Transcript: Intel’s Swan explains how Intel can win the PC market

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Editor’s note: Intel chief executive Bob Swan sat down briefly via Zoom with reporters and analysts in advance of CES 2021 to summarize where the company stands in 2021 and what the company plans to talk about at CES. He then briefly respondied to reporters’ questions.

Below is a partial transcript, edited for clarity. You can use the table of contents to the left to jump right to the reporters’ questions and Swan’s answers, which follow Swan’s lengthy introduction. We’ve also broken up Swan’s comments, here and there, with subheadings describing the topic he’s discussing.

Swan: Right when I joined somebody was saying it’s good to have 2020 behind us, and I couldn’t agree more. At the same time, the start to the year hasn’t been that great just in terms of the things we have had to deal with. I thought what I would do is just kind of kick off a little bit about strategically what we’ve been up to, and then a little foreshadowing into what what we expect you to see on the 11th.

So first, the market dynamics in terms of how we see it. It’s odd to say it’s a good time to be in [semiconductors]. The digitization of everything seems to be accelerating, computing is everywhere. It’s no longer just our PC or our server. Everything seems to need high-performance compute, and the PC is essential once again, so the dynamics of the market are extremely favorable.

The second thing I would say is to capitalize on these data-centric transitions, that requires massive transformation for all your clients [and] obviously, for us—a massive transformation so that we’re adjusting, adapting, developing, the new technologies that are going to enable these transformations like 5G, like AI, like the intelligent autonomous edge.

Fortunately—in some ways, unfortunately—we’re not the only ones that have noticed this massive opportunity in front of us. You know competition is intense. They never sleep. And that means we’ve got to be on top of our game which we have every intention to be as we closed out last year, and entered this year. So we’re more excited about the competitive landscape. Sometimes I wish it would be less intense, but I think it makes us stronger along the way. 

Intel / YouTube

How does Intel see its role in the chip market?

Swan: The market overview is relatively attractive, strategically. What we’ve been talking about for the last couple of years in terms of our role in this market is just to be the trusted performance leader. That takes an insatiable appetite for data. It makes that data relevant, and actionable. Analyzing it, storing it, moving it faster and faster so that, whether it’s a business or consumer going through their own digital transformation, our technologies are there to make the data that everybody’s getting after increasingly relevant.

We know that for us to achieve our dreams that requires us to transform ourselves on three fundamental dimensions. One: from CPU to GPU to XPU—the industry evolves as workloads evolve. Having a variety of different architectures enhanced in our core CPU but also adding additional architectures is increasingly important. Secondly, from silicon to platforms: not just the hardware, but how do we couple the hardware with software with other technologies to build platforms that can delight our customers.

Gordon Mah Ung

And then the third area for us has been a transformation from what we’ve characterized as the traditional IDM [integrated device manufacturer] to a more modern IDM. This is not to get rid of the IDM—we think it’s a unique advantage of this company—but we know the industry has evolved quite a bit. We know that leveraging design, disaggregation, packaging technologies, that the IDM of the future is going to be a little bit different than the IDM of the past.

And then to kind of bring it all together: our intensity and focus on both execution and tightly coupled with re-energizing the culture of the company. So we’re moving in a much more nimble way, as we see opportunities to grow and innovate as opposed to protect what we built in the past. So that’s a little bit about what we’ve been up to.

Where does Intel need to improve?

Swan: A year ago I flagged, you know, three fundamental areas that I thought were critical for us to improve execution. One was capacity, to ensure that we have the capacity to meet the demands of our customer base. Second was, once and for all, the ramp of 10 nanometer, and third was to increase the rate of innovation of these multiplicity of architectures.

As we enter 2021, we built some really good momentum. Obviously we have a lot more to do, but we’ve added over $20 billion in revenue over the last five years. We exited the year having essentially doubled our capacity over the course of the last couple years and we’re going into 2021 with a lot more capacity in place both for 14-nanometer but also for 10.

The second area is 10-nanometer itself, and it was a year ago that we finally launched it. Going to a second-generation SuperFIN, the biggest internode enhancement in transistor density ever for us, was a big introduction during the course of the year, coupled with our packaging technology. Bringing them to life was a really important aspect of execution on 10 nanometer.

Intel

Third is products: just the rate of innovation, and during the course of the year, whether it was Lakefield, 5G, SOC, FPGAs, discrete graphics, One API. The amount of products that we launched during the course of the year was really good momentum. And I would say that, maybe most importantly, the Tiger Lake launch: It ramped on the new node faster than we anticipated; the adoption of designs by our customers was more than we expected. So we enter the year with that momentum, and the opportunity really to scale 10nm, as we come into the year.

The last thing about the execution as we exit the year: You know, we launched the Ice Lake server product, qualified it at the end of the year, started production of the third-gen Xeon scalable processors and ramped it in the first quarter. That was an important launch, completing the portfolio products that we have had from Lakefield at the beginning of the year all the way to server at the end of the year.

What does Intel have in store for CES 2021?

Swan: The client (PC) business is going to show more advances and industry firsts for virtually every type of experience in every segment of the PC market during the year. We’ll have four families and processors from entry-level to premium.

In that lineup will include some real desktop innovation. [Executive vice president and general manager of the Client Computing Group] Gregory Bryant will showcase two new technologies coming to market in 2021, including the 11th-Gen core desktop processor or Rocket Lake, [as well as] our next-generation processors, codenamed Alder Lake, which from our vantage point represents a significant breakthrough in the x86 architecture. It’s our most scalable system on chip for both desktop and mobile processors.

We’ll launch our first ever 11th-gen Core Chromebooks, based on the Evo platform, and we’re going to debut the Intel Evo vPro platform, which is going to feature that highest-performance business PC platform with the most comprehensive hardware-based security. 

Editor’s Note: At this point, Swan opened the floor to questions by reporters and analysts. We haven’t preserved the exact phrasing of the questions, nor which reporter asked them.

What’s the latest in Intel’s 10nm manufacturing challenges?

Swan: We’ve got three high-volume fabs ramping now, so the capacity for this year and going out a couple years, we have the capacity in place, first and foremost.

Second, in terms of yields, [and] unit cost, driven by wafer costs on the front end and back end—yields have been progressing very well, almost quarter on quarter, during the course of 2020, and then ramped even faster in the fourth quarter of the year. Unit cost, driven by those three factors, continues to come down—all else being equal, gross margins get better and better as we ramp it.

And then the third—it’s not just the process technology. What products are you putting on it? I think we’ve ramped up everything during the course of last year, and the Ice Lake product was the last one to ramp. The volume on 10 nanometer this year was 30 percent higher than we anticipated at the beginning of the year. Obviously Tiger Lake was a big driver for that, but you know we felt great about the design wins and our ability to ramp across all three fabs as we exited the year.

How does Intel survive in a largely fabless world?

Swan:  It was a year ago that I think collectively we all looked into 2020 thinking, well. the PC [market] might [grow] plus one or minus one [percent]. And it feels like it was about a century ago. The demand profile wasn’t that great, all of a sudden COVID hit, and the immediate reaction was, oh my god, the second half is gonna fall off like a rock.

Lo and behold, the second half grew like crazy—not only grew, but the mix of the products changed dramatically as well so that the whole ecosystem was scrambling to  to keep pace, not just with the increased demand but the changing mix of desktop and mobile devices.

Intel

You flagged this as one of the massive advantages of [being an integrated device manufacturer]. We’re still dependent on other commodities, but being able to control your own destiny, and be the allocator, as opposed to the allocatee, is a big deal.

How do we preserve the advantages of IDM, and in other words, how do we leverage our size and scale with the entire supply chain to to get preferential treatment, and be first in line when allocation decisions are being made? We’ve got a lot of practice and doing that with all kinds of commodities. As we think and evaluate whether to expand in a [disaggregated] world, with more utilization of third party foundries, maintaining and securing the advantages of an IDM is important to us.

A second part of your question, is there a time in the future that we would use somebody else’s process technology inside our manufacturing environment? And I would just say that: possibly. I think that strategically for us we know that the ecosystem has evolved quite a bit over the last 10 years, and if there’s ways or opportunities for us to leverage some of the advancements in the industry in new and different ways, I think it’s going to be very front and center for us to capitalize on industry innovations.

We don’t have to do all the innovations ourselves. That means, we may outsource more; it means we may use more available, third-party IP. It means we may make stuff for others, not just be a foundry ourselves. Is there a scenario where we can be using somebody else’s process technology, in our fabs—that’s possible.

The key is the industry is evolving. How do we leverage the innovation, not just within our four walls but the innovation that’s happening in the industry as a whole and be very flexible and adaptable to take advantage of those along the way? 

Why should PC builders buy Intel’s Core processors over AMD’s Ryzen or an Arm chip?

Swan: This goes back to my introductory comments. In the good old days, there wasn’t that much [competition]. But now we’ve got the good old days where competition makes us stronger, makes us move faster.

First it starts with the rate of innovation, and then a broad-based product offering. Having products from intro to premium; having products for business, for consumer; for notebook, for desktop; and then that annual predictable cadence of leadership products. That’s what we’ve been known for over time.

Secondly, and back to the IDM: we are not going to constrain your growth, i.e., I’m going to have too much capacity before I’ll have not enough capacity, and I don’t have to wait for somebody else to allocate to me. I’m going to be the allocator, and you can count on us to have inventory on hand to meet your spikes in demand. And then the third: it’s knowledge, our ability to work with our engineering teams to almost co-optimize the products that they’re working on, the technology dialogues that we have with the OEMs in particular. So we’re part of their design team, not just an order taker for their product needs.

Is there any news around Intel’s Xe HPG GPU and its high-end variants? 

Swan: The idea was how do we start with integrated graphics and enhance integrated graphics, but do it in a way that made migrating to discrete much easier. It leverages the same design. You saw last year, the progress we made on integrated graphics and then the launch of DG1. I actually don’t know if we’ve mentioned, or given a date for when DG2 is, or when we launch into the data center.

Cristiano Siqueira/Intel Graphics

But clearly, our intentions are in this CPU to XPU world where there’s multiple architectures required, whether it’s gaming, whether it’s in the data center, we’re going to invest to extend our graphics capabilities, from entry level all the way up the stack. We expect to have real innovation rolling out during the course of the next couple of years.

What matters more to Intel, financials or technical leadership?

Swan: The technical.