Search

The Six Five Insider – A CHIPS Act Special Edition with Intel’s Bruce Andrews

On this episode of The Six Five – Insider – CHIPS Act Special Edition, hosts Daniel Newman and Patrick Moorhead welcome Bruce Andrews, Corporate Vice President and Chief Government Affairs Officer at Intel.

Their discussion covers:

  • Intel’s role in the US’s adoption of the CHIPS Act
  • Intel’s investments to establish domestic semiconductor foundries without sacrificing its competitiveness in the global semiconductor industry
  • Intel’s contributions to the CHIPS Act and how the company is actively contributing to national security & sustainability, fostering a strong global supply chain, and positioning the US as a leader in the technology industry
  • How Intel’s foundry investments, in part with the CHIPS Act, are creating opportunities for job growth, workforce, and economic development in communities throughout the country.

Be sure to subscribe to The Six Five Webcast so you never miss an episode.

You can watch the full video here:

You can listen to the conversation here:

Disclaimer: The Six Five Insider Edition is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded, and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors, and we ask that you do not treat us as such.

Transcript:

Patrick Moorhead: Hi, this is Pat Moorhead and we are here for another Six Five Insider where we talk with the most famous executives from the most influential companies out there. And we’re here for a special CHIPS Act edition. Daniel, man, we love semiconductors. We love talking about the CHIPS Act, and I think I can speak for both of us when I say we both thought that semiconductors were cool before the entire rest of the planet thought they were cool.

Daniel Newman: Yeah, this is a really big moment for the United States, for the world. Over the course of the pandemic, I think semiconductors had a moment. There was a lot of attention brought onto the industry, but I still think there’s a long way to go. And I think that sometimes the problem with the way the world works, sometimes the media works, is that we hit on something and it gets a lot of attention, and then we say, “Oh, problem solved, it’s over.”

And then we move on and, Pat, as industry analysts and you and I being people that the market listens to, I think it’s almost our responsibility to make sure that these topics stay top of mind and that we continue to really focus on the fact that semiconductors are so important to our everyday lives. Not just our phones, not just our computers, but our cars, our ovens, our national security, our missiles. I mean, across the board, the way our world functions is really powered by semiconductors.

Patrick Moorhead: And one of the biggest companies out there, actually the largest semiconductor company, Intel, is playing a pivotal role and has been for as long as I’ve been in this industry, and that’s been a long time. So Daniel, without further ado, let’s bring in our guest Bruce Andrews, Chief Government Affairs Officer at Intel. Bruce, thanks for coming on The Six Five, the first time and we really appreciate it.

Bruce Andrews: Well, thank you and thanks for having me. Hopefully after this you’ll invite me back.

Patrick Moorhead: We’ll see. We’ll commiserate, we’ll ask our fan base, but I’m pretty sure I know what the answer is going to be. So…

Daniel Newman: Well, Pat, after you started this off by saying, “We bring in the most famous and influential executives in tech,” which by the way, your chief Pat Gelsinger has been on the show a few times before. You’re in good company, several of your other C-suite executives throughout Intel have been on. We definitely find it to be one of the most important and influential companies in not just semis, but across technology. And we are very interested, and Pat and I actually really love talking about things like policy, government affairs, because it does intertwine with the tech. Sometimes it’s like we just want to focus on process. No, no, no. This is really important.

So I’d like to start with you, and then we’re going to get a little bit more into Intel, but talk a little bit about the role of the Chief Government Affairs Officer. You’ve done this job in a pivotal moment. What was your role working on a global scale and of course with domestic policymakers throughout the CHIPS Act at Intel?

Bruce Andrews: Well, so it could not be a more interesting, exciting time in both the world of government affairs and the semiconductor industry. For better or worse, semiconductors have never been more front and center, both as a technology, particularly as the world grows more digital, but also as a geopolitical issue. And what we’ve realized, and whether it was the COVID situation, whether it was the Shanghai port shutdown, whether it was the shortages that we saw through natural disasters and all kinds of other things, what we’ve come to realize is having a resilient and strong supply of semiconductors couldn’t be more important to the global economy.

All you have to do is ask autoworkers at Ford who were idled because they were waiting for a 50 cent chip to come in. But that’s just the tip of the iceberg. And we look at a world where, for example, premium automobiles right now, about 4% of the value is semiconductors. That’s going to get up to 20%. You’re basically driving a computer on wheels right now.

And so where do we come in? So government affairs, I’m lucky because I’ve got a global team that works with governments around the world, but it’s a particularly important time in the United States. Intel is in the middle of what we call our IDM 2.0 strategy, which is really an exciting reinvention of the company because traditionally we’ve been a company that’s designed and manufactured our own semiconductors. We do them for ourselves, but we don’t do them for other people. And when Pat came in as CEO, he really recognized that there is an unbelievable market opportunity for a company that can make leading-edge semiconductors, but particularly here in the United States.

So we’re in the middle of what is a metamorphosis as a company. We’ll still design and manufacture our own semiconductors, but more importantly, we’re also going to become a foundry for the world’s leading fabulous companies. And so there’s this great opportunity. The global demand is only going to continue to skyrocket. Every part of our lives has become more digital. I talked about automobiles, but light bulbs, I mean, you name it, our homes, our workplaces are all going to be giant computers, and they’re all making our lives better. That’s all going to take semiconductors.

So the big responsibility for my team is educating governments about what the issues are for the semiconductor industry and what it really takes to make countries competitive. And that was particularly something we spent a lot of time, during the CHIPS Act, explaining to government officials – first of all, why semiconductors are important – second, why having a resilient support supply of semiconductors made in the United States is critical, both to economic security, but also national security. And also explaining the global aspects of the market because, as you guys know, but to be honest, the average policymaker did not know how complicated a market.

I mean, this is an industry, when we build the new fab, you’re talking 20 to 30 billion dollars. It’s also an industry that in 1990, 37% of production was in the United States. Over 40% was in Europe. Now that figure is in the United States, we have about 12% of global production, which Intel is half of that. And then Europe has about 9%. So there has been this significant change in movement to Asia. And the CHIPS Act is really an intent to help close the cost difference because of the significant subsidies that Asian governments, particularly Taiwan and South Korea, but that they’ve done, that’s helped build up the production in their countries.

And as Pat has often said, it’s not like Congress took a vote to move the leading-edge semiconductor industry to Taiwan. It was actually really smart and proactive policies by the Taiwanese government that really helped build up their industry. And so for 30 years, everybody else, particularly the United States, has been sitting on the sidelines. And so my job was to help explain to people what the importance of the industry is and why we need to be able to manufacture here in the United States and regain some of that global market share.

Patrick Moorhead: Bruce, I think you set the table great. And if you’ve watched some of our shows and read the corresponding research reports both Dan and our companies have put out, we are in full alignment. And my relationship with Taiwan goes all the way back to 1995. And it has been an incredible run. And the world’s different now, and things changed, and we need to move to the next step.

And the CHIPS Act is one of the things that can move us to the place where I think we need to be, which is a good supply, a protected supply of silicon that is closer to US shores. And by the way, we’re not alone. I mean, we have western Europe, we have Japan. So this isn’t a US thing. Now the CHIPS Act is, obviously. And so let’s dive into that. What is the latest on the CHIPS Act? Can you give us a little bit of an update on the status and timing? Did you give them your bank routing number and a check that’s sent out? Where are we in the process?

Bruce Andrews: If only it were that easy. But unfortunately it’s not that easy. So the Commerce Department, since the legislation passed in August, has been building up a team to administer this program. And they’ve gone through a major ramp up because they’re going to be administering about 52 billion dollars to give out of taxpayer’s money.

So they issued about two weeks ago what’s called a notice of funding opportunity, which basically sets out – it’s 75 pages – setting out what the ground rules are for an applicant, so a company like Intel, to come forward. And the good thing is they’re prioritizing the leading-edge chip manufacturing, because that is the most important. And as we sort of talked about, 90% of that is currently in Taiwan. There’s only three companies in the world – TSMC, Samsung and Intel – who can do it. And what the government has recognized is having that capacity in the US is critical.

So the notice of funding opportunity really sets out the rules for us. And so we are starting to work on our applications. We are already building in Arizona. We’ve already started working in Ohio. Intel has announced 43.5 billion, and that’s probably the floor and it will go up from there, but over 43.5 billion dollars in investments. So we are very eager to submit those applications to the US government because having that capital is critical to enable to, one, do all the construction that we’re doing because we’re entering what is probably the biggest capital expenditures in United States history. And then second is really helping to close that cost gap that I mentioned.

So we’ll submit our application. The Commerce Department will go through a rigorous process of reviewing them. Hopefully you’re right that we can just send them our routing number, but I have a feeling it’s going to be a lot more work than that. But we are very prepared to make our case about why this process is so important. And I think the Commerce Department recognizes they need to move quickly, because, as you guys know, it takes about three years to build a leading edge fab. So this really has all started, the starting gun has gone off, and we need to build that capacity quickly for the demands of the future.

Daniel Newman: And I think that’s a really good point, Bruce, that because the market has somewhat subsided in terms of the intensity, the pandemic has come to an end, the shortage has now become, in some cases, oversupply, and what we can’t let happen is the policy makers misconstrue that the cycles are something that means less demand, less urgency. These cycles have been seen, they’ve happened many times before, there’s a lot to be learned from history. Although, sometimes I worry that people in powerful positions don’t pay good attention to that. Pay attention here, is that we will have another boon of demand. And you look at what’s come out over the last few weeks of generative AI alone, you look at the amount of computing horsepower that it’s going to take to actually enable these next products that are going to complete our sentences, and build our PowerPoint decks for us, all of this. Pat, you and I always make the joke, software doesn’t rule the world, semiconductors do. Because you can’t run software on air. And so all this software we’re hearing about is going to require more GPU, more DPU, more IPU, more VPU, CPU. And the point is, behind that, we need capacity and we need to protect what’s going on here in the US.

So, with that in mind, what I’d love to ask is, where does Intel sit in your mind in terms of how much money? I wrote a piece on MarketWatch when this first got granted, and I said, four companies in the US should see money. And I did say, and I’m on the record, that Intel should see the vast majority of it. Where are you thinking Intel lands against this 52 billion?

Bruce Andrews: Well look, my hope is at least our fair share. I guess I would say two things. One is, we are doing by far and away more capital expenditure than any other company. The CHIPS Act was intended to do one thing that’s really important, and I’ll be honest, I think policymakers sometimes forget this, which is, the intent of the CHIPS Act is to make up the cost differential between manufacturing in the US and in Asia. And as I mentioned, Taiwan. Taiwan, depending on who you listen to, the low end, and this is a dated number, it’s at least, least 30% cheaper because of the subsidies and the advantages of Taiwan. Morris Chang, the TSMC founder, has said it’s 55% cheaper in Taiwan, somewhere in between there is a number. And so what the CHIPS Act is intended to do is fill out that delta.

And you really hit two important points. One is, we’re doing much more building than anybody else. And secondly is, we’re not just building one small fab to make a couple customers happy, what we are doing is we are building out two more fabs in Arizona onto what is already there. We’ve created this incredible ecosystem in Arizona, but we’ve also announced that we’re building a mega fab in Ohio that will do two things. One is, it will create an unbelievable amount of capacity in Ohio. And then secondly, and this is really important, it’s going to transform the Midwest. This is going to have an impact that will have significant benefits for the entire Midwest, particularly Ohio. So in order to do that, we need these fabs to be globally competitive, and that’s where the CHIPS Act comes in. So we will submit very specific data to the Commerce Department about what the cost gap is, about what our investments are, and we will be very clear with them what we think it will take, and then they’ll obviously have to make the decisions. But if they do this right, they will help us to make up that cost differential between the US and the incentives that are given for manufacturing in Asia. And that’s really going to be the measure of success.

Patrick Moorhead: I like the way you simplified that, what people were looking for in the CHIPS Act. Now, there are three different struts to the CHIPS Act. One of them is national security. The second one is having, as we discussed, a resilient global supply chain. And the third is regaining tech leadership for the US. This is the criteria in the document that you and others are filling out. So the question is, how are you addressing these? And maybe go down the list in what are the top three proof points, or so, each?

Bruce Andrews: Sure. Well, so let’s start with, when President Biden signed the CHIPS Act, this was truly the biggest piece of competition policy, probably since the Second World War. This was the biggest recognition by the United States that we need to make investments in the next generation. And so you cited three things. First, national security, having our own resilient set of capacity, not only for the civilian sector, so you’ve got it in phones, and laptops, and servers, and all the other things, but also for the US Department of Defense. And you look at an F-35 fighter as a good example, there are over 2,000 chips in the F-35. And do we really want to be dependent on another country for those chips? That’s a terrible recipe for potential disaster in the future.

And part of the challenge of this is, and the geopolitical situation has only made it worse, there’s currently a heavy over concentration in Asia, so in Taiwan, in Korea, in China, that leaves the US at risk if there is a natural disaster, or if there’s a geopolitical conflict, there’s all kinds of things that could happen. And so having that supply in the United States is absolutely critical for national security. You look at, whether it’s planes, tanks, drones, everything that our national security runs on, they’re all going to require chips. And that’s only increasing over the course of time as the tools of the Defense Department in the military become more technologically sophisticated. And so that was one of the biggest goals, and you see Secretary Raimondo talking about that all the time. So that is critically important in making sure that those chips can be made here in the United States by a company that the US government can trust.

That is so important. And it’s particularly true because DOD tends to design systems on a lag. So in an F-35 fighter, there’s probably 20-year-old chips right now, so being able to take advantage of the latest technologies and really being able to be state-of-the-art is something that the private sector can partner with the Department of Defense on. But it really is having an American company that can make those chips and provide them is super important.

So the next thing you raised is the resilient global supply chain. And that’s really, really important. Just to be really blunt, we need to have a supply chain in the United States that is resilient and that we’re not overtly dependent. I think we saw this in the beginning of the COVID crisis. All these countries realized having PPE, personal protective equipment, concentrated in a few countries when there’s a crisis is not a good plan. And what we don’t need is our entire economy idled because we don’t have a supply of leading edge chips in the United States.

So as I had mentioned, in 1990, it was 80% in the US and Europe, now it’s down below 20%. This is an opportunity to reset, and we’re never going to replace completely because having a resilient global supply chain is important. But having that option, and having the United States and American companies have the access to that is critically important. And we are seeing what I would describe as a once in a generation inflection point where companies are reconsidering how they’ve done it. Since the 1980s, the view has been globalization, let’s move to the lowest cost country and let’s concentrate all of the supply in that country. And I think there’s a pretty broad recognition that has not been successful, that that was great if you have no problems in the world, that everything’s perfect, and you never have anything that interrupts supply, you don’t have natural disasters, you don’t have geopolitical conflict. But if you have those things, you really need to have the balance and resiliency.

Patrick Moorhead: Yeah, it’s really resetting. I call that resetting the supply chain calculus. It’s all changed.

Bruce Andrews: 100%. And every company is going through this and figuring out, “Hey, how do we make sure we’re not dependent on an over-concentration, or a single point of failure?” Because, frankly, that’s the lesson we’ve learned recently. I’ve made reference to my old company, Ford Motor Company, where I used to work, you have employees and plants idled because a 50 cent chip. We can’t be in that position again.

Daniel Newman: How many times have we said that on our pod, Pat? The 50 cent, or maybe it was 37 cent, we throw different numbers out, but they’re somewhere between a dime and a buck.

Bruce Andrews: It’s crazy. And so this is a once-in-generation opportunity, but there’s also really the opportunity for the United States to continue our technology and R&D leadership. Intel is the company that puts silicon in Silicon Valley. We’re very proud of our history, but we’re also excited because we think there is an opportunity to really write the next chapter. And it’s an American chapter, it’s a chapter where we have the most advanced logic chips manufactured here in America. We have the ability to continue our global leadership. We have the ability to create these tech ecosystems in the United States. If you go to our facility in Oregon, that started out as a farm. Mr. Ronler had his farm out there. Now, you go out and it’s huge semiconductor manufacturing in R&D, they’re Google plants and Microsoft and NTT’s data centers. It’s really created this unbelievable opportunity because one of the things, and Andy Grove used to talk about this, separating the manufacturing from the R&D, you can do it, but it’s not as effective. So having those two things together is critically, critically important.

And like I said, there’s three companies in the world that can do this; TSMC, who’s massively building up in Taiwan, excellent, really impressive company; Samsung, also really the South Korean champion; and then Intel. And so we see an opportunity here to really regain the US leadership that’s been lost over the last 30 years by other countries having much more aggressive policies to really…build up their manufacturing in that country.

And that’s why we’re leading. That’s why we’re putting the pedal to the metal on these investments here in the United States. As you guys mentioned, in a down cycle, a lot of companies reduce their investment. We’re actually increasing. We’ve basically taken our company cash flow negative for the first time in 30 years because we see that we need to be ready on the other side of this downturn because the history, and you guys know it better than I do, the history is the market shoots up at the end.

And so we are ready. We’re also, and people don’t talk about this, but we’re one of the leading R&D spenders here in the United States. We are massive investors in research and development, which will help maintain American leadership for years ahead. And I talked a little bit about the $43.5 billion investment in Ohio, in Arizona and New Mexico, but we’re also looking at the impact that’s going to have across the United States. It’s not just the thousands of jobs that are going to be created there and the billions of dollars of economic impact, but it’s also the ability by increasing manufacturing in the United States to bring the supply chain here to the United States.

Daniel Newman: Bruce, you covered a lot there, and Pat and I have to give you the capacity to run on some of these answers because there is so much ground to cover. I’m really glad that you itemized those three things because I feel like I said it a lot and I was surprised how often I felt like I had to explain it’s not just the supply chain. And in fact, there’s an argument to be said that the supply chain maybe was what made it as visible as it was, but the national security was probably the real reason it passed. And of course, the technology leadership is something that I don’t think our policymakers should be able to sleep at night, knowing they gave up so much ground on the ability to lead such an important industry on a global basis.

The other thing that’s important, though, is to really look at the interdependence of these three things and how that impacts where dollars should go because these three things…there are many companies that are US-based, US-listed, traded companies that maybe do one of these three things. Maybe they offer capacity, maybe they have leadership in a certain process node, maybe they work closely with our government on building certain chips for utilization in submarines or in tanks or for AI for advanced missile technology.

But my point is that the criteria was all three. And when I’ve come out and I’ve put my name on the line, and Pat, you and I have to always be very cautious when we put our name out there and when we go on the record, Intel is the obvious company domestically in the US that ticks the three boxes. Having said that, though, the market always needs more convincing. The market always needs more convincing. So what’s the X factor? So yeah, you’re building more fabs, you’re spending more money. People will say, “Of, course they are. They’re expecting to get money, They’re going to spend money.” Let’s not pretend that the market doesn’t believe you’re going to get a lot of the money, but having said that, I think everyone wants to be convinced one more time. So tell me, what is the-

Bruce Andrews: Sure.

Daniel Newman: … X factor when you’re out there talking to policymakers and you’re talking to government leaders and, of course, when you’re trying to convince the market this is the right thing and dollars going to Intel, what do you call the X factor for Intel right now?

Bruce Andrews: Sure. Look, you have really hit the nail on the head here because the Commerce Department has recognized where you have your IP, where you do your R&D, how it benefits the United States more broadly is a key criteria for how this money is given because, if it’s just to build one plant, that’s not going to do it. And the great thing about Intel is we are a company that really does two things well. We do many things remarkably well, but I think there are two really important things that distinguish us from our competitors.

One is sustainability. And these fabs that we are building are going to be world-leading in terms of having sustainability in mind. So they’re going to be net zero from greenhouse gas emissions by 2040. They’re going to be 100% renewable electricity across our operations by 2030. We’re going to have 100% renewable electricity in the US, Europe, Israel, and Malaysia. Our new manufacturing investments in the United States and Europe will be built to lead standards, and we’re incorporating energy efficiency into the design of our factories.

But the other thing, and this is something that we are so proud of because I really do think Intel is a model company in terms of our workforce, we are so proud. And one of the other companies that’s doing this, you can go read it in the New York Times, has talked about American workers not being up to the task here and the challenges. We believe in our workforce. We have a track record of recruiting, training, and having a world-class workforce that’s diverse in their skills, that are bringing amazing talents. In a lot of cases, we’ve set up our own training programs, which is really important because to have workers for the future trained for AI and STEM fields, and there’s a huge national shortage in those areas.

So we really want to contribute to the re-skilling of the American workforce while advancing diversity and inclusion at the same time. We think that our corporate responsibility work, the way we approach this, the values we bring as a company, the hiring we do, the training we do, the local investments, there is nobody who does it. And I can guarantee, as these fabs are built, there will be no one who does it, building the next generation workforce, in the way that we do. I’ll just give you an example. One of the reasons we chose Ohio, so we went and, look, we had nearly 40 states that were interested in Intel building these fabs, this mega fab in their stat.

Daniel Newman: Who were the ten that weren’t?

Bruce Andrews: What?

Daniel Newman: We can talk offline. I’m just curious.

Bruce Andrews: Yeah. So look, it was a remarkably impressive competition, but one of the things that attracted us to Ohio was the number of veterans. We’re building not that far from Wright Patterson Air Force Base, because one of the things that we’ve found is veterans are amazing to work in our fabs. These are people who have incredibly disciplined, well-trained, and they can take those skill sets that they’ve learned in the military and bring them and put them in place.

So we’re actually really proud of the workforce that we built, but also hiring veterans, hiring people of diverse backgrounds. And if the US Government is going to put this kind of money into an industry, then we should absolutely be able to show the benefits to the American worker, to American skills training. We’ve already announced investments in eight leading institutions for $17.7 million over the next three years as part of our $50-million commitment in Ohio to higher education institutions. So we are literally putting our money where our mouth is to do this. And we view setting up these programs, setting up our job training, working with education institutions – and look, it’s great.

We want them to come and work at Intel, but we’re also going to be skilling up the workers of the future, not just for Intel, but across the board. You look at what’s happened in Arizona, where…we’ve got our own training programs with Maricopa Community College. We’ve partnered with local institutions, with Arizona and Arizona State. And I will tell you, it is not a coincidence that another company decided to come build near us in Arizona because we have built up the ecosystem and we’ve built up the job training structures there to make it globally competitive.

The investments that we’ve announced are going to create over 6,700 Intel jobs, more than 11,000 construction jobs, and that’s going to really multiply across the economy because, for every one job we create, there’s a multiplier of somewhere between 10 and 12 other jobs that are created in the economy. As part of building these training programs, we’re working with mathematicians, cybersecurity professionals, we’re partnering with two-year schools, four-year schools, historically black colleges and universities…the Quickstart program. So we’re super proud of the work that we’re doing and how we think this is going to benefit the US economy more broadly.

Patrick Moorhead: Yeah, Bruce. I grew up in Ohio. I was born in Columbus. I went to school near Dayton, Ohio, and I lived in Cleveland for my entire life and they have no idea the benefit that this is going to bring them, yet a few do. Not many people get out of Ohio to get into tech. I was one of the few. To be able to do this is a big deal for that area. And talk about an area that’s hungry for growth. When I grew up there, they were shutting down steel mills, auto manufacturing, and the investment to re-skill is paramount and important. And I’m just going to say TSMC, at least based on some of their own quotes, is questioning the efficacy of the US worker. And the last time I checked, that’s not the way to impress people in the US government or it shouldn’t be at all.

But my apology for my editorialization here, but I know what it’s like and I know the impact. And I know at the end of the day what Intel building that facility in Ohio is going to mean for the entire Midwest, not just Ohio. Bruce, I want to ask you one more question here, and that is about capacity. I have a take on this. Daniel has a take on this, but we want to hear your take on this. We hear about this big downturn in chip demand, the ups and the downs. Why build so much capacity given this short term downturn?

Bruce Andrews: Let me just say one thing on your previous and then we’ll go to it. I think history is rife with examples of people betting against American workers and it’s never right. And the thing that’s going to be amazing about Ohio. And look, I grew up in upstate New York in Syracuse where for generations smart young people have had to leave to go to New York City and other places to find really jobs of certain types that they’re just not available there. What we’re going to do in Ohio is going to allow young people not to say, “Hey, I have to move to one of the coast to train a tech job.”

Patrick Moorhead: I had to. I had to.

Bruce Andrews: Yeah, yeah, I did too. I’d love to live in Syracuse, but the types of jobs that I was interested were not there. This is going to transform. But let’s go to your question because it’s a really important one. We are carefully monitoring both the economic and market conditions because there’s no doubt we are in a short-term downturn. And guys, you know the history of this market. It is…there are periodic downturns, are long runs of really high demand and then there are downturns, but then every single time. And I would challenge either of you and anybody listening to this to tell me which parts of their life are going to be less digital in the future. Now, do I wish I could get my kids to be a little less digital on their phones? Yes, but that’s not going to happen. Our lives are all increasingly becoming more digital. And a fab takes three to five years to build. The fabs that we’re building now are coming onto line, not for the demand today, but for the demand after 2025.

And there is a recognition in this industry broadly that the demand is only going to continue to go up. What we’re doing is we’re using our smart capital approach to support and inform our capital spending. We’re being, I think, remarkably innovative in how we’re approaching this because we are trying to stretch our money and maximize our ability to do capital investment now. Companies that have problems are the ones that stop investing in the downturn. And that’s the easy thing to do. We’ve made a number of tough decisions, but what we said is this is a long-term bet and this is so important to continue our capital spending now so that we’re ready for the future. We’ve taken significant actions to reduce our costs because it is all about making sure we have the money to invest in the future to be successful.

And we think that these incentives in the US and we’re also, I should have said we’re building a fab in Germany as well. In the EU, these types of incentives are critical to make these investments, but also to allow them to be globally competitive. Because the worst thing that could happen, we can build fabs, but if they can’t be globally competitive against Taiwan and Korea and China, then we are not going to be successful. And we need these investments. We need this cost differential to be competitive. And we need secure and resilient supply chains to make sure that we have access to the various inputs that will help make these semiconductors and all these great technologies in the future that we and all of your listeners are going to be able to enjoy for years into the future.

Daniel Newman: Bruce, I just want to say thank you on behalf of both Patrick and myself so much for taking the time to really break this down. Both of us, Pat and I and the Six Five, we’ve been really outspoken about this, as analysts that spend a lot of time on semiconductors. But also as those that are really trying to influence the way the world sees digitalization, the way the world sees the way we move forward in our industries.

We talk a lot about national security, but look, the way we learn, the way we play, the way we travel, semiconductors are going to shape the world. And being here in the United States, I want to see innovation here. I want to see jobs here. I want to see resiliency here. That doesn’t mean we don’t want to see the world contributing and we don’t want to see an economy that’s global.

I think that is always going to be part of our future, but I hope we learned something. I hope as a world that the pandemic, as sad as it was and all that took place, that we learned from it what is going to be important to make sure that we are able to stay connected. We’re able to stay safe, we’re going to be able to keep data secure, we’re going to be able to keep the economy growing and keep people employed.

And these are all things that I think matter a lot. And so, I just want to say personally thank you. I hope this isn’t the last time we talk and I hope that the world doesn’t turn this off just because we passed the 52 billion. I think that’s the first 52 billion. I think there needs to be more spent. If I look at the way our government spends money, I think this should be a much bigger priority than some of the other ways. And Pat, I’m sure you probably share my sentiment on several of these things.

Patrick Moorhead: Well, I do, and quite frankly, I view this as an investment, not spend. And if I look at everything we’re spending money on, I don’t think everything can apply to that. There will be a net output out of that. I know everybody’s not, but I just don’t see, it’s incomprehensible for me to not see that. I mean, when you land a fab in a certain area, literally hundreds, if not thousands, of people come in to support and make that happen. And then the workers who come in, who not only build it but get it going and then have it on peak optimization, they’re spending money. I mean they’re employed. I wouldn’t be surprised if there’s net adder to Phoenix and to Columbus, Ohio who will move there to be able to do that. It’s this awesome virtuous cycle that I believe is one of the reasons, one of the elements that made our country great. And I have confidence this is not just going to be spend, this is going to be an investment that has an ROI and that has a payoff.

Bruce Andrews: Yeah. Look, you guys are 100% right. I mean the amount of private capital that has been unleashed by the CHIPS Act, Intel alone, we’ve announced 43 and a half billion dollars publicly. It’s going to be a lot more than that. And that is all due to the fact without the CHIPS Act, we probably would not be able to… Actually, I don’t even say probably. We would not be able to make those investments. I just want to thank you guys though for having me. Hopefully, I passed the test and you’ll invite me to come back. Because you guys are doing a great service in helping explain what is a very complicated thing in a way that is understandable to people. Thanks so much for having me.

Daniel Newman: Yeah, Pat and I will have a discussion and we’ll let your representatives know. But in all seriousness-

Bruce Andrews: We’ll see if I passed the test.

Daniel Newman: Really enjoyed having you on the show. Everyone out there, a really important topic. Hope you tuned in, pay attention. Share it with your friends and family, those around you that you talk to that are asking questions about just how important this CHIPS Act is. This may be one of the best explainers I’ve seen and, of course, that we’ve done here on the Six Five. Subscribe to all our shows, check out all our other insider editions. We have lots of great thinkers on the Six Five Insider Podcast and we hope you will be a regular listener. But for this show, for Patrick, for myself, it’s time to say goodbye. See you all later.

Bruce Andrews: Thank you.

 

Author Information

Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.

From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.

A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.

An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.

SHARE:

Latest Insights:

SIOS LifeKeeper for Linux Simplifies High Availability for Mission-Critical Applications in the Multi-Hybrid Cloud
Krista Macomber, Research Director and Senior Analyst at The Futurum Group, shares her insights on SIOS releases LifeKeeper for Linux Version 9.8.1.
Matt Butcher, CEO at Fermyon Technologies, joins us to share his insights on how WebAssembly and SpinKube are revolutionizing cloud computing, showcasing unprecedented performance gains and true serverless potential at ZEISS Group.
Erik Nordmark, Co-founder and CTO at ZEDEDA, shares his insights on the critical role of open source in edge computing and how addressing its challenges can pave the way for innovation and robust security at the edge.
Charles Giancarlo, Chairman and CEO at Pure Storage, shares enlightening perspectives on advancing AI innovation using flash technology and Pure's partnership with NVIDIA.