Intel CEO Pat Gelsinger speaks at the World Economic Forum in Davos, Switzerland — 1/17/2024

Intel CEO Pat Gelsinger speaks at the World Economic Forum in Davos, Switzerland — 1/17/2024

Introduction

  • The semiconductor industry can be categorized into four main types of chips: memory chips, specialty chips, mature chips, and Leading Edge chips.
  • Long lead time investments in semiconductor factories and the inability to accurately predict future demand contribute to the cyclicality of the industry.
  • Currently, there is a reasonable supply-demand balance in the semiconductor industry, but oversupply of memory chips and a potential undersupply of memory chips in the future.
  • AI is driving the demand for Leading Edge chips and will continue to do so in the coming decade.

Loss of Cutting Edge Chip Factories in the US and Europe

  • No vote was taken in Brussels or DC to get rid of the semiconductor industry, but Asian countries such as Korea, Taiwan, and China put in long-term industrial policies and investments to attract the industry, resulting in the loss of factories in the US and Europe.
  • The need for balanced and resilient supply chains led to the US and the EU chips act.

Challenges in Producing Cutting Edge Chips

  • Becoming a cutting-edge semiconductor supplier requires significant investment, both in terms of capital (billions of dollars per year) and R&D (billions of dollars per year).
  • There are only three companies in the world capable of producing Leading Edge chips: TSMC, Samsung, and Intel.
  • Cutting Edge chip production is capital-intensive, research-intensive, and requires significant intellectual property.
  • Building a new factory can cost around $30 billion, making it the largest construction project on Earth.

Intel's Advanced Manufacturing Plans

  • Intel plans to build an advanced manufacturing facility in Magur, Germany, that will produce 1.5nm devices, making it the most advanced manufacturing facility in the world.
  • Intel already operates advanced manufacturing in Ireland (4nm) and plans to bring manufacturing back to the US with the Silic and Heartland project.
  • Intel designs its own chips and has also started becoming a Foundry for chips.

Importance of Artificial Intelligence (AI)

  • AI has become an insatiable demand for compute power, driving the need for advanced logic requirements in the industry.
  • The next few years of AI will focus on deploying and utilizing AI models for inference and edge computing.
  • Research in AI is mainly driven by the industry rather than the scientific world, with AI experiencing a 50-year overnight success.
  • Long-term research investment is crucial for the continued advancement of AI.

Industrial Policy and National Security

  • The shift of semiconductor research and development to the industry from the scientific world has been a long-term trend.
  • Western democratic-oriented countries need to rebuild their long-term research capabilities to stay competitive.
  • The dependence on foreign supply chains, particularly China, poses risks to national security.
  • Renewable energy and sustainability are key considerations in the semiconductor industry.

Future Outlook and Overcapacity Concerns

  • The exponential growth in AI and compute demand will ensure a continued need for advanced logic capabilities.
  • Even with several investments in different countries, overcapacity is not a major concern due to the insatiable demand for compute power.
  • The future of the industry lies in the deployment and utilization of AI models rather than just training.

Rebuilding the Semiconductor Industry

  • Rebuilding the semiconductor industry will take time and require a combination of government policies, investments in R&D, and capital.
  • Intel aims to regain unquestioned technology leadership through its manufacturing capabilities.
  • The industry needs long-term sustainable policies to avoid further dependency on foreign supply chains.
  • The Chips 2 Act may be necessary in the future to continue rebuilding the industry.

Conclusion

  • The semiconductor industry is complex and requires significant conceptual thinking and leadership.
  • Intel is committed to rebuilding the industry, focusing on advanced manufacturing, R&D, and sustainability.

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