide to next generation of application. Overall, I made 251 semiconductor-related investment. Of this, we have 43 IPOs and 25 successful M&A. Then I expand towards content creation, like some of you may be familiar called Typeface. I was early investor in the company and then Search. And I used to use a lot of Google Search. Now I changed to Perplexity search. And it's a very interesting different way of conversation search that I like. And then software in our cloud service and also AI safety-related area. So I invest quite a bit of this company and Together.ai, Virtual AI and many of the genetic area of AI. Most recently, I have been focused on generative and agentic AI as well as application in life sciences and medical innovation. And a good friend of mine, he built this using the brain wave to help Parkinson patients to how to -- using semiconductor to drive 82% accuracy of the conversations. And some of the medical innovation is amazing. And my experience in VC prepared me well for 12 years as a CEO of Cadence Design when they asked me to step in as a CEO to turn around the company. And first of all, what I did is I changed the culture of one team, changed the culture of innovation and delight our customer, a deeply partnership with the customer to find a solution. In addition to growing our core EDA business, I also decided IP is very important through multiple acquisitions. I basically put the cash we have. I bought Denali, some of you may be familiar, and I bought Tensilica, and I bought new semi for high-speed SerDes, and that's critical. And so that will help accelerate our design process and it grow to more than 10% revenue. I always like to see where is the other 10% growth that we can see by new innovation and new area that we can move in. Then we move also aggressively into system design enablement. That is the system modeling, system analysis that expanding our addressable market and create a new revenue stream. And all this transformed the company from low single-digit growth to double-digit growth. It went from having no new organic development culture in the road map to have every year 12 to 14 new products organically developed rather than buying from outside. And we grow our addressable market 3x and delivering 3,200% in shareholder return, and that's reached out to almost $75 billion market cap. Most important, we become the trusted partner to customers that they knew they could count on us. Overall, this experience taught me a lot. My time at Walden trained me to how to build company from startup with small team and focus and address what company need. And my time at Cadence as CEO help me to understand design methodology, foundry ecosystem and what it takes to delight customers. I also spent 2 years at the Intel Board, and I learned a lot from our engineers about our problem, the challenges we face and how to fix them. All these have prepared me well on taking on this very challenging task to build the new Intel. This is an iconic and essential company that is important to the industry and also to the United States. I care deeply about Intel's success and have many mentors from Intel over the years who inspire me. Some of you may remember Albert Yu, some of you may remember Sean Maloney, and some of them you may know [ Dip Bermuda ]. They are a very close friend of mine. I learned a lot about semiconductor industry from all these mentors of mine. Some of the people asking me, Lip-Bu, why take on this job now at this stage in your career? The answer is very simple. I love this company. It was very hard for me to watch it struggle. I simply cannot stay on the sideline, knowing that I could help turn things around. I also fully recognize it won't be easy. It has been a tough period for quite a long time for Intel. We fell behind on innovation. As a result, we have been too slow to adapt and to meet your needs. You deserve better, and we need to improve, and we will. Please be brutally honest with us. This is what I expect you this week. And I believe harsh feedback is most valuable. I learn a lot by giving from customer and when you give me honest feedback, then I need to know what to do. I learned the lesson firsthand at Cadence Design. When I took over during my initial one major customer review, I asked them to grade my products. And the executive said, "Lip-Bu, none of the vendors would even dare to ask this question." And I said, "Well, I got to know how bad my product is." So just for information, we got a lot of D, a lot of E and many F, and that's humiliating. And I learned a lot and because in my career in academic, I never get anything below B, it's humiliating. But it's really ignite me to change, and that's a turning point for the company. We will reinvent how we engage with the customer, and it begin today, and really looking forward to build the trust with you. I have a competitor at the past tell me, Lip-Bu, customers treat us as their vendor, but they treat you as a true partner. And at Intel, I will expect you to do the same to me. I won't be rest until I see the same way. It starts with the culture. We have to foster inside the company the culture change. And the most important and valuable lesson I learned in the college, beside the glass classroom and research labs, it was a basketball court. I used to play power forward in Singapore for my college. And I learned a lot, teams win championship, even though sometimes I score 38 points and it's not individuals. It's really finally, we win the championship. When I found my teammates, they can shoot 3 pointers, and that helped me to kind of inside, outside and we win. And we work hard every day after school, and we fight to win every game and learn from our mistakes and always ask, how can we make the difference? And we review it, the video, and how to improve that. That's why some of you know that I'm a big Warriors fan, and I love the game, and I really enjoy the teamwork, how they pass the ball without even looking at that. And you know your teammate is the other side to receive it. And this is the kind of team I would like to build at Intel. Most important, we need to strive every day to extend your dream, fully dedicated to your success. To make that happen, we're going to refocus the company on essential ingredient of innovation. And clearly, I need to focus on strengthen my balance sheet, and I need to really drive efficiency, and I need to really regroup the talent we have and attract some of the new talent with a clear vision of what we're going to do. Innovation starts with incubation. And we are a big company, sometimes prevent new ideas from having room to develop and grow. And I'd like to really practice the start-up day 1 culture, and we're going to work as a day 1 start-up and a big startup. And then we're going to really drive some new ideas, giving engineers freedom to innovate from within. My weekend usually packed with a lot of engineers and architects, and they have some brilliant idea they want to change the world, and that's why I get excited to work closely with them. I will also put resources behind people and ideas where we can see the opportunity to innovate and we can free some of this -- the infrastructure to really drive innovation and empower them. Most importantly, we will simplify the way we work. Bureaucracy kill innovation. In my career, I see how small focused team and move very fast and innovate and take on incumbents, and we're going to practice that in Intel. We may not be perfect in the beginning, but eventually, you can count on it. I will make it perfect. This will unleash the potential I know exists across my team. It will also help us attract new talent from outside, and they can join us and enter this most exciting period of creating innovation and creating the new Intel. Some of you know my e-mail address. If you are interested, call me. I will spend time with you. We are operating in the very dynamic, fast-moving industry. Technology adoptions and disruption are accelerating faster than ever. This is being driven by the one transformational force called AI. AI is not new, but with all the data, massive data available, you can really drive some of the new way of learning, new way of interpret things and new way to even forecast the future. And this is really reshaping many of the companies I involve and shaping our daily life. Can you imagine the agent help you to decide and move some of the mundane process? I love agents, and some of them are using it. For the starter, AI is driving a total architectural change to the computing, especially in the cloud computing, no code, low code, the software 2.0 later on I will talk about. This is driving the hyperscale innovation, massive computational power and new data capacity. This will accelerate us to move forward. And some of the infrastructure, as I mentioned earlier, move into the photonics area. And also, I have invested in 3 quantum computing company, and this is coming. I keep a very close eye. It will come in sooner than we all thought. AI has also revolutionized how we discover, create and interact with content to generative AI and intelligent agents. And then some of my friend, they are really working on to become the control center of all the AIs and some of them talking to me, "Lip-Bu, we would love to have Intel computer platform that we can base on and build all these killer apps and agents," and I love it. And when can I come to your house to talk about that. AI is also expanding into physical world. You may have heard of humanoid robotics. I'm a very big fan of that. This is a new frontier. It will redefine industrials from auto to manufacturing. It will create a new era of robotics and intelligent system embedded everywhere around us. I have a lot of experience in this area. Stay tuned from the Intel perspective. That will create great opportunity for us going forward. At Intel, we will redefine some of our strategy and then free up the bandwidth. And some of the noncore business, we will spin it off, but really focus on our core business and how to expand that using AI and Software 2.0. It will require a foundational shift how we approach product design. In the past, Intel approach has been inside out. We design hardware, then you figure out developing the software to make it work. The world has changed. You had to flip that around. Going forward, we will start with the problem, what you're trying to solve and the workloads you need to handle, enable, then we work backward from that. That require embrace the Software 2.0 mentality, which means that having software-first design mindset. I invest quite a few the Software 2.0 startup and some will be really exciting, it's game changing. We will use AI-driven system design to accelerate the development of new compute architecture platform. I know from my time running Cadence that we adopt the AI and drive significant performance and power efficiency and more than double digit. And you can see a game change and how to help customers to be more productive in their design. And it will also help us to enable new compute-intensive models and application and agent that we are going to be enjoying in the years to come. All of these will, fundamentally reshape our approach to the hardware. The world is moving forward to power purpose-built silicon that design and optimize for specific workload that you try to address. And it open the door for the new 86 solutions. I also believe we can play an important role in developing custom silicon that tailor for specific application that you need to enable. Last weekend, I spent quite a bit of time with 3 major data and AI platform. They love to work with us in terms of define the next 86 solution, and it was fascinating and very exciting of the opportunity. We have already started deep dive with my engineering team to kick start this transformation. We'll begin to reimagine our portfolio. At the same time, I'm equally focused on our immediate priority, both products and foundry. Let me talk about that. Let's start with products. I'm a big believer the best product always win. And our team began to refocus here last year and will remain a top priority for us going forward. There's a few areas that's non-negotiating for me. First, we have developed -- delivered the great performance that is essential to enable your workload of the future. We have to anticipate the future. We must deliver great efficiency to -- essential to enable AI in the increasing power-constrained world. The power today, we have no way to even meet the AI cloud infrastructure we try to build. And that's something that I pay a lot of attention. That's the main reason I rejoined MIT Advisory Board because of my nuclear engineering. They said, "Lip-Bu, the future is fusion and nuclear. And Lip-Bu, please come back and help us." So I'm delighted to be part of that brainstorming future. And we must deliver great quality on-time delivery without exception. And we have to have a culture of first-time pass, and we are not there. And I will implement that. So stay tuned. This is something that is non-negotiating for me because it's essential part of earning customer trust. Those are the North Star. It will take time, but we start from today, send the data I start. Michelle and the team will give you a deep dive tomorrow morning. And today, I will just highlight a few specific priorities that I see. In client computing, we will drive strong innovation. That's a long have been the area of strength, but competition have increased. They change the workload, and we need to -- cannot be stand still. We have to move forward to meet those requirements. We will continue to strengthen our product and road map and then we were also looking forward to shipping Panther Lake on 18A later this year. We also remain focused on building the industry broadest ecosystem of ISV and application, AI application. We will leverage our capabilities in client to help enable the AI edge. That's the next frontier. In data center, we need to strengthen our offering. We lost quite a bit of talent. That's my top priority, to recruit some of the best talent in the industry to come back and then to rejoin or join Intel. You have told me we need greater performance and efficiency and also lower your total cost of ownership, especially you scale your AI investment. Our latest Xeon portfolio is step forward to enhance our competitiveness. We will work to drive continued improvement as CPU will play an increasing important role in AI inferencing with low-power, efficient power. In the broader AI data area, I'm not happy with our current position. I know that you are not happy either. You have -- I have heard the feedback loud and clear. It is time to turn the new page. We are going to learn to write the lesson from the past mistakes and working towards a competitive system that we can provide you. It won't happen overnight, but I know we can get there. And as we strengthen our Intel products, we're equally committed to build the great foundry. Global demand for chip production is growing, and you'll need supply chains that are flexible, resilient and secure. Intel Foundry play a crucial role. We will continue to advance our foundry strategy to meet our needs. I have a weekly update from my team leaders. And then I go down to the week on the engineering side, how can we improve the process technology? And then I will keep you posted. And you have to satisfy my requirement. I have a very high bar. I'm working directly with my team and then understanding where we are and then define the clear path going forward, include clearly to strengthen my balance sheet to drive more efficiency, put the right people in the right place and to scale the business. Foundry is a service business, and that is built on the foundational principle of trust. That is very important. And also realize that every foundry customer have their own unique design methodology and style of design. And that part, I learned a lot from my Cadence day. And this is something that we need to learn and how to adopt each different customer. They all have their preference IP vendors and their preferred EDA partners. And then to optimize the performance quality and yield, we're not going to change that. We're going to listen to the customer and then focus on which pattern recognition, which EDA player, which IP they use, and we optimize and drive the performance, the yield that they need. This is an ecosystem I know extremely well, and I'm leaning in to help advance our goals. We are continue to advancing our 18A as well our future node 14A. 18A is set to win high-volume production in the second half this year with Panther Lake. That is our own requirement. We need to have that. And our laser-focused weekly review that. And also approaching our first external tape-out, we're going to be planning to do that. We'll keep continue the improvement with yield, quality and customer service to move our foundry business forward. It will take some time. I'm very patient. I always like to build business for the long term to build a successful model. And very important for me, you need 2 or 3 very important customer, they're going to help us to drive the performance and yield. And I know this few customers very well, and then I will depend on them to help us and then to really improve over time. We are the only American company that design and manufacturing advanced chips. That means that we have an essential role. We are core to play the foundry ecosystem, especially in U.S. I have been very pleased to see Trump administration focus on strengthen the American technology and manufacturing leadership. And I'm looking forward. They're asking me what can we help? And definitely, I will come to get their help to do what we need to do. I'm looking forward to work closely with them to advance these shared goals. Let's -- I will talk more about the Intel Foundry at our Direct Connect Event at the end of April. I hope many of you will join us there. And whether the foundry or the product, our priority is the same. We are here to serve you and earn your trust. I won't be happy and satisfied until we're consistently delivering our promise on time, on quality to exceed your expectation, and we have to earn it, and we know that. We're deeply committed to the journey, and I personally am committed to this journey. People are asking me when I was at Cadence, how long you will be there? And I told them, I will be there as long as the company needs. Even though the Board asking me just 2, 3 months, I stay on 15 years to make sure that we really deliver and delight customers. And people are asking me, "Why on earth you take on this challenging job?" And I commit the long term. Again, the answer people ask me how long you be Intel. I'll be here as long as the company needs. So I'm deeply committed to this journey. Under my leadership, we will return our roots into an engineering-first company and follow the first step that I learned so much from Albert Yu and [ Dip Bermuda ]. We will start acting like a start-up day 1 again. We will listen closely and act on your input. Most importantly, we will create the products and then solve the problem and drive your success. And with humility, I urge you to help me. I can't do it alone. I need your help. As a customer, give me honest feedback. And many people know, I don't have an ego to just meeting with another CEO. I go down to the 6, 7 layer down engineers to get your feedback. So stay tuned. You will see me a lot. And that's the moment you demand from us and then what you deserve from us. And with that, I just want to wish all of you have a wonderful Intel Vision. There's a lot of track you can go to. There's a lot of networking, social event. And just building the networking is fantastic. And then all the best. I wish you all enjoy that. Thank you so much.