Intel 'really is not an AI player and that's where they're really being punished': Strategist

CNBC International TV

2 Aug 202402:34

Summary

TLDRThe script discusses the current state of the chip industry, highlighting that hardware and infrastructure providers are likely to lead for the next five years. It points out Intel's challenges, including lagging behind TSMC in process technology and not being a significant player in AI, despite claims. The speaker notes Intel's missed opportunities in transitioning from 14nm to 10nm and then to 7nm, which has allowed competitors like AMD, with access to TSMC's advanced technology, to compete effectively. The analysis predicts a tough period for Intel, possibly lasting two to three years, before they can hope to catch up with TSMC's growth in process technology.

Takeaways

🌟 The speaker predicts that hardware and infrastructure providers will be the winners in the tech industry for the next five years.
💡 Major tech companies like AWS, Microsoft, and Meta are increasing their capital expenditures (capex), especially in cloud infrastructure, which is driving AI-specific hardware demand.
🚫 Intel is not considered a significant player in the AI market, despite their claims, and this perception is negatively affecting their market position.
📉 Intel's data center revenue has decreased by 3%, which is a significant setback given the expectations for growth in the sector.
🏭 The U.S. government's plan to bolster domestic chip manufacturing and design has not been well-executed by Intel, who were expected to be a key beneficiary.
🔬 Intel missed a critical transition in process technology from 14 nanometers to 10 nanometers in 2016, which has had lasting impacts on their competitiveness.
📉 Intel's failure to keep pace with process technology advancements has put them almost two generations behind TSMC, a leading semiconductor foundry.
🛠️ TSMC's flawless execution in advancing their process technology has given competitors like AMD a significant advantage over Intel.
🆚 AMD, with access to TSMC's advanced process technology, is now on equal footing with Intel, eroding Intel's historical performance lead.
📉 Intel's market share is continuously declining due to their inability to maintain a technological edge in the industry.
🔮 The speaker foresees that Intel's challenges will persist for another two to three years before they can hope to catch up with TSMC's growth in process technology.

Q & A

What is the current trend in the hardware and infrastructure sector according to the speaker?
-The speaker suggests that providers of hardware and infrastructure are expected to be the winners in the next five years, driven by increased capital expenditures in cloud computing by major companies like AWS, Microsoft, and Meta.
Why is Intel not considered a significant player in the AI market despite their claims?
-Intel is not seen as a major AI player because, although they make server chips used for some simple tasks before handing off to graphics processors like those from Nvidia, they have not been able to establish a strong presence in the AI-specific market.
What has been the impact on Intel's data center revenues due to their position in the AI market?
-Intel's data center revenues have been negatively affected, with a reported decrease of 3%, which was unexpected given the context of increased investments in chip manufacturing and design.
What historical mistake did Intel make that has continued to impact them?
-Intel missed the transition in process technology from 14 nanometers to 10 nanometers in 2016, and then from 10 nanometers to 7 nanometers, which has left them almost two generations behind TSMC.
How has TSMC's execution in process technology affected Intel's competitive position?
-TSMC's perfect execution in advancing their process technology has put Intel at a disadvantage, as Intel's designs, while good, are no longer significantly better than AMD's, especially now that AMD has access to TSMC's more advanced process technology.
What is the 'moat' that Intel is losing in the market, as mentioned in the script?
-The 'moat' refers to Intel's competitive advantage, which they are losing due to their inability to maintain a lead in process technology, allowing competitors like AMD to compete on equal footing.
What is the government's role in the chip manufacturing and design industry, and how has Intel responded to it?
-The government has a plan to double down on supporting chip manufacturing and design in the US, but Intel has unfortunately not performed well in this context, failing to capitalize on the opportunity.
How does the speaker predict Intel's position in the market for the next few years?
-The speaker predicts that Intel will continue to struggle for at least the next two to three years before they can start to grow their process technology faster than TSMC, although they will still be behind.
What does the speaker mean by 'ancient history' in the context of Intel's situation?
-The term 'ancient history' refers to past decisions and events that are no longer relevant but have had a lasting impact on Intel's current predicament, such as missing the transition in process technology.
What is the significance of capex in the context of the script?
-Capex, or capital expenditures, is significant in the script as it indicates the investments made by companies like AWS, Microsoft, and Meta in cloud infrastructure, which is driving demand for AI-specific hardware.
Why is the speaker critical of Intel's strategy regarding process technology investments?
-The speaker criticizes Intel's strategy because instead of investing heavily in advancing process technology, they chose to squeeze margins, which led to them falling behind competitors like TSMC and AMD.

Outlines

00:00

🚀 AI Hardware and Infrastructure Growth

The speaker agrees with a previous guest's assessment, predicting that hardware and infrastructure providers will lead the market for at least the next five years. They highlight that companies like AWS, Microsoft, and Meta are increasing their capital expenditures (capex) in cloud infrastructure, which will drive AI-specific hardware purchases. The speaker notes that Intel is struggling to be recognized as an AI player, despite their claims, due to their lack of focus on AI-specific chips and their lagging process technology compared to competitors like TSMC and AMD.

Mindmap

Keywords

💡Hardware providers

Hardware providers refer to companies that manufacture and supply the physical components required for technology systems, such as servers, chips, and other infrastructure. In the context of the video, the speaker suggests that these providers are likely to be the winners in the technology market for the next five years, as they are central to the functioning of AI and cloud services. The script mentions companies like AWS, Microsoft, and Meta as examples of those increasing their capital expenditures in this area.

💡Infrastructure

Infrastructure in this context refers to the underlying systems and structures that support the operation of technology, including data centers, networks, and the physical components that make up these systems. The script discusses how the providers of this infrastructure are poised to succeed due to the growing demand for AI and cloud computing services.

💡CapEx

CapEx, short for capital expenditure, is the money spent by a company to acquire, maintain, or improve its fixed assets. In the script, the speaker points out that companies like AWS, Microsoft, and Meta are increasing their CapEx, which indicates their investment in expanding or upgrading their infrastructure to support AI and cloud services.

💡AI

AI, or artificial intelligence, is the simulation of human intelligence in machines that are programmed to think and act like humans. The script highlights the importance of AI-specific buying and the role of hardware and infrastructure in supporting AI advancements. It also discusses Intel's position in the AI market, suggesting that they are not considered a significant player in this space.

💡Intel

Intel is a multinational technology corporation known for its computer hardware products, particularly its processors. The script discusses Intel's challenges, including their perceived lack of involvement in AI and their struggles with process technology advancements, which have affected their competitiveness in the market.

💡Process technology

Process technology refers to the techniques and methods used in the manufacturing of semiconductors and other electronic components. The script mentions Intel's missteps in transitioning from 14 nanometer to 10 nanometer process technology and then to 7 nanometer, which has put them behind competitors like TSMC.

💡TSMC

TSMC, or Taiwan Semiconductor Manufacturing Company, is the world's largest dedicated independent semiconductor foundry, which manufactures chips for companies like Apple and AMD. The script praises TSMC for executing perfectly in advancing their process technology, which has allowed them to stay ahead of competitors like Intel.

💡AMD

AMD, Advanced Micro Devices, is an American multinational semiconductor company that develops computer processors and related technologies for businesses and consumers. The script contrasts AMD's access to TSMC's advanced process technology with Intel's struggles, highlighting how this has enabled AMD to compete effectively with Intel.

💡Data center revenues

Data center revenues refer to the income generated from the operation of data centers, which are facilities used to house, power, and cool the computer systems that store, process, and manage data. The script notes that Intel's data center revenues were down, which is indicative of their challenges in the market.

💡Government plan

The government plan mentioned in the script refers to initiatives aimed at bolstering domestic chip manufacturing and design within the US. Intel was expected to benefit from such plans, but the script suggests that they have not performed well in this regard.

💡Moat

In business terminology, a 'moat' refers to a sustainable competitive advantage that protects a company from competitors. The script indicates that Intel lacks such a moat, which is why they are losing market share and facing challenges in their business.

Highlights

Hardware and infrastructure providers are expected to be the winners in the next five years.

Increased capex in cloud infrastructure by companies like AWS, Microsoft, and Meta is driving AI-specific buying.

Intel is not considered a significant player in the AI market despite their claims.

Intel's server chips are used for simple tasks before handing off to Nvidia's graphics processors.

Intel's data center revenues were down 3%, which was unexpected given the government's support for domestic chip manufacturing.

Intel missed the transition in process technology from 14 nanometers to 10 nanometers in 2016.

Intel's decision to focus on margins over investing in process technology led to further delays.

Intel is now almost two generations behind TSMC in process technology.

TSMC's execution has been flawless, putting pressure on Intel.

Intel's designs are good but not significantly better than AMD's, and their process technology advantage is gone.

AMD's access to TSMC's advanced process technology allows it to compete equally with Intel.

Intel is losing market share and lacks a competitive edge in its business.

The impact of Intel's past decisions will likely continue for the next two to three years.

Intel's future growth in process technology will need to outpace TSMC's, although still lagging behind.

The importance of investing in process technology for maintaining a competitive edge in the chip industry.

The government's support for domestic chip manufacturing has not yielded the expected results for Intel.

The significance of TSMC's advanced process technology in shaping the competitive landscape of the chip industry.