Intel CEO Gelsinger: ‘We Are Hitting Or Beating All Our Product Roadmap Milestones’

‘We are on track with five [advanced process] nodes in four years. We are hitting or beating all our product roadmap milestones. We are establishing ourselves as a global scale systems foundry for both wafer processing and advanced packaging. We are unlocking new growth opportunities fueled by AI and we are driving financial discipline and operational efficiency as we continue to unlock value for our shareholders,’ says Intel CEO Pat Gelsinger.

Intel Thursday presented an upbeat look at its future based on the growth of AI, investment in industry-leading manufacturing process, and a recovery of the PC market.

Intel’s presentation to financial analysts also surprised IT industry investors by beating revenue and earnings expectations and providing an upbeat forecast, moves that saw investors drive Intel share prices up by over 8 percent in after-hours trading.

Intel CEO Pat Gelsinger, speaking Thursday afternoon to financial analysts during Intel’s third fiscal quarter 2023 quarterly financial conference call, said in his prepared remarks that his company is executing on a transformation journey that has already been going on for two-and-a-half years.

[Related: Intel CEO Pat Gelsinger On Foundry Plans, Chip Roadmaps And Mobileye’s IPO]

“We are on track with five [advanced process] nodes in four years,” Gelsinger said. “We are hitting or beating all our product roadmap milestones. We are establishing ourselves as a global scale systems foundry for both wafer processing and advanced packaging. We are unlocking new growth opportunities fueled by AI and we are driving financial discipline and operational efficiency as we continue to unlock value for our shareholders.”

While Intel’s revenue was above the high end of the company’s guidance, more important were key operational milestones Intel achieved across process and products, Intel Foundry Services, and its strategy to bring AI everywhere, Gelsinger said.

“The foundation of our strategy is reestablishing transistor power and performance leadership,” he said. “Well, many thought our ambitions were a bit audacious when we began our five nodes in four years journey roughly two-and-a-half years ago. We have increasing line of sight towards achieving our goal. Intel 7 is done, with nearly 150 million units in aggregate of Alder Lake, Raptor Lake, and Sapphire Rapids already in the market. In addition, Emerald Rapids has achieved product release and began shipping this month.”

The quarter also saw initial shipments of Meteor Lake processors on Intel 4, taking advantage of EUV (extreme ultraviolet) lithography, which is already providing over 20 percent more capital efficiency than when EUV tools were first launched, Gelsinger said. High-volume EUV manufacturing is well underway in Oregon and Ireland, he said.

Meanwhile, Intel is on track to begin manufacturing using the Intel 3 process to support its Sierra Forest and Grand Rapics products, Gelsinger said.

“In fact, our production stepping up Sierra Forest is already out of fab, and what we expect to be the production stepping of Granite Rapids is already taped in and is in the fab now,” he said.

Intel also expects to achieve manufacturing readiness on Intel 20A (2-nanometer) process in the first half of 2024, with its first processor using that process, Arrow Lake, already running Windows and demonstrating excellent functionality, Gelsinger said. Even more significant, he said, Intel hit a critical milestone on Intel 18A (1.8 nanometers), with the first products based on the 18A process scheduled to go to the fab in the first quarter of 2023, including Clear Water Forest for servers, Panther Lake for clients, and more.

Intel also plans to begin installation of the world’s first high-NA (high-numerical aperture) EUV tool for commercial use by the year-end, Gelsinger said.

Intel is also on a mission to bring AI everywhere, Gelsinger said.

“We see the AI workload as a key driver of the $1-trillion semiconductor TAM (total addressable market) by 2030,” he said. “We are empowering the market to seamlessly integrate and effectively run AI in all their applications. To the developer working with multi-trillion-parameter frontier models in the cloud Gaudi [AI deep learning training processor] our suite of AI accelerators provides a powerful combination of performance competitive MLPerf benchmarks and a very cost efficient TCO.”

However, Gelsinger said, as the world moves toward more AI integrated applications, Intel is moving with it via its AI-accelerated Xeon for Enterprise, Core Ultra launching the AI PC generation, and OpenVINO helping developers with seamless and versatile support for a range of client and edge silicon.

“We are bringing AI to where the data is being generated and used rather than forcing it into the cloud,” he said. “Our extensive footprint spanning cloud and enterprise servers to volume clients and ubiquitous edge devices positions us well to enable the AI continuum across all our market segments.”

On the client PC side, Intel saw customers complete their inventory burn in the first half of the year, helping drive solid sequential growth on that side of the business which is expected to continue into the fourth quarter, Gelsinger said.

“We expect full year 2023 PC consumption to be in line with our Q1 expectations of approximately 270 million units,” he said. “In the near term, we expect Windows 10 end-of-service to be a tailwind, and we remain positive on the long-term outlook for PC TAM returning to plus or minus 300 million units.”

Intel is seeing the AI market as an important driver for its Intel Foundry Services side, Gelsinger said. The company has established an important business relationship with Tower Semiconductor utilizing its New Mexico-based manufacturing assets, and has proposals for totaling $100 billion in U.S. manufacturing and research investments in Arizona, New Mexico, Ohio, and Oregon to the CHIPS Program Office, he said.

During the question and answer period of the conference call, when asked about how the increasing number of competitors adopting ARM-based processors might impact Intel’s business, Gelsinger said that overall that the industry is excited about the AI PC.

“ARM and Windows client alternatives generally have been relegated to pretty insignificant roles in the PC business, and we take all our competition seriously. But I think [with] history as our guide here, we don’t see these as potentially being all that significant overall. Our momentum is strong. We have a strong roadmap [with] Meteor Lake launching this AI PC generation December 14. Arrow Lake, Lunar Lake, we’ve already demonstrated the next generation product, Lunar Lake, which has significant improvements in performance and capability. We’ll be sending Panther Lake, the next generation, the fab in Q1.”

Intel also unveiled its AI Acceleration Program, which already has attracted over 100 ISVs, and the company expects over 100 million x86 AI-enhanced PCs to be in the market in the next two years, Gelsinger said.

“We see that as a unique opportunity that we have to participate in the whole success of the ARM ecosystem in whatever market segments that may be as an accelerant to our foundry offerings which are now becoming, we think, very significant around the ARM ecosystem.”

Gelsinger also took a moment during his prepared remarks to address the war in Israel, where Intel has had a presence for nearly 50 years.

“We are deeply saddened by the recent attacks and their impact on the region,” he said. “Our utmost priority is the safety and welfare of our people in Israel and their families. But I also want to recognize the resilience of our team as they have kept our operations running, and our factory expansion progressing. Our thoughts are with all of those affected by the war, and I am praying for a swift return to peace.”

For its third fiscal quarter 2023, which ended September 30, Intel reported total revenue of $14.16 billion, down about 8 percent over the $15.34 billion the company reported for its third fiscal quarter 2022.

This included client computing revenue of $7.87 billion, down from last year’s $8.13 billion thanks to a big drag on the company’s desktop PC-related revenue to $2.75 billion from last year’s $3.22 billion. Notebook PC-related revenue, however, rose slightly to $4.50 billion compared to last year’s $4.41 billion, while other client computing revenue of $611 million was up over last year’s $498 million.

Intel also reported data center and AI revenue of $3.81 billion, down from $4.26 billion; network and edge revenue of $1.45 billion, down from $2.13 billion; Mobileye revenue of $530 million, up from $450 million; and other revenue of $186 million, down from $294 million.

The one area of significant growth was Intel Foundry Services, which reported revenue of $311 million, up from last year’s $78 million.

Intel’s total revenue beat analyst expectations by $560 million, according to Seeking Alpha.

For the quarter, Intel reported GAAP net income of $319 million or 7 cents per share, down significantly from last year’s $1.02 billion or 25 cents per share. On a non-GAAP basis, Intel reported a net income of $1.74 billion or 41 cents per share, up from last year’s $1.53 billion or 37 cents per share.

Non-GAAP earnings beat analyst expectations by 19 cents per share, according to Seeking Alpha.

Looking ahead, Intel is expecting fourth fiscal quarter 2023 revenue of $14.6 billion to $15.6 billion. This compares to fourth fiscal quarter 2022 revenue of $14.0 billion

The company is also expecting GAAP earnings of 23 cents per share, and non-GAAP earnings of 44 cents per share. This compares to last year’s GAAP net loss of 16 cents per share and non-GAAP income of 10 cents per share.