A Message from Intel CEO Pat Gelsinger to Employees

There is a little bit of "when a measure becomes a target, it ceases to be a good measure" with respect to chasing financial performance.

While you can't escape thinking about financial metrics, the goal should be something like creating great products, building a competitive barrier etc. Financials can act as a constraint rather than a goal.

A concrete example is Costco.

Even here, Gelsinger puts it last, which is sort of reads like a constraint. Seems fair.

I think with this kind of leadership they should probably liquidate and return money to the stockholders.

> What other expectations do you have of Intel?

I expect them to follow the Silicon Valley maxim of "Build the best product instead of focusing on making the most amount of money".

It'd be nice if they could give me a compelling reason to upgrade my computer more than once or twice a decade, other than 'Our new AI computers have keyboards that go to 11'.

A company serves three groups.

Customers, employees, and owners.

I don't have a strong opinion about whether customers or employees come first, but owners should be last.

"The Shareholder Value Myth" is an interesting book about companies purpose https://www.amazon.com/The-Shareholder-Value-Myth-Shareholde...

To reach something you need to get rid of something. The 3rd Newton's law.

With the results they're getting, what are they supposed to do?

Look out Moore's Law!

Instead of doubling transistors every two years, look out, new Sheriff in town -- Gelsinger's law : the staff roster halves every two years!

We predict in the coming decades, Intel will consist of a single CEO producing microchips with over a quintillion transistors!

"no longer try to turn money into real innovation" because they can't. they've failed at every turn which is why they are in this predicament. They let a company with less resources, fewer engineers, no fab trounce them. It's like Intel hasn't done a thing for years and years when they were far ahead of the game. But CEO gets to walk away with MILLIONS while losing the company BILLIONS. If you ever wanted to look up the meaning of loser, look no further. And Pat is left to fix the mess. What's he got to work with? A bunch of losers.

I do not read it that way. They've made investments (EUV systems) and are now focusing on getting the most out of them.

He's not talking about that.

Intel's problem is they are fat and inefficient.

On the product design side, they have far more employees than their competitors, and they still produce a lower quality product. When you translate that to finances, it means their gross margin is low (lots of employees means high cost).

On the foundry/fab side: Same story. The amount of revenue the fab generates per foundry employee is tiny compared to TSMC - and it's not because Taiwan is cheaper.

Intel was behind TSMC. When Pat became CEO, he set his vision of "5 nodes in 4 years" to get ahead of TSMC. Next year will be the 4th year, and so far that plan is panning out. But doing 5 nodes in 4 years is unprecedented, and the only way they achieved it so quickly is by throwing all kinds of resources at it (e.g. lower than acceptable yields, with Intel eating up the costs of the low yields). This is what he means by "accelerated investment".

So what he is saying in the quote above is: Now that we are near the end of the 4 year period, we need to focus on improving the efficiency of the fab to be competitive with TSMC's prices.

> they could explain to the investors why 18A is such a game changer and how Intel will capitalize on it to regain their crown

I think that’s what they’re doing. They’re leaning up before approaching markets for a massive investment.

> Instead what we're getting with this message is "we want to save 10 billion and everything that isn't 18A go-to-production is on the chopping block

This comment (https://news.ycombinator.com/item?id=41588241) explains the financial predicament pretty well with regards to saving money. Intel is far more "wasteful" than their competitors, and they cannot survive that way.

Intel fabs is set for a loss of $8B this year. I believe next year the forecasted loss is over $6B. They need to both get more customers to increase the revenue, and save money. The former alone will not get them to profitability.

> Maybe instead of cutting to hit arbitrary financial performance numbers that they set for themselves in the hopes of impressing investors, they could explain to the investors why 18A is such a game changer and how Intel will capitalize on it to regain their crown.

They do that every time they talk to the press. Wall Street understands it already. There's just skepticism that they will get as many customers as they need.

They sold the NUC business off to ASUS. But yeah, still lots of other stuff, like discrete graphics cards.

They probably will over the next few years. Not feasible to do it all at once (too chaotic).

Conversely, the money that was redeployed into higher margin industries had a net benefit for innovation.

AMD EPYC would not have existed if AMD was stuck in the fabrication and packaging space because they wouldn't have had the money to spend building a dedicated design team, and Nvida's breakthroughs in GPUs would have never happened if Nvidia had to also fabricate and package.

A company cannot have every single subsegment of an industry - it's unrealistic and a bad use of capital.

And high capex low margins industries are bad for workers from a salary perspective. This is why CS became so popular in comparison to EE/CE - the starting salaries are easily 2x as a SWE compared to working as a Fab Engineer.

And it's not a simple question of raising salaries. Becuase margins are very low (within the low double digits at most), a foreign competitor like TSMC, Samsung, and UMC can win by paying peanuts - which is what they did. Engineering salaries at those companies in Taiwan and SK are around $40-70k with 996 hours de facto enforced (and why Samsung employees globally are on strike right now)