Suddenly, what Intel's CEO means by new products must deliver 50% gross profit [1], and it being too late to catch up with AI [2] is starting to be clearer.

[1]: https://www.tomshardware.com/tech-industry/semiconductors/in...

[2]: https://www.tomshardware.com/tech-industry/intel-ceo-says-it...

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baq 2 days ago | parent | next [-]

CEO of a silicon company saying his business is "too late for AI" is a CEO either without a vision or guts, an accountant, the safe option. If it's anywhere close to true, Intel is looking to sell itself for parts.

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BeetleB 2 days ago | parent | next [-]

There's a whole backstory to this.

When he joined only a few months ago, he set the vision of making Intel a worthy participant in the AI space.

Then just a few months later, he announced "we cannot compete".

What happened in the middle? Recent articles came out about the conflict between him and Frank Yeary, the head of the Intel board. He wanted to acquire a hot AI startup, and Frank opposed it. Two factions were formed in the Board, and they lost a lot of time battling it out. While this was going on, a FAANG came in and bought the startup.

I think his announcement that Intel cannot compete was his way of saying "I cannot do it with the current Intel board."

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horsawlarway 2 days ago | parent | next [-]

Feels like a fair statement.

My read is basically that Intel's board is frustrated they can't part the company out, take their cash, and go home.

I'd also be incredibly frustrated working with a board that seems deadset on actively sabotaging the company for short term gains.

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Scramblejams 2 days ago | parent | prev | next [-]

What startup was it?

	▲	BeetleB 2 days ago \| parent [-]
		The news articles didn't name it.

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panick21_ a day ago | parent | prev | next [-]

Intel has bought and destroyed a large number of startup already. Not sure that is the solution.

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downrightmike 2 days ago | parent | prev [-]

What happened is they fired tens of thousands of their workforce. They knee-capped themselves. Having people with experience and institutional knowledge is required. You can't just toss that out the windows and expect things to work.

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BeetleB 2 days ago | parent [-]

By any measure, Intel was bloated. All their competitors are doing a lot more with a lot fewer people.

Now whether they fired the right tens of thousands is another matter.

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snerbles 2 days ago | parent | next [-]

> All their competitors are doing a lot more with a lot fewer people.

According to Wikipedia, for FY25:

Intel: 102,000 employees

AMD: 28,000 employees

Nvidia: 36,000 employees

I'm pretty sure the latter two have been growing headcount lately, and even then combined they still have fewer employees than Intel.

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AnotherGoodName 2 days ago | parent | next [-]

You need to add tsmcs employees to the amd and nvidia counts since intel is a foundry. +82k puts it around equal.

Now intel isn’t doing as well on the chip design side as amd or nvidia nor as well on the fab side as tsmc but i suspect that’s on leadership thrashing constantly like it is more than anything else.

	▲	BeetleB 2 days ago \| parent [-]
		Yes, but TSMC does a ton more volume than Intel's fabs.

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tester756 2 days ago | parent | prev [-]

Intel (100k +-) should be compared with AMD (28k) + TSMC (84k)

	▲	nomel a day ago \| parent [-]
		Intel also uses TSMC [1] for ARC, since they can't compete. So, you need to add some large fraction of TSMC to intel, also. [1] https://www.tomshardware.com/tech-industry/intel-will-keep-u...

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HPsquared 2 days ago | parent | prev [-]

Both statements can be true.

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tester756 2 days ago | parent | prev | next [-]

The real quote is:

>"On training, I think it is too late for us,"

Not too late for AI, but too late for training meanwhile there's inference opportunity or something like that

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freedomben 2 days ago | parent | prev | next [-]

Agreed, either their business situation is far more critical than we know, this is a gross indictment of their R&D, or this is malpractice on the part of the leadership

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aDyslecticCrow 2 days ago | parent | prev | next [-]

Too late for the AI boom if they have to spend another 2 years and manufacturing investments to get a product out for the segment. We are over-inflated on AI hype. Its relevance will remain but betting a company on it isn't a wise idea.

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checker659 2 days ago | parent | prev | next [-]

> of a silicon company

With their own fabs, at that

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h2zizzle 2 days ago | parent | prev | next [-]

Or, a sly way of calling the AI bubble.

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moralestapia 2 days ago | parent | prev [-]

Well, but if it's true and there's a better strategy, why wouldn't he do it?

Seems like you'd prefer yet another +1 selling AI oil and promises ...

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phkahler 2 days ago | parent | prev | next [-]

Cutting products that don't have 50 percent margins seems like a bad choice when their goal should be filling their advanced fabs. Keeping that investment at or near capacity should be their goal. They said they'd have to cancel one node if the foundry business couldn't get enough customers, and yet they're willing to cut their own product line? Sure they need to make a profit, but IMHO they should be after volume at this point.

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KronisLV 2 days ago | parent | next [-]

Even the Arc B580 GPUs could have been a bigger win if they were actually ever in stock at MSRP, I say that as someone who owns one in my daily driver PC. Yet it seemed oddly close to a paper launch, or nowhere near the demand, to the point where the prices were so far above MSRP that it made the value really bad.

Same as how they messed up the Core Ultra desktop launch, of their own volition - by setting the prices so high that they can’t even compete with their own 13th and 14th gen chips, not even mentioning Ryzen CPUs that are mostly better in both absolute terms and in the price/perf. A sidegrade isn’t the end of the world but a badly overpriced sidegrade is dead on arrival.

Idk what Intel is doing.

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FirmwareBurner 2 days ago | parent [-]

Where do you live? Because Intel Arc cards ARE available at MSRP almost everywhere in western nations. It really isn't a paper launch.

	▲	KronisLV a day ago \| parent \| next [-]
		Latvia, when it released over here it was around 350 EUR for a LE B580, not from an individual scalper but a regular e-commerce store that sells all sorts of parts. For comparison's sake, a regular RTX 3060 12 GB (not Ti) was 300 EUR around that time. In other countries, any place that sold them at near-MSRP very much was out of stock immediately (not that there was that much of it to begin with, which is my critique), leaving other vendors to raise the prices to around 350 USD and the more greedy ones and scalpers all the way up to 400 USD, I saw those listings myself: https://www.tomshardware.com/pc-components/gpus/where-to-buy... https://www.digitaltrends.com/computing/intel-arc-b580-out-o... Whether anyone actually bought those is another question entirely, but a GPU that's only available to you at 350 USD but should have been sold for 250 USD (and performs well for that price) is just plainly bad value. It is nice that since the prices have dropped, however the hype around it is already past, so we're in the long tail of the product's lifecycle, especially with things like the CPU driver overhead being identified and getting lots of negative press. They had a chance to move a lot of units at launch thanks to positive reviews from pretty much everyone... and they fumbled it.
	▲	AnotherGoodName 2 days ago \| parent \| prev [-]
		To be fair to the parent they absolutely were a paper launch. Looks like supply has finally caught up now but we’re also a long way from launch.

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AnthonyMouse 2 days ago | parent | prev | next [-]

> Cutting products that don't have 50 percent margins seems like a bad choice when their goal should be filling their advanced fabs.

It seems like a bad choice at all times. A product with a 45% margin -- or a 5% margin -- is profitable. It's only the products with negative (net) margins that should be cut.

And meanwhile products with lower margins are often critical to achieving economies of scale and network effects. It's essentially the thing that put Intel in its current straits -- they didn't want to sell low-margin chips for phones and embedded devices which gave that market to ARM and TSMC and funded the competition.

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panick21_ a day ago | parent [-]

Well, often you cut 5% margin product because you should focus your people and your capability on growing your 50% products. Sure if the 5% products are well established keep selling them, but usually in tech, you need to continue to invest in the 5% product to keep t up to date.

Intel did this for memory in the 80s. Memory was still profitable, and could be more so again (see Micron), but it required much investment.

But Intel might not be in this position, and filling the fabs by itself can defiantly be worth it.

But if you don't have the capacity in the new fab, maybe that isn't an issue, so its hard to say from the outside.

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AnthonyMouse a day ago | parent [-]

Most of this is in properly accounting for capital costs (i.e. interest on borrowed money) when calculating net margins. If you have to invest capital in something then the interest cost between when you make the investment and get the return goes into the formula, but the number that comes out at the end is still going to have a plus sign or a minus sign in front of it and that matters more than the magnitude.

It's usually not about the number of people. If you have two projects and both of them are profitable then you can hire more people and do both, even if one of them is more profitable than the other. The exception would be if that many qualified people don't exist in the world, but that's pretty rare and in those cases you should generally divert your focus to training more of them so you don't have such a small bus factor.

Another common mistake here is the sunk cost fallacy. If you have to invest ten billion dollars to be able to do both X and Y and call this five billion in cost for each, and at the end of that one of them has a 5% net margin and the other a 75% net margin, or even if the first one has a -5% net margin, you may not be right to cancel it if you still have to make the full ten billion dollar investment to do the other one. Because it's only -5% by including a five billion dollar cost that you can't actually avoid by canceling that product, and might be +20% if you only include costs that would actually be eliminated by canceling it.

	▲	panick21_ 10 hours ago \| parent [-]
		I agree, but the issue with hieing people is that your pipeline is also limited, along with other functions. So you need to heir more people to heir more people. You need more admin staff and so on. And the management needs to focus on that and build up the organization. I also don't think its not as rare as you suggest finding people. Depending on your location and industry. It takes time to add people. Good people existing somewhere on the world wasn't enough, specially before remote work. Also if you can grow your 50% margin business even a little bit faster by focusing on it, over the 5% margin business. It doesn't take that much focus for that to be the better choice. So if to achieve this 5% margin, lots of your best people work it, shifting those to the larger margin business might make sense. But I agree, if you are a mature company that has the needed infrastructure to keep that product alive then doing so makes sense. Specially because maybe in the future it could be a more important better business.

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ndiddy 2 days ago | parent | prev [-]

Intel's Arc GPUs are fabricated by TSMC, not Intel.

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tester756 2 days ago | parent | prev [-]

The real quote is:

>"On training, I think it is too late for us,"

Not too late for AI, but too late for training meanwhile there's inference opportunity or something like that