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Intel first quarter 2024 earnings of

Mooredaddy

Well-known member
In-line with muted guidance. Putting in your slide deck that you’ve “engaged with almost foundry customers” is kind of a rough flex. No reason to get excited until 2030 it seems. Another thing I noted when going through financial statements. TSMC has $11 billion more USD in straight cash than Intel has total current assets. David vs Goliath.


  • “Intel Foundry has a strong pipeline of nearly 50 customer test chips, and has engagements with almost every foundry customer in the industry on advanced packaging, including five design awards”
 
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Patrick Gelsinger
Thanks, John, and welcome, everyone. We reported solid Q1 results, delivering revenue in-line and EPS above our guidance as we continue to focus on operating leverage and expense management. Our results reflect our disciplined approach on reducing costs as well as the steady progress we are making against our long-term priorities.

While first-half trends are modestly weaker than we originally anticipated, they are consistent with what others have said and also reflect some of our own near-term supply constraints. We continue to see Q1 as the bottom and we expect sequential revenue growth to strengthen throughout the year and into 2025, underpinned by, one, the beginnings of an enterprise refresh cycle and growing momentum for AIPCs. Two, a data center recovery with a return to more normal CPU buying patterns and ramping of our accelerator offerings. And three, cyclical recoveries in NEX, Mobileye and Altera.

We had an extremely productive Q1 and achieved several important milestones along our journey to reposition the company for improved execution, competitiveness and perhaps most importantly, financial results. We hosted our first-ever Intel Foundry Direct Connect, which drew nearly 300 partners, customers and potential customers to hear about the momentum we are building with our foundry offerings.

We were pleased to announce Microsoft as our fifth Intel 18A customer. We also updated our lifetime deal value to greater than 15 billion and extended our roadmap with Intel 14A, the first process node in the industry to use High NA EUV technology.

Shortly following Direct Connect, we were thrilled to join with President Biden and Commerce Secretary, Raimondo to announce our position as the national semiconductor champion, along with the single largest award from the CHIPS and Science Act of more than 45 billion of proposed grants, tax incentives and loans.

During the second week of April, we brought together more than 1,000 of our top customers and partners at Intel Vision 2024, where we introduced our next-generation Gaudi 3 accelerator. We were joined by NAVER, Dell, Bosch, Supermicro and Roche, among many others who shared how they are benefiting from Intel solutions.

Vision led straight into Open Source Summit, where we led the launch of the Open Platform for Enterprise AI project. This industry initiative aims to accelerate GenAI deployments in what will be the largest market for AI applications starting with retrieval augmented generation or RAG. Our Xeon plus Gaudi use cases along with our established enterprise ecosystem have a big role to play here.

Lastly, we hosted the industry's first sustainability summit, underscoring our deep commitment to building a more geographically diverse, resilient, trusted and of course, sustainable supply-chain for semiconductors. We are proud of our leadership position in chemical conservation, renewable energy and water reclamation.

Our accomplishments year-to-date build on all the work we have done to executing the strategy I laid out when I rejoined the company three years ago. Job number one was to accelerate our efforts to close the technology gap that was created by over a decade of underinvestment. The heart of Phase 1 was five nodes in four years. The rallying cry was torrid. It combined accelerating our node transitions with improving our product execution and cadence to regain customer trust.

We have rebuilt our Grovian culture and execution engine and are on track to completing our five nodes four year goal, which many of our stakeholders thought impossible at inception. In so doing, we are in a unique position with at-scale EUV technology, Western base capacity, and at the very least, a level playing field with the market leader.

Intel 20A, which helps pave the way for Intel 18A, begins production ramp in the second-half of this year with Arrow Lake. We expect to release the 1.0 PDK for Intel 18A this quarter. Furthermore, our lead products, Clearwater Forest and Panther Lake are already in fab and we expect to begin production ramp of the Intel 18A in these products in the first-half of '25 for product release in the middle of next year. Given this progress, now is the time to turn our focus to matching technology leadership with a competitive cost structure.

Establishing a foundry relationship between our products group and our manufacturing group was a critical step to achieve better structural cost. This quarter, we officially transitioned to our new operating model and introduced Intel Products and Intel Foundry. Today, for the first time, we are reporting our results to reflect the new way in which we are running the company.

Separating the internal financial reporting between Intel Foundry and Intel products was a critical step needed to provide transparency, accountability and the proper incentives to allow both groups to make better decisions to optimize their own cost structures.

This change also provided the added benefit of giving more transparency to our outside owners. We knew that the day one P&L for Intel Foundry was going to spark debate, but we also knew it was important to establish a baseline and provide a target model based on reasonable to conservative revenue and cost assumptions that we have a high degree of confidence we will achieve.

I'm going to reiterate that point, so it is heard and understood. Our target model is reasonable, conservative and reflects a high degree of confidence in our ability to deliver. And you can rest assured that we will be working hard to beat these targets. If we can move faster and do better, we will and our new operating model is already catalyzing change and driving efficiencies across the organization. Let me highlight three important aspects of our business and our strategy that is underscored by the new model.

First, with Intel Products, we have exposed a solid, fabless franchise with established powerful and hard to displace installed-base and ecosystem across enterprise, consumer and edge that provide meaningful benefits to our customers and partners. Intel Products is a solidly profitable business today, despite just recently emerging from a semiconductor downturn and still competing with legacy process technology. That is changing rapidly as we ramp Intel 3 in 2024 and Intel 18A in 2025.

Within client, we are defining and leading the AI PC category. IDC indicates the overall PC market is now expanding. And as stated earlier, as standards emerge and applications begin to take advantage of new AI-embedded capabilities, we see demand signals improving, especially in second half of the year helped by a likely corporate refresh.

Our core ultra-ramp led by Meteor Lake continues to accelerate beyond our original expectation with units expected to double sequentially in Q2, limited only by our supply of wafer level assembly. Improving second half Meteor Lake supply and the addition of Lunar Lake and Arrow Lake later this year will allow us to ship in excess of our original 40 million AI PC CPU target in 2024.

Next year with Panther Lake, we will extend our lead with Intel 18A and further product enhancements. Our share position is strong and continues to strengthen as we execute on our product roadmap.

Within DCAI, as committed, we have achieved product release on our first Intel 3 server product, the first generation E-Core Xeon 6 codename Sierra Forest. The next-generation P-Core Xeon 6 product, Granite Rapids will be released in Q3. At Vision, we demonstrated the 70 billion parameter model running natively on Xeon 6 with good performance.

We continue to expect share trends to stabilize this year before improving in 2025. While budgets are still being prioritized to generative AI build-out where we have a strong position in the head node, customer conversations continue to show improving signs for traditional CPU refresh starting in late Q2 and into the second-half.

Our first Intel 18A product, Clearwater Forest is slated to launch next year and will allow us to accelerate share gains. Our Gaudi 3 launch gave us a strong offering to improve our position in accelerated computing for the data-center and cloud. We now expect over 500 million in accelerated revenue in second half of 2024 with increasing momentum into 2025 based on Gaudi 3's vastly superior TCO as well as our own expanding supply.

In addition, we are finding good traction with the Intel Developer Cloud with customers onboarding with this platform, including Dell and Seekr, our largest IDC win to date. We are encouraged by our progress, but far from satisfied.

Lastly, within NEX, the business has stabilized and beat our Q1 targets with channel inventories approaching normal levels and business acceleration expected through the year as a result. We also recently announced our plans for scale-up and scale-out Ethernet-based AI networking delivered as a discrete NIC and chiplets for AI foundry customers with numerous key providers in the industry and market standardization through the Ultra Ethernet consortium.

So that is Intel products, good momentum and a lot for us to build on. Let me turn to Intel Foundry. We are executing on our strategy to drive meaningful improvement in profitability over-time. We are obviously not there yet given the large upfront investment we needed to build-out this business, but we always said this was going to be a multi-year plan and we are right on track with where we expect it to be right now.

As we discussed during our webinar at the beginning of the month, the transition from pre-EUV wafers to post-EUV wafers is a powerful tailwind for us. We expect our blended average wafer pricing to grow 3x faster than cost over the decade, driving significant margin expansion.

In addition, more competitive wafers will allow us to bring home many of the tiles that today are being manufactured at external foundries. Both dynamics are in our control and not dependent on revenue growth and are key elements to drive the business to breakeven, more than doubling our current earnings power at the Intel consolidated level.

Of course, more competitive wafers combined with our position as the only company manufacturing with leading-edge wafers outside of Asia is drawing strong interest from potential external customers. It is important to note that our leadership in advanced packaging creates more value in our wafer technologies and wafer level assembly and base dye opportunities further fill our factories and extend the useful life of our tools for increased financial returns.

I am pleased to announce that this quarter, we signed another meaningful customer on Intel 18A, bringing our total to six. A leader in the aerospace and defense industry, this customer chose Intel Foundry based not only on the process technology benefits of Intel 18A, but also because of their desire to have a secure US only supply base.

Just this week, we were very pleased to announce that the DoD awarded Intel Foundry Phase 3 of the RAMP-C Program, which we are confident will lead to additional federal aerospace and defense customers.

More broadly, we are seeing growing interest in Intel 18A and we continue to have a strong pipeline of nearly 50 test chips. The near-term interest in Intel Foundry continues to be strongest with advanced packaging, which now includes engagements with nearly every foundry customer in the industry, including five design awards. While we are highly focused on improving the near-term profitability of Intel Foundry, it is also important that we keep sight of the long-term opportunity here.

The foundry market is expected to grow from $110 billion today to $240 billion by 2030 with almost 90% of the growth coming from EUV nodes and advanced packaging. Given this backdrop, we have clear line-of-sight to becoming the largest system foundry for the AI era and the second-largest overall by 2030, building on our EUV High NA process technology, leadership in advanced packaging, manufacturing capacity, our systems expertise and the surge in AI demand.

Put it another way, our 15 billion of external revenue embedded in our Intel Foundry target model would represent less than 15% of the leading-edge foundry market. It is not a question of if, but when Intel Foundry achieves escape velocity. And every day, we are proving to the market that Intel Foundry is a resilient, sustainable and trusted alternative to serve a semi-market on a path to top 1 trillion by the end of the decade.


Let me wrap up by speaking to our all other category, where our number one priority is to unlock shareholder value. This quarter, we formally rebranded our programmable solutions group, Altera, an Intel company. We look forward to bringing in a private equity partner this year to help prepare the company for an IPO in the coming years. This puts Altera on a similar path as Mobileye.

We are excited about the future of both companies. By providing them with separation and autonomy, we believe we enhance their ability to capitalize on their growth opportunities in their respective market and accelerate their path to create value.

Combined with IMS, our mask writing equipment business, we believe these three assets represent more than a quarter of our overall market value today. Along with a solid Intel products franchise and an Intel Foundry business rapidly approaching 100 billion in net tangible assets, we see the opportunity to unlock significant value for our shareholders as we meet our financial commitments, stand-up Intel Foundry and drive it to profitability and further leverage our opportunity in AI.

So overall, I'll say that there is a lot for us to build on coming out of Q1. We are systematically executing to our strategy and we are making steady progress. We are maniacally focused on executional excellence and fiscal discipline and we are relentless in our drive to regain process leadership and bring next-generation solutions to solve our customers' hardest problems. All of this gives me confidence in where we are headed.

Yes, we have a lot of hard work in front of us, but we know what we need to do and the payoff will be significant in the end. Semiconductors are the currency that will drive the global economy for decades to come. We are one of two, maybe three companies in the world, that can continue to enable next-generation chip technologies and the only one that has Western capacity in R&D. And we will participate in the entire AI market. Quarter-by-quarter, we are positioning ourselves well to capitalize on the immense opportunities ahead.
 
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We were pleased to announce Microsoft as our fifth Intel 18A customer. We also updated our lifetime deal value to greater than 15 billion and extended our roadmap with Intel 14A, the first process node in the industry to use High NA EUV technology.

I have asked my friends at Microsoft, both in the West and East, and have not been able to confirm this. I have confirmed that Microsoft is also using TSMC N2.

Separating the internal financial reporting between Intel Foundry and Intel products was a critical step needed to provide transparency, accountability and the proper incentives to allow both groups to make better decisions to optimize their own cost structures.

I wonder what margins Intel Foundry will see on Intel design business? List price wafers and packaging? Someone is going to have to take the hit.

Our first Intel 18A product, Clearwater Forest is slated to launch next year and will allow us to accelerate share gains.

Based on what TSMC said yesterday Intel 18A and TSMC N2 are lock in step. Production in 2025 and meaningful revenue in early 2026?

I am pleased to announce that this quarter, we signed another meaningful customer on Intel 18A, bringing our total to six. A leader in the aerospace and defense industry, this customer chose Intel Foundry based not only on the process technology benefits of Intel 18A, but also because of their desire to have a secure US only supply base.

Solid news!

The foundry market is expected to grow from $110 billion today to $240 billion by 2030 with almost 90% of the growth coming from EUV nodes and advanced packaging.

I certainly hope so.

Put it another way, our 15 billion of external revenue embedded in our Intel Foundry target model would represent less than 15% of the leading-edge foundry market. It is not a question of if, but when Intel Foundry achieves escape velocity.

Wow, escape velocity, that is a new one, I like it! One thing I have not heard on the street is IFS wafer pricing. Will Intel undercut TSMC to reach said escape velocity like Samsung Foundry? Or do people think foundry customers will pay more for US made wafers?

Q&A:

And then, of course, 18A as we deliver the PDK for that in Q2, the 1.0 PDK

Deliver it outside of Intel? And you should know 1.0 PDKS are not created equal. Samsung 1.0 PDKs are equivalent to TSMC .5 PDKs. It will be interesting to see where Intel PDKs are at in regards to foundry PDKs.

Matthew Ramsay
Yeah, thank you very much, guys. Pat, one question I've been getting from some folks and I totally understand the lead times of starting some of these programs to put increased tile volume at external foundry, but you guys have made the progress on the five nodes in four years as you highlighted multiple times. Is there any flex at all to bring back some of that external volume earlier? And I think it matters to some folks because it's a demonstration of you guys being able to ramp your own product to volume and to yield and to economics on 18A, which might give some indication to some external customers that are looking at your foundry business. So just any flex at all to pull that timeline in of sort of reshoring some of the external tiles? Thanks.

Patrick Gelsinger
Yeah. Thanks, Matt. And largely those decisions are made when the product decisions are made. So there's limited flexibility to move them around. And if you pick a process node for a certain tile, generally, that's the process node that it's on. So there's limited flexibility there. And many of those decisions, as we've highlighted before, Matt, were literally made years ago, right, and those choices were made. That said, we see the peak of our external tiles being this year and next year. And then the roadmap and the movement of those coming back begins to quite accelerate even starting late next year. So the plan is clearly laid out. As we said, we see a couple of fabs worth of capacity coming back into the Intel factory network as we move into '26 and beyond, so this becomes a significant driver. We've also driven significant roadmap decisions against that improving profile of our products. And I'll say that begins in a very powerful way next year with Panther Lake and Clearwater Forest. Unquestioned, the best products and clients, the best products and server are now being built on Intel 18A. And as the question suggests, we see customers seeing that what every foundry customer that we speak to, right, understanding where we are in our product and process cycle and the ability for them to essentially benefit from Intel as customer zero in the foundry network. So overall, this is feeling very good. We're on track to go accomplish that. And the business model that we've laid out and Dave and I presented as we go through the decade shows a very healthy improvement in wafer ASP, wafer volume, foundry, and these decisions are made, right. We are on track to both have the wafer foundry capabilities, have the process technology and the products to fill those factories. And that's why Dave and I have such confidence in the business model that we've laid out and the improvements that it will deliver as we go over the next several years together.

***

Translation: Intel will not be using TSMC N2 which I have heard elsewhere.

The question I would ask is: Do you still see AMD in your rearview mirror? :ROFLMAO: A minor slip up, but seriously, can you image where Intel would be today without Pat? My guess would be SOL.

Overall I would say it is good to see Intel in there fighting. It is for the greater semiconductor good, absolutely. I do believe the competitive winds are picking up significantly however. TSMC is definitely turning up the heat as are AMD and Internal Arm based products. I still give Intel a better than average bet at winning foundry business. I do not think however that 18A will do it. To me 18A is the foundry test case, if successful Intel 14A could be the big winner. Until then it is the NOT TSMC foundry business mostly taken from Samsung.

I talked to one foundry team leader at a major customer and asked if his CEO could mandate which foundry they use. He did not answer but he did chuckle.

Exciting times, absolutely!
 
One quote sticks out for me - here's Pat:

"We have rebuilt our Grovian culture"

But is that actually what is required ? That may have worked well 30 or 40 years ago. But it's a far more competitive and dynamic world these days and ruling by rigid process and top-down diktat insisting everyone's in by 8:30am (OK, my understanding of Grovian culture is mainly based on reading "Intel Inside") isn't going to help hiring and retaining key people these days.

My gut feeling is that "Grovian culture" was ultimately as much a part of the problem at Intel as any future solution. Pat's words here worry me. He needs to let go of the past.
 
Is there a tipping point where if Intel takes enough Samsung foundry business, Samsung won’t be able to justify investment in the current rapid pace of leading edge? Or will Samsung’s other businesses (and the Korean government) always subsidize this business?

Note I don’t see this as likely any time soon since the total pie is growing a lot lately, but just curious if there’s a possibility 3-4 nodes out that Intel by default gets all of Samsung’s leading edge business on top of their own wins and of course Intel products.
 
One quote sticks out for me - here's Pat:

"We have rebuilt our Grovian culture"

But is that actually what is required ? That may have worked well 30 or 40 years ago. But it's a far more competitive and dynamic world these days and ruling by rigid process and top-down diktat insisting everyone's in by 8:30am (OK, my understanding of Grovian culture is mainly based on reading "Intel Inside") isn't going to help hiring and retaining key people these days.

My gut feeling is that "Grovian culture" was ultimately as much a part of the problem at Intel as any future solution. Pat's words here worry me. He needs to let go of the past.

I’m not saying you’re wrong.. but BK (and to a lesser degree Otellini) let go of Grovian culture, and we saw them leave a whole lot of opportunity on the table for a long time. Intel definitely needed a culture change of some kind.
 
Is there a tipping point where if Intel takes enough Samsung foundry business, Samsung won’t be able to justify investment in the current rapid pace of leading edge? Or will Samsung’s other businesses (and the Korean government) always subsidize this business?

Note I don’t see this as likely any time soon since the total pie is growing a lot lately, but just curious if there’s a possibility 3-4 nodes out that Intel by default gets all of Samsung’s leading edge business on top of their own wins and of course Intel products.
We'll find out in the next semi downturn. Current sentiment ("it's different this time ['cause AI] !") says this isn't happening. But it always does eventually (I'd give it < 5 years). Can't imagine Samsung throwing in the towel though.
 
Is there a tipping point where if Intel takes enough Samsung foundry business, Samsung won’t be able to justify investment in the current rapid pace of leading edge? Or will Samsung’s other businesses (and the Korean government) always subsidize this business?

Note I don’t see this as likely any time soon since the total pie is growing a lot lately, but just curious if there’s a possibility 3-4 nodes out that Intel by default gets all of Samsung’s leading edge business on top of their own wins and of course Intel products.

Samsung has big internal logic business like Intel which is the benefit of being an IDM Foundry. Samsung also has big internal and external memory business making them the #1 semiconductor company in the world, right? No way they are giving any of that up.

If you really look at it, Samsung is the original Systems Foundry since they really are a systems company that produces thousands of electronic products and also makes chips and memory. Intel is a chip company and foundry that works with systems companies. TSMC is a logic foundry for systems companies. Three very different things.

Everybody seems to think the semiconductor industry, which is now at $650B, will hit $1T in 2030. That is a very big jump. AI is supposed to drive this big number but I am not confident it will. I do believe other disruptive technologies will drive us to that number so maybe all of the fabs we are building have a chance.

Right now foundry capacity utilization is hovering at 70%. If we are going to make it to $1T in 6 years we had better get to work!
 
  • “Intel Foundry has a strong pipeline of nearly 50 customer test chips, and has engagements with almost every foundry customer in the industry on advanced packaging, including five design awards”

TSMC stated at the symposium that N2 has more design starts than N3 which is a big statement considering N3 has 99% market share versus Intel 3 and Samsung 3nm.

Speaking of packaging, TSMC was all about packaging pointing out that TSMC has been packaging chips with customers for more than 10 years. Here are some slides:

TSMC HPC Platform.jpg


TSMC SoW.jpg


TSMC SoW Data Centers.jpg

TSMC Automotive Packaging.jpg
 
Intel 14A, the first process node in the industry to use High NA EUV technology.

TSMC bragged a little bit about EUV and how they were the first and have the majority of the EUV systems installed etc... They did however stumble a bit when asked about HNA-EUV. TSMC said they do not need it for A16 but it is on the roadmap for future process nodes. ASML shipped a second HNA EUV system, TSMC would not confirm or deny that they have it. I guess Samsung could have it but I was told privately it was TSMC.

From what I have been told by experts here on SemiWiki is that HNA EUV will be a significant cost reduction for design and manufacture. I realize TSMC would need dozens of these HNA EUV systems before they could be in production while Intel can pump out 14A CPU chiplets from their R&D facility and use 18A for the rest of the chiplets. Intel however could not put HNA EUV into foundry production doing full chips with just one HNA EUV system.

Samsung's foundry event is coming up. It will be interesting to see what they have to say about HNA-EUV.
 
Patrick Gelsinger
Thanks, John, and welcome, everyone. We reported solid Q1 results, delivering revenue in-line and EPS above our guidance as we continue to focus on operating leverage and expense management. Our results reflect our disciplined approach on reducing costs as well as the steady progress we are making against our long-term priorities.

While first-half trends are modestly weaker than we originally anticipated, they are consistent with what others have said and also reflect some of our own near-term supply constraints. We continue to see Q1 as the bottom and we expect sequential revenue growth to strengthen throughout the year and into 2025, underpinned by, one, the beginnings of an enterprise refresh cycle and growing momentum for AIPCs. Two, a data center recovery with a return to more normal CPU buying patterns and ramping of our accelerator offerings. And three, cyclical recoveries in NEX, Mobileye and Altera.

We had an extremely productive Q1 and achieved several important milestones along our journey to reposition the company for improved execution, competitiveness and perhaps most importantly, financial results. We hosted our first-ever Intel Foundry Direct Connect, which drew nearly 300 partners, customers and potential customers to hear about the momentum we are building with our foundry offerings.

We were pleased to announce Microsoft as our fifth Intel 18A customer. We also updated our lifetime deal value to greater than 15 billion and extended our roadmap with Intel 14A, the first process node in the industry to use High NA EUV technology.

Shortly following Direct Connect, we were thrilled to join with President Biden and Commerce Secretary, Raimondo to announce our position as the national semiconductor champion, along with the single largest award from the CHIPS and Science Act of more than 45 billion of proposed grants, tax incentives and loans.

During the second week of April, we brought together more than 1,000 of our top customers and partners at Intel Vision 2024, where we introduced our next-generation Gaudi 3 accelerator. We were joined by NAVER, Dell, Bosch, Supermicro and Roche, among many others who shared how they are benefiting from Intel solutions.

Vision led straight into Open Source Summit, where we led the launch of the Open Platform for Enterprise AI project. This industry initiative aims to accelerate GenAI deployments in what will be the largest market for AI applications starting with retrieval augmented generation or RAG. Our Xeon plus Gaudi use cases along with our established enterprise ecosystem have a big role to play here.

Lastly, we hosted the industry's first sustainability summit, underscoring our deep commitment to building a more geographically diverse, resilient, trusted and of course, sustainable supply-chain for semiconductors. We are proud of our leadership position in chemical conservation, renewable energy and water reclamation.

Our accomplishments year-to-date build on all the work we have done to executing the strategy I laid out when I rejoined the company three years ago. Job number one was to accelerate our efforts to close the technology gap that was created by over a decade of underinvestment. The heart of Phase 1 was five nodes in four years. The rallying cry was torrid. It combined accelerating our node transitions with improving our product execution and cadence to regain customer trust.

We have rebuilt our Grovian culture and execution engine and are on track to completing our five nodes four year goal, which many of our stakeholders thought impossible at inception. In so doing, we are in a unique position with at-scale EUV technology, Western base capacity, and at the very least, a level playing field with the market leader.

Intel 20A, which helps pave the way for Intel 18A, begins production ramp in the second-half of this year with Arrow Lake. We expect to release the 1.0 PDK for Intel 18A this quarter. Furthermore, our lead products, Clearwater Forest and Panther Lake are already in fab and we expect to begin production ramp of the Intel 18A in these products in the first-half of '25 for product release in the middle of next year. Given this progress, now is the time to turn our focus to matching technology leadership with a competitive cost structure.

Establishing a foundry relationship between our products group and our manufacturing group was a critical step to achieve better structural cost. This quarter, we officially transitioned to our new operating model and introduced Intel Products and Intel Foundry. Today, for the first time, we are reporting our results to reflect the new way in which we are running the company.

Separating the internal financial reporting between Intel Foundry and Intel products was a critical step needed to provide transparency, accountability and the proper incentives to allow both groups to make better decisions to optimize their own cost structures.

This change also provided the added benefit of giving more transparency to our outside owners. We knew that the day one P&L for Intel Foundry was going to spark debate, but we also knew it was important to establish a baseline and provide a target model based on reasonable to conservative revenue and cost assumptions that we have a high degree of confidence we will achieve.

I'm going to reiterate that point, so it is heard and understood. Our target model is reasonable, conservative and reflects a high degree of confidence in our ability to deliver. And you can rest assured that we will be working hard to beat these targets. If we can move faster and do better, we will and our new operating model is already catalyzing change and driving efficiencies across the organization. Let me highlight three important aspects of our business and our strategy that is underscored by the new model.

First, with Intel Products, we have exposed a solid, fabless franchise with established powerful and hard to displace installed-base and ecosystem across enterprise, consumer and edge that provide meaningful benefits to our customers and partners. Intel Products is a solidly profitable business today, despite just recently emerging from a semiconductor downturn and still competing with legacy process technology. That is changing rapidly as we ramp Intel 3 in 2024 and Intel 18A in 2025.

Within client, we are defining and leading the AI PC category. IDC indicates the overall PC market is now expanding. And as stated earlier, as standards emerge and applications begin to take advantage of new AI-embedded capabilities, we see demand signals improving, especially in second half of the year helped by a likely corporate refresh.

Our core ultra-ramp led by Meteor Lake continues to accelerate beyond our original expectation with units expected to double sequentially in Q2, limited only by our supply of wafer level assembly. Improving second half Meteor Lake supply and the addition of Lunar Lake and Arrow Lake later this year will allow us to ship in excess of our original 40 million AI PC CPU target in 2024.

Next year with Panther Lake, we will extend our lead with Intel 18A and further product enhancements. Our share position is strong and continues to strengthen as we execute on our product roadmap.

Within DCAI, as committed, we have achieved product release on our first Intel 3 server product, the first generation E-Core Xeon 6 codename Sierra Forest. The next-generation P-Core Xeon 6 product, Granite Rapids will be released in Q3. At Vision, we demonstrated the 70 billion parameter model running natively on Xeon 6 with good performance.

We continue to expect share trends to stabilize this year before improving in 2025. While budgets are still being prioritized to generative AI build-out where we have a strong position in the head node, customer conversations continue to show improving signs for traditional CPU refresh starting in late Q2 and into the second-half.

Our first Intel 18A product, Clearwater Forest is slated to launch next year and will allow us to accelerate share gains. Our Gaudi 3 launch gave us a strong offering to improve our position in accelerated computing for the data-center and cloud. We now expect over 500 million in accelerated revenue in second half of 2024 with increasing momentum into 2025 based on Gaudi 3's vastly superior TCO as well as our own expanding supply.

In addition, we are finding good traction with the Intel Developer Cloud with customers onboarding with this platform, including Dell and Seekr, our largest IDC win to date. We are encouraged by our progress, but far from satisfied.

Lastly, within NEX, the business has stabilized and beat our Q1 targets with channel inventories approaching normal levels and business acceleration expected through the year as a result. We also recently announced our plans for scale-up and scale-out Ethernet-based AI networking delivered as a discrete NIC and chiplets for AI foundry customers with numerous key providers in the industry and market standardization through the Ultra Ethernet consortium.

So that is Intel products, good momentum and a lot for us to build on. Let me turn to Intel Foundry. We are executing on our strategy to drive meaningful improvement in profitability over-time. We are obviously not there yet given the large upfront investment we needed to build-out this business, but we always said this was going to be a multi-year plan and we are right on track with where we expect it to be right now.

As we discussed during our webinar at the beginning of the month, the transition from pre-EUV wafers to post-EUV wafers is a powerful tailwind for us. We expect our blended average wafer pricing to grow 3x faster than cost over the decade, driving significant margin expansion.

In addition, more competitive wafers will allow us to bring home many of the tiles that today are being manufactured at external foundries. Both dynamics are in our control and not dependent on revenue growth and are key elements to drive the business to breakeven, more than doubling our current earnings power at the Intel consolidated level.

Of course, more competitive wafers combined with our position as the only company manufacturing with leading-edge wafers outside of Asia is drawing strong interest from potential external customers. It is important to note that our leadership in advanced packaging creates more value in our wafer technologies and wafer level assembly and base dye opportunities further fill our factories and extend the useful life of our tools for increased financial returns.

I am pleased to announce that this quarter, we signed another meaningful customer on Intel 18A, bringing our total to six. A leader in the aerospace and defense industry, this customer chose Intel Foundry based not only on the process technology benefits of Intel 18A, but also because of their desire to have a secure US only supply base.

Just this week, we were very pleased to announce that the DoD awarded Intel Foundry Phase 3 of the RAMP-C Program, which we are confident will lead to additional federal aerospace and defense customers.

More broadly, we are seeing growing interest in Intel 18A and we continue to have a strong pipeline of nearly 50 test chips. The near-term interest in Intel Foundry continues to be strongest with advanced packaging, which now includes engagements with nearly every foundry customer in the industry, including five design awards. While we are highly focused on improving the near-term profitability of Intel Foundry, it is also important that we keep sight of the long-term opportunity here.

The foundry market is expected to grow from $110 billion today to $240 billion by 2030 with almost 90% of the growth coming from EUV nodes and advanced packaging. Given this backdrop, we have clear line-of-sight to becoming the largest system foundry for the AI era and the second-largest overall by 2030, building on our EUV High NA process technology, leadership in advanced packaging, manufacturing capacity, our systems expertise and the surge in AI demand.

Put it another way, our 15 billion of external revenue embedded in our Intel Foundry target model would represent less than 15% of the leading-edge foundry market. It is not a question of if, but when Intel Foundry achieves escape velocity. And every day, we are proving to the market that Intel Foundry is a resilient, sustainable and trusted alternative to serve a semi-market on a path to top 1 trillion by the end of the decade.


Let me wrap up by speaking to our all other category, where our number one priority is to unlock shareholder value. This quarter, we formally rebranded our programmable solutions group, Altera, an Intel company. We look forward to bringing in a private equity partner this year to help prepare the company for an IPO in the coming years. This puts Altera on a similar path as Mobileye.

We are excited about the future of both companies. By providing them with separation and autonomy, we believe we enhance their ability to capitalize on their growth opportunities in their respective market and accelerate their path to create value.

Combined with IMS, our mask writing equipment business, we believe these three assets represent more than a quarter of our overall market value today. Along with a solid Intel products franchise and an Intel Foundry business rapidly approaching 100 billion in net tangible assets, we see the opportunity to unlock significant value for our shareholders as we meet our financial commitments, stand-up Intel Foundry and drive it to profitability and further leverage our opportunity in AI.

So overall, I'll say that there is a lot for us to build on coming out of Q1. We are systematically executing to our strategy and we are making steady progress. We are maniacally focused on executional excellence and fiscal discipline and we are relentless in our drive to regain process leadership and bring next-generation solutions to solve our customers' hardest problems. All of this gives me confidence in where we are headed.

Yes, we have a lot of hard work in front of us, but we know what we need to do and the payoff will be significant in the end. Semiconductors are the currency that will drive the global economy for decades to come. We are one of two, maybe three companies in the world, that can continue to enable next-generation chip technologies and the only one that has Western capacity in R&D. And we will participate in the entire AI market. Quarter-by-quarter, we are positioning ourselves well to capitalize on the immense opportunities ahead.

"The foundry market is expected to grow from $110 billion today to $240 billion by 2030 with almost 90% of the growth coming from EUV nodes and advanced packaging. Given this backdrop, we have clear line-of-sight to becoming the largest system foundry for the AI era and the second-largest overall by 2030, building on our EUV High NA process technology, leadership in advanced packaging, manufacturing capacity, our systems expertise and the surge in AI demand."

Does that mean for the next six years, non EUV foundries (non TSMC, Samsung , and Intel) in the world can only grow their business up to $13 billion annually ( 10% * ($240-$110)) by 2030.

Because TSMC and Samsung are still doing a lot matured nodes production and have large share of global foundry market, the actual available market growth will be much smaller for those non TSMC, Samsung and Intel foundries. Are UMC, Globalfoundries, SMIC, Tower, doomed?

Or it's a marketing announcement from Pat Gelsinger that we should not take it seriously?
 
"The foundry market is expected to grow from $110 billion today to $240 billion by 2030 with almost 90% of the growth coming from EUV nodes and advanced packaging. Given this backdrop, we have clear line-of-sight to becoming the largest system foundry for the AI era and the second-largest overall by 2030, building on our EUV High NA process technology, leadership in advanced packaging, manufacturing capacity, our systems expertise and the surge in AI demand."

Does that mean for the next six years, non EUV foundries (non TSMC, Samsung , and Intel) in the world can only grow their business up to $13 billion annually ( 10% * ($240-$110)) by 2030.

Because TSMC and Samsung are still doing a lot matured nodes production and have large share of global foundry market, the actual available market growth will be much smaller for those non TSMC, Samsung and Intel foundries. Are UMC, Globalfoundries, SMIC, Tower, doomed?

Or it's a marketing announcement from Pat Gelsinger that we should not take it seriously?

TSMC mentioned that mature nodes are down while advanced nodes are up. I have always said TSMC can eat GF alive if they wanted to and now I think they want to.

TSMC did a whole section on specialty technologies which is clearly targeting GF and other boutique foundries. Unique embedded memories, RF, photonics sensors, etc... Whether TSMC can beat them point-to-point on the technology I do not know. But if you look at the total "package" TSMC has a compelling story and by economies of scale alone the cost to manufacture is a big advantage for TSMC.

TSMC Optics SoIC-X.jpg
 
Intel 14A, the first process node in the industry to use High NA EUV technology.

TSMC bragged a little bit about EUV and how they were the first and have the majority of the EUV systems installed etc... They did however stumble a bit when asked about HNA-EUV. TSMC said they do not need it for A16 but it is on the roadmap for future process nodes. ASML shipped a second HNA EUV system, TSMC would not confirm or deny that they have it. I guess Samsung could have it but I was told privately it was TSMC.
Not surprising. Even if TSMC isn't adopting it for production as fast as intel, they still need R&D tools to actually be able to one day adopt it.
From what I have been told by experts here on SemiWiki is that HNA EUV will be a significant cost reduction for design and manufacture.
TSMC said as much on their most recent call. But who knows maybe Dylan Patel and his totally not made up "sources" are smarter than Intel+TSMC+ASML+Techinsight's combined. :LOL:
I realize TSMC would need dozens of these HNA EUV systems before they could be in production while Intel can pump out 14A CPU chiplets from their R&D facility and use 18A for the rest of the chiplets.
There are more considerations than that. Since A16 is an offshoot of N2 the fabs that will be running the two technologies would need to demo their current EUV steppers (plus any additional equipment if the reduce the number of mask layers while doing so) and in their place install these new steppers. This is A) expensive since TSMC already paid for said tools and is B) disruptive to their current operations. This would also require a fair amount of development work to requalify their process for this new tool and a TON of work to remove some multipatterning stages from the flow (which is presumably where the cost savings would be). These alone might make Hi-NA EUV only worth implementing if TSMC designed the process with High-NA in mind from get-go rather then retrofitting it on after the fact.

Another consideration is weight. High-NA tools are significantly larger than their low-NA counterparts. Since the pictures floating around seem to indicate that the N2/A16 fab design is similar to or identical to the N5/3 shell design it is totally possible that their litho bays are incapable of properly dealing with the vibrations under such a heavy tool with the EPE they need. Some circumstantial evidence for this would be that intel mentioned that D1X-Mod 3 is designed to handle high-NA tools, and that project was started in 2019. The N5 fab design would have been locked in years before then since N5 risk production started up in 2019, and there would simply be no reason to have that fab design built around supporting high-NA tools.
Intel however could not put HNA EUV into foundry production doing full chips with just one HNA EUV system.
Yes, but that isn't the point, 14A production is years away. The value of getting the a tool first would be to get extra learning cycles over folks that wait longer before getting their first R&D unit.
Samsung's foundry event is coming up. It will be interesting to see what they have to say about HNA-EUV.
I would assume they will trail intel/TSMC given High-NA likely has limited applications in memory for a good while (or maybe even forever since Samsung might jump to 3D-DRAM before high-NA makes sense for DRAM HVM).
 
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We were briefed on Intel HNA-EUV:

 
Dylan has zero semiconductor experience or education. Is that not an issue for you?
I am just saying he knows things and details about supply chain and what people are doing. I assume he has a great network as some of the details he knows are incredibly accurate and not widely known. As Tyrion Lannister said "That's what I do. I drink and I know things" (I dont know if Dylan drinks LOL)

I dont know his education or background. I am not hiring him to lead R&D. I just listen and then double check.

Just an opinion.
 
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