Intel CEO Pat Gelsinger on profitability pivot, chips shortage

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Bloomberg Oct 25, 2021 02:26 · 4691 Views Executive Talks

Intel CEO Pat Gelsinger on Profitability Pivot, Chips Shortage

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  • 00:00 What we said is fifty one to fifty three is a range for the next couple to three years and that margin depression is largely driven by this capital cycle that we're on you know we're building out capital we'VE been under invested in capital for a while you know we have a growing market to catch up with and we're committed to sustain leadership you know five process nodes in four years so all of that requires investment we're also building out these new business areas and we said until those new business.
  • 00:30 Area start producing revenue you know their drags in the margin and when they start producing it we start seeing the benefits of those business roll through the p NL so overall you a couple three years nice recovery path in the future you know also the free cash flow we continue to have great operational cash flow you know but a free cash flow we're making big capital investments and couple three years we're going to see a nice recovery cycle we'VE laid it out clearly to the street at this point so every investor knows exactly what they're getting into.
  • 01:00 When they participate in this turnaround story the pivot has happened we are underway I spoke to Tony fidelll yesterday longtime former Apple executive creator of the iPod behind the iPhone and he said by Apple making its own chips so much more as possible when it comes to innovation and they're never coming back to Intel can Intel recover from losing Apple and how specifically well you know whether Apple ever comes back or not to me the answer is do I have better products or better process.
  • 01:30 Technology to do a better job that they could do themselves you know maybe they become a founderary customer and as my process technology becomes the best they may or may not be interested in that but I can promise you that we will have the best process and the best packaging technologies and generally Apple is very pragmatic they make good decisions so that they can produce the best products you will they ever move back to Intel based products rather than designing their own well again if I deliver better products they make pragmatic decision.
  • 02:00 But we're also very realist that these decisions are many years in the making and our objective is build great products have a vibrant PC ecosystem a tremendous process technology leadership and the capacity and packaging To Go do it and I believe they and everybody else will make pragmatic decisions that is that story builds in the Intel portfolio of technologies our business will be well rewarded for those investments in our customer.
  • 02:30 Will be able to produce the best stuff on earth the supply chain pain only seems To Be getting worse Apple might have to cut production of ten million iPhones and employees at Apple are saying this is the bleakest backlog they'VE ever seen do you have an updated projection on when this crisis gets better yeah my projections haven't changed one syllable right we'VE always said the second half of this year is the worst q q is the bottom q.
  • 03:00 Every quarter next year we'LL get incrementally better but we are going to see shortages that persist into twenty three but you know this is the bottom and it will just start getting a little bit better every quarter next year but we're not going to see reasonable supply demand balance until twenty twenty three it just takes that long To Build new capacity To Bring on new factories to expand capabilities and manufacturing and to see a rebalancing of the supply chain across the industry.
  • 03:30 Overall it clearly impacted our q and we expect our q results if I can build more we have better revenue results.