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Former Intel CEO Craig Barrett on saving Intel

Xebec said:
A couple of teasers from the article:

"6. The current Intel CEO's comments about not investing in new technology (14A) until customers sign up is a joke."

"9. The FFWBMs (four former wise board members) of Intel continue to claim you have to break Intel into two pieces before any customer will invest in Intel. Be serious. There are many company interactions that involve both supply and competition. It is also extremely hard to imagine Intel really competing with the likes of Nvidia, Apple, Meta, Google, Dell, etc in their well established product lines. By all means, if you want to complicate the problem, then take the time to split up Intel and make the FFWBMs happy but if you’re in the business of saving Intel and its core manufacturing strength for the USA then solve the real problem – immediate investment in Intel, committed customers, national security, etc."

fortune.com

Exclusive: Former Intel CEO Craig Barrett outlines rescue plan to save Intel and America's advanced chip manufacturing

Intel needs a cash infusion of roughly $40 billion to remain at the leading edge of chip manufacturing, according to former CEO Craig Barrett. The U.S. government is unlikely to be the main savior—instead cash rich chip customers like Nvidia, Apple, and Google need to step up.
fortune.com fortune.com
Click to expand...

The following link provides more details of this article without paywall.

 
Fred Chen said:
4. Intel is cash poor and can’t afford to invest in the capacity needed in the future to replace TSMC or even a reasonable fraction of TSMC capacity. They probably need a cash infusion of $40B or so to be competitive.

Is $40 billion even enough?
Click to expand...
Doesn't Intel already have like $20B in cash on hand? I mean, not everyone can have Apple levels of cash, but that's substantial.

5. The only place the cash can come from is the customers. They are all cash rich and if 8 of them were willing to invest $5B each then Intel would have a chance.

8. Where does the money come from? The customers invest for a piece of Intel and guaranteed supply. Why should they invest? Domestic supply, second source, national security, leverage in negotiating with TSMC, etc. AND IF THE USG GETS ITS ACT TOGETHER, they catalyze the action with a 50% (or whatever number Trump picks) tariff on state of the art semi imports. If we can support domestic steel and aluminum, surely we can support domestic semiconductors.
Click to expand...
"Invest for a piece of Intel" meaning each of these 8 customers would have to buy up ~5% stakes ($5B) in Intel off the public market? This does not generate cash, unless the plan is to pump and dump INTC stock. Surely he understands that customer investment = wafer commitments and pre-payments? No public company is just going to throw "no strings attached" cash at another.

"Whatever number Trump picks"... I'm glad even Barrett acknowledges the tariffs are arbitrary. But then expects "THE USG GETS ITS ACT TOGETHER".

3. U.S. customers like Nvidia, Apple, Google, etc needs and should understand they NEED a second source for their lead product manufacturing due to pricing, geographic stability and supply line security reasons.
Click to expand...
I don't understand why the second source must be Intel. Samsung can be a second source in both Korea and the US.
 
siliconbruh999 said:
there are multiple ?
Click to expand...
I think so. There was the Itanium path. Appointing Pat Gelsinger CTO in 2001. An attempt to create a foundry business based on a new 90nm process. The decision to keep CPU memory controllers on separate chips. The support for and continuation of the inane two-in-the-box management organization strategy. Those are the ones at the top of mind for me.
 
tedc said:
Doesn't Intel already have like $20B in cash on hand? I mean, not everyone can have Apple levels of cash, but that's substantial.


"Invest for a piece of Intel" meaning each of these 8 customers would have to buy up ~5% stakes ($5B) in Intel off the public market? This does not generate cash, unless the plan is to pump and dump INTC stock. Surely he understands that customer investment = wafer commitments and pre-payments? No public company is just going to throw "no strings attached" cash at another.

"Whatever number Trump picks"... I'm glad even Barrett acknowledges the tariffs are arbitrary. But then expects "THE USG GETS ITS ACT TOGETHER".


I don't understand why the second source must be Intel. Samsung can be a second source in both Korea and the US.
Click to expand...

Any CEO’s decisions, strategies, and vision can greatly impact a company’s future long after his or her retirement. They can determine whether the company thrives or struggles. Mr. Craig Barrett’s career at Intel is one such example.

Craig Barrett served as CEO of Intel from 1998 to 2005 and as Chairman from 2005 to 2009. He was not only the captain steering the entire Intel ship, but also the steward of its long term prosperity. His recent suggestion that Intel’s customers and competitors should contribute $40 billion to save Intel is certainly a refreshing idea.

From my analysis, Intel spent $50.32 billion on share buybacks between 2000 and 2009, when Mr. Barrett was either CEO or Chairman. I can’t help but wonder: what if he had spent only half that amount, keeping $25 billion to improve Intel’s long term competitiveness, or even to start Intel Foundry at a time when TSMC was still not as strong as Intel?

Note:
From 2010 to Q1 2021, Intel spent about $83.54 billion on share buybacks. After Q1 2021, Intel stopped repurchasing shares because it could no longer afford to do so.
 
Last edited:
These ideas are really missing the sad reality point IMHO:
1) People had a chance to work with Intel Foundry. They chose not to. There are lots of reasons why that the recently Laid off people can tell you.
2) Intel Foundry loses Billions and they sold of part ownership of leading fabs to investment companies.
3) Intel has discussed IFS sell off/JV with other companies. They chose not to move forward.
3) Intel is not too big to fail. People are perfectly happy using TSMC, AMD, Nvidia, ASICs.
4) If the government wants a US leading edge foundry, controlled by the government, Then take Intel's foundry and call it AMFAB.

Intel Product groups without the IFS anchor can easily be worth as much as AMD..... Focus on that for turnaround.

Intel is not even close to where it was under Barrett and the whole industry has changed. Intel is not a top 10 company anymore. The financial decisions of the past 4 years have seriously endangered Intel. LBT plans to fix that and I think he will create a very different and successful Intel

Just an opinion
 
MKWVentures said:
These ideas are really missing the sad reality point IMHO:
1) People had a chance to work with Intel Foundry. They chose not to. There are lots of reasons why that the recently Laid off people can tell you.
2) Intel Foundry loses Billions and they sold of part ownership of leading fabs to investment companies.
3) Intel has discussed IFS sell off/JV with other companies. They chose not to move forward.
3) Intel is not too big to fail. People are perfectly happy using TSMC, AMD, Nvidia, ASICs.
4) If the government wants a US leading edge foundry, controlled by the government, Then take Intel's foundry and call it AMFAB.

Intel Product groups without the IFS anchor can easily be worth as much as AMD..... Focus on that for turnaround.

Intel is not even close to where it was under Barrett and the whole industry has changed. Intel is not a top 10 company anymore. The financial decisions of the past 4 years have seriously endangered Intel. LBT plans to fix that and I think he will create a very different and successful Intel

Just an opinion
Click to expand...
Totally agree... everyone here saying Intel MUST have a foundry to be relevant is conveniently ignoring all the fabless companies out there that only 10 years ago were far behind Intel. Going fabless is Intel's only chance of being relevant again.

People saying it's a national security issue may have a point, but Intel splitting into two companies does not mean the fabs disappear or get dismantled. IFS either becomes an American foundry company or is merged with someone like GFS.

I think there are a lot of old school semiconductor people here who lament what Intel has become and wants to see it succeed again... but the world has changed and IDM is no longer a viable business model.
 
hist78 said:
Any CEO’s decisions, strategies, and vision can greatly impact a company’s future long after his or her retirement. They can determine whether the company thrives or struggles. Mr. Craig Barrett’s career at Intel is one such example.

Craig Barrett served as CEO of Intel from 1998 to 2005 and as Chairman from 2005 to 2009. He was not only the captain steering the entire Intel ship, but also the steward of its long term prosperity. His recent suggestion that Intel’s customers and competitors should contribute $40 billion to save Intel is certainly a refreshing idea.

From my analysis, Intel spent $50.32 billion on share buybacks between 2000 and 2009, when Mr. Barrett was either CEO or Chairman. I can’t help but wonder: what if he had spent only half that amount, keeping $25 billion to improve Intel’s long term competitiveness, or even to start Intel Foundry at a time when TSMC was still not as strong as Intel?

Note:
From 2010 to Q1 2021, Intel spent about $83.54 billion on share buybacks. After Q1 2021, Intel stopped repurchasing shares because it could no longer afford to do so.
Click to expand...
Share buybacks are not the best use of capital unless the goal is to inflate earnings per share artificially (note: 1. Buybacks reduce the number of outstanding shares. 2. Compensating executives based on EPS motivates them to raise EPS). The best way to predict the future is to invent it, and Intel should have been inventing new stuff. Copying TSMC is not going to save them. Invent new products.
 
MKWVentures said:
These ideas are really missing the sad reality point IMHO:
1) People had a chance to work with Intel Foundry. They chose not to. There are lots of reasons why that the recently Laid off people can tell you.
2) Intel Foundry loses Billions and they sold of part ownership of leading fabs to investment companies.
3) Intel has discussed IFS sell off/JV with other companies. They chose not to move forward.
3) Intel is not too big to fail. People are perfectly happy using TSMC, AMD, Nvidia, ASICs.
4) If the government wants a US leading edge foundry, controlled by the government, Then take Intel's foundry and call it AMFAB.

Intel Product groups without the IFS anchor can easily be worth as much as AMD..... Focus on that for turnaround.

Intel is not even close to where it was under Barrett and the whole industry has changed. Intel is not a top 10 company anymore. The financial decisions of the past 4 years have seriously endangered Intel. LBT plans to fix that and I think he will create a very different and successful Intel

Just an opinion
Click to expand...
Abandoning FAB will not restore performance
Because there are no good products in Intel at the moment
The idea that just throwing away the FAB will solve it is short-sighted.
 
EganVector said:
Share buybacks are not the best use of capital unless the goal is to inflate earnings per share artificially (note: 1. Buybacks reduce the number of outstanding shares. 2. Compensating executives based on EPS motivates them to raise EPS). The best way to predict the future is to invent it, and Intel should have been inventing new stuff. Copying TSMC is not going to save them. Invent new products.
Click to expand...
Intel spent more money than all their competitors. They still fall behind. They spent tons on AI. But nothing was delivered as roadmaps slipped each quarter. If they spent 2x as much, The results would be the same. Buyback are never the problem

Less people, greater speed will help them invent. Not spending on "assistant to Chief of staff to the co-regional roadmap Program Manager "
 
MKWVentures said:
Intel spent more money than all their competitors. They still fall behind. They spent tons on AI. But nothing was delivered as roadmaps slipped each quarter. If they spent 2x as much, The results would be the same. Buyback are never the problem

Less people, greater speed will help them invent. Not spending on "assistant to Chief of staff to the co-regional roadmap Program Manager "
Click to expand...
Reducing personnel... Reducing personnel... It would be nice if we could appropriately reduce the number of personnel, but there is no point in reducing the number of personnel we need.
 
tomatoma said:
Abandoning FAB will not restore performance
Because there are no good products in Intel at the moment
The idea that just throwing away the FAB will solve it is short-sighted.
Click to expand...
Fabs provide no competitive advantage and they lose 5-10B per year. Product group prefers to work with TSMC. There are no customers for foundry.

Reminder: the goal at this point is no longer restoring performance. It is survival
 
MKWVentures said:
Fabs provide no competitive advantage and they lose 5-10B per year. Product group prefers to work with TSMC. There are no customers for foundry.

Reminder: the goal at this point is no longer restoring performance. It is survival
Click to expand...
That's not what I'm saying
It's not a matter of throwing away the FAB or not
Which way Intel can't survive
 
EganVector said:
Share buybacks are not the best use of capital unless the goal is to inflate earnings per share artificially (note: 1. Buybacks reduce the number of outstanding shares. 2. Compensating executives based on EPS motivates them to raise EPS). The best way to predict the future is to invent it, and Intel should have been inventing new stuff. Copying TSMC is not going to save them. Invent new products.
Click to expand...
These reasons aren't correct. While buybacks do reduce the number of outstanding shares, the motivation isn't increasing executive compensation based on EPS. I'm not aware of any company that does that.

The two most important justifications for share buybacks are:

1. To reduce dilution of share book value when a company issues stock to employees as compensation in the form of stock options or restricted stock units.

2. To return excess earnings to shareholders while avoiding the multiple-taxation of earnings delivered as dividends in the US. The earnings returned are double-taxed because the corporation pays federal income tax on the earnings, and then the recipients of the dividends pay federal income tax on them (though probably at the qualified dividend rate, which is the same as the long-term capital gains rate). And for those recipients who live in states with an income tax, they're taxed again. And if you live in a city with a local income tax the dividend funds get taxed a fourth time. Share buybacks increase the value of shares by reducing the number of shares available to trade in the stock market (called "float"), which increases the value of each share without further taxation until the shares are sold by a stockholder for a gain.
 
The problem Barrett is trying to address is that US national security priorities don't necessarily align with business priorities.

The US government wants to promote domestic leading edge semiconductor production by a US-based company. The sole company that could achieve that has been mismanaged to the point where divesting / eliminating those production capacities actually makes more financial sense.

To prioritize security means investing even more money and putting Intel deeper into the red. Will the government actually step in to support Intel, or is this all bark? Or is the plan really to depend on Intel's competitors to bail it out?
 
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