India is becoming an alternative for a globally diversified resilient supply chain: Intel’s Steve Long

In an exclusive interview with this Moneycontrol correspondent, who was in Penang on Intel’s invitation, Long discussed the company’s larger AI vision, change in business model, India business, Israel-based Tower Semiconductor deal cancellation, layoffs and more. Edited Excerpts:

What is the status of the global chip shortage at the moment? By when do you see complete recovery happening?

We have been aggressively investing in factory expansion. Apart from Malaysia, we have done some expansions across the globe and announced some greenfield projects. We're doing that because we never want to be in that situation again. Right now, I'd say in the client PC space, things are much more stable.

It’s the same in the data centre space, there's still some, longer lead time components in certain areas…but those are also improving. I think the chip shortage situation is much, much better. Inventories are stabilising now.

Intel has seen a few quarters of slowdown and layoffs. According to media reports, more layoffs are expected to happen but we saw some green shoots in the latest quarterly earnings. Can you address that? Will there be further layoffs or is the worst over for Intel at the moment?

Our company is in a transformation stage. Anytime you're in transformation, you make business choices to build the future and that requires making hard trade-offs and choices. We're a $70-billion revenue company. This year, we will be somewhere in the $ 50-billion-plus area.

When you have that kind of revenue, which is market-driven, you have to look at your cost structures. And in a good way, Intel is building muscle by continually finding the best projects to invest in, which may come at the expense of having to continue to redeploy people and redeploy resources so that we get the most important thing -- resources.

I think the structural shifts that you saw and the austerity commitments that we made to our investment community… They wanted to see us look at our operating expenses and be disciplined on that. And I think largely, we have done that, and we're on track with some of those cost-cutting measures.

Are you hiring at the moment?

Oh, yeah, we're hiring across Asia-Pacific and Japan. I've got open roles right now and I'm actually sitting on some requisitions and I'm deciding where the best investment opportunity is for me. So we're looking for where to invest and put our resources and companies are always hiring and shifting the profile in the workforce.

Can you elaborate on the changing businesses and the transformation underway for the company? Which are the next set of focus areas in terms of business?

We talked a lot about the excitement and enthusiasm in the industry around AI. We think AI is a workload, it's going to be deployed across all different architecture types. There are going to be real-use cases beyond the hype and the excitement around generative AI and large language models. There’s an opportunity to take AI across industries not only in the cloud but all the way to edge computing.

We have also invested a lot in our service providers in the 5G space. With the adoption of 5G, we see connectivity as an opportunity. We're taking old, proprietary networks, and we're opening those networks. I will continue to invest in our data centre business in the region. The way we monetise that is going to be increasingly through industries where we can actually develop use cases and solutions.

And how are you approaching this on the GPU side. There is increasing competition with NVIDIA and others?

GPUs have been NVIDIA’s business model. In our portfolio products, computing is solved through heterogeneous architectures, everything from client CPUs to data centre CPUs and accelerators like Intel Geti, which can be very applicable to large language models. Our pipeline of Geti is over a billion dollars right now and that’s growing.

Our GPU approach has been both client and data centre-based. We remain committed to the roadmap. We've had to simplify the roadmap a bit. I think we were probably ambitious with some of the products that were made and committed to early on. Everyone in the industry wants open architecture where many can participate.

Intel has set up some serious targets, including regaining technology and product leadership by 2025 and becoming the second-largest foundry business, globally, within a decade. How do you plan to achieve that? What are driving these targets?

When our CEO came on board, we said one of the pillars of what we needed to do to regain unquestioned product leadership was to get back to process technology leadership. So, we've taken a couple of steps back, and, I would say, adopted some industry standards that are used in production. We've gone back to standard tools and use the EUV (extreme ultraviolet) lithography system in our process technology…This allowed us to move fast.

So, the first two nodes are done. We have some in high volume manufacturing with Intel 4 coming, and Meteor Lake is going to ramp up etc…Our results in Q2 are kind of proof points of some of that. I think you'll continue to see us do and talk a little less.

A couple of weeks back, your acquisition deal with Tower Semiconductor was called off due to some regulatory delays in closing it. Will you now be looking at more such M&As in the APJ region?

Our foundry strategy was not dependent on the Tower deal. It would have enhanced it, had the regulators closed the deal. We had 18 months to close the deal but we didn’t get regulatory approvals to close, so we decided to pay a fee instead and exit the deal.

In these 18 months through the deal, we learned a lot. We on-boarded customers and drove the standards we spoke about. We learned how our businesses need to evolve --- looking at partnerships, joint ventures and acquisitions, etc.

We are always looking at other partnerships, joint ventures and acquisitions, but there’s nothing to announce. We're always looking at how we can add to our portfolio.

Can we expect Intel to manufacture semiconductors in India?

I would never tell you that I am not looking at starting semiconductor manufacturing in India. Never say, never. However, there are no plans to set up semiconductor manufacturing in India at the moment. It is evolving.

What you saw and experienced in Malaysia happened over 50 years ago and not overnight. We are eagerly and actively talking to multiple players in the Indian ecosystem to enable them to enter manufacturing — whether it is by enabling an ecosystem so that they can build and assemble locally and move up the manufacturing value chain.

Do you think India is late to the party in attracting semiconductor manufacturing?

They (Indian government) are never too late. Investing in infrastructure, improving access to connectivity with 5G deployments… Those are foundational things. Enhancing and growing the population out of poverty into productivity are the foundational things India has done already. It is never too late to have policies that can drive activity in the country.

India is becoming an alternative for a globally diversified resilient supply chain, not only in the semiconductor industry but in any industry. I think it's never too late for that.

What is driving business for Intel in India in 2023?

Domestic consumption, for sure. The population is big, affluence is increasing and connectedness is driving a big domestic consumption opportunity, in which we see more people buying PCs and more projects to give people access to technology coming from the government. That's driving 5G, too. Our 5G endeavours with Indian service providers are a big one. There are designs that are happening on 5G and radio access networks that could end up being export businesses for India. So, that's a big part.

The other big one I would mention is GSI or global system integrator. We have found ways to partner with Indian GSI in ways that we haven't before and let them be a partner who can actually catalyse business for exporting software and embedding services. We're finding new ways to work with them. I think it is exciting to export to the world.

The Biden government is banning US investments in manufacturing components like chips and electronics in China. What will this mean for Intel’s relationship and investments with Taiwan? How are you assessing the situation?

We have had business in Taiwan since 1985. It's great, we have 1,400-plus employees, and the ecosystem is rich, and healthy. We're going to continue doing business in Taiwan and abide by the regulations, which are upon us. We still believe the world needs a diversified and resilient supply chain. We want to make sure that one small thing is not dependent on only one part of the world. That's good for the world and good for business.

Companies are moving towards China+1 strategy. Which markets are likely to benefit from it from a semiconductor standpoint?

There are a bunch of them that have some kind of scale. There is Vietnam and some of the Southeast Asian countries. People have chosen Thailand, Vietnam and India. There are folks who are choosing Mexico; there's a lot of discussion on Mexico, Eastern Europe, and in some cases, Poland. That's where our hubbing is and what we're trying to do will be a catalyst to where people can say, if Intel is going to be there, let's try to bring the rest of the supply chain there.