 Good afternoon, and it's one of the settings I Preferred during this meeting instead of being on the big stage to be really in the discussion and having a conversation with people who really matter and Pat Gelsinger, of course, I don't have to introduce you Pat. You are the CEO of Intel and You are here not only as Representative as a representative of Intel, but as a representative of a whole industry and I Think your insights into an industry which is so much discussed at the moment and many aspects I think will be very valuable for all of us and We know after some kind of sluggish growth last year, I think the prospects for 2024 are more robust and There are many issues to be discussed and Pat I I would like maybe as a first question To ask you how do you see? See evolution of it's a very general question How do you see the evolution of the chip market? Yeah, and obviously a lot to talk about in first It's just an honor to be here with you Klaus and you know what you've done in creating the world economic forum I just say for everybody who is looking for right, you know continued progress and continued peace We owe you a debt of thanks. Thank you. So thank you Klaus and as we You know and the semiconductor industry the chip industry obviously coming out of COVID, right? You know we went from you know potato chips to semiconductor chips, you know the world knew what we were about and We achieve the what I believe are the two most consequential pieces of industrial policy Legislation since World War two the EU chips act and the US chips act You know to fundamentally say that this idea of semiconductors and I always like to ask people What aspect of your life is not becoming more digital? Everything everything digital runs on semiconductors where oil reserves have been have defined Geopolitics for 50 years right where the technology supply chains is more important for the next 50 years And that's why we've seen this whole you know idea of the industrial policy around semiconductors to be so Absolutely seminal to economies to industries to national security around the world and since then right? You know the world has woken up, you know to the criticality of this industry, and we're well underway You know we've announced projects others have announced projects to start rebuilding and if we were here in 1990 80% of the world's semiconductors would have been in Europe and US and today 20% right, you know when we said by 2030 could we achieve a moonshot goal of 50-50 you know where we truly have rebuilt the industries in US in Europe which by the way almost all of the technologies and semiconductors emanate from us in Europe This is our industry. Let's rebuild it. Let's create a balanced resilient supply chain And in the almost three years since we've been on this journey in February 15th There's three years for me I didn't tell that we've made tremendous progress and Beginning to rebuild those supply chains, but this takes a long time class, you know to build these factories It's about five years, you know for them to come up in place. So three years later. Guess what? We're not up in place yet, you know We're still got a lot of work to do but all of the things are moving in the right direction And I'm super proud of the things that we've accomplished in that time Pat when we when we speak about Semiconductors or chips we have sometimes the feeling it's a more or less Identical product, but actually we should much more Distinguish between different categories. Could you could you explain a little bit and where and maybe also? When you said 80 20 percent and now 50 50 percent if you relate it to the different categories Yeah, and you sort of put I put semiconductors in the four buckets memory chips, you know DRAMs flash memories into specialty chips, you know These would be like sensors for cameras or RF chips for analog radios Mature chips, you know, these would be things like for microcontrollers right and older cars and then leading edge Right and today, you know the leading edge market is hot Largely driven by AI right because you know imagine if you have an old no chip Maybe you do 10 tops if you have a modern no chip you do 200 tops, right? You know just dramatically different, you know the performance capabilities so those are the four major categories of Semiconductors as I like to view it and obviously when you're making you know factory commitments that take five six years to come into Manufacturing, you know, tell me what the demand signal is next quarter You can't even answer that question much less what the demand signal is five to eight years in the future, right? And these are a long lead-time investments So you end up with crazy cyclicality in the industry because you know markets go up and down But you build factories that are five years into the future and the only way to run a semiconductor factory, you know Huge capital asset if you run it empty it cost X if you run it full it cost X So you always run it full right and that creates some of these, you know crazy economics around semiconductors And today we're in a reasonable position of supply demand balance obviously we've had an oversupply of memory We're probably going to go into an under supply of memory because nobody's been investing in it You know, we have lots of investment going into leading edge You know, I expect there's going to be a lot of pressure on mature because China in particular has been building a lot of capacity In that area, but right now as we think about the decade in front of us AI is this insatiable demand for compute Right insatiable, right? We're going to be building the biggest machines that have ever been built and we're going to be driving AI to the edge that Everything right that we touch will be fueled by AI capabilities and it's going to need more capabilities as a result So we're going to see this being you know I think we have 10 great years in front of us for advanced logic requirements driving You know the industry and many of these factories that we're building right now You mentioned cutting-edge chips and May I ask you where we come back to this 80 2050 50 How does it apply to? So those cutting-edge chips and but maybe first I want to ask you Why did rest or the US vertically and Europe lose out and All those cutting-edge chip factories. I think 95% are now Located in Taiwan if I'm not mistaken Yeah, Taiwan in particular a couple of other you know Korea as well Yeah, but fundamentally as I like to as I like to describe it never was a vote taken in Brussels Or DC to get rid of this industry, but there were votes taken in the Asians Countries Korea Taiwan China to get this industry, you know, they put in place long-term Industrial policy tax investment, etc to attract this industry and 30 years later They attracted the industry right and all of a sudden in COVID we all woke up and we realized oh my gosh What happened 30 years of industrial policy and we lost something so critical to our future the world needs balanced Resilience supply chains and that's what created the environment for the US and the EU chips act Now when you look at I mean already 2016 if I'm not mistaken China put out several development plans, but some people even today China has not yet come up to the level of Taiwan and Why is it so difficult could you tell us to produce those cutting-edge? Yeah, as I like to say, you know if you want to be a cutting-edge semiconductor supplier You just need to invest 20 30 billion of capital per year You need to invest you know 8 to 10 billion of R&D per year, and you need to do that for 30 years And how much do you invest? You know in technology you know we do 18 billion of R&D per year as a company per year You know we you know we'll do over 25 billion of capital last year That's going up next year it will go up the year after that you know this is extraordinarily long term R&D and capital intensive. It's a consolidating industry There's only three companies in the world that are capable of doing these cutting-edge chips TSMC Samsung And Intel you have key technologies like the EUV technology from ASML key research like iMac in Belgium You know and you know frankly Europe has many of the core technologies and it's not like to say between US Europe and Japan are the source of all of these core technologies. It's expensive. It's R&D it's extraordinary innovation and Sometime class I'm going to get you Into a bunny suit in one of our fabs because you these fabs you know They're almost 30 billion dollars to build one of these complexes. These are the largest Construction projects on earth happening today to build the smallest things that have ever been built on earth This is extraordinary right and what's being done and they're done then at scale over and over again We're producing these extraordinary chips, you know today our most advanced chip is about a hundred billion Transistors you know on a single package, you know and as we continue the progression of Moore's law And as I like to say until the periodic table is exhausted Moore's law is alive and well And we're gonna hit a trillion transistors by the end of the decade right in a single package device You know this is just extraordinary But if I understand directly, it's not so much the development which is costly. It's what what you call the foundries and Can you can you explain why? There are quite a number of Manufacturers, but so few foundries if I'm not mistaken self five foundries or five to six I don't know yeah, you know being able to you know lots of people can design chips and this idea of you know Fabless semiconductors, you know, it's R&D centric Right, but they don't it's not capital and manufacturing centric. There's very few people that manufacture, you know Semiconductors and only as I said three that can do leading edge, you know today and you know, this is very expensive very R&D Intensive extraordinarily intellectual property heavy, you know, we have you know 100,000 plus patents are associated with the leading edge semiconductor manufacturers Yeah, you know associated with it, you know, it's just you know quite stunning, right? What's been built up over the 50 year history of the semiconductor industry and every aspect of your life needs more of them going forward So if you build for example now a factory, I think in Magdeburg in in Germany Is it a foundry or what or for cutting edge or is it? Just a normal chip factory. No, this is cutting edge. So it's cutting. Yeah, and this will be you know We expect when it comes online, you know our most advanced process technology, you know That we're just soon to bring into manufacturing is what we call 18 a sub two nanometers, you know This will be beyond that so this will be on the order of one and a half nanometer devices that will build in Magdeburg So this will be not only the most advanced manufacturing in Germany It'll be the most advanced manufacturing in the world will occur, you know in the Magdeburg site You know, we're quite excited about that under way and to I know is that Chancellor Schultz is very excited indeed He referred to you and probably saw you indeed But the most advanced manufacturing today in Europe, you know is what we do in Ireland at four nanometers You know outside of us, you know, it's probably in the 10 to 15 nanometer range This is a huge leap forward for all of Europe So if I understand you correctly you may design chips and you may Outsource the production to someone else to the foundry right and we're gonna be a we design chips And we're a foundry for chips as well going for that's the intellectual property is with you right for the foundry But the intellectual property for the design is with the design company. It's with yeah, which you are both now Essentially, I'm rebuilding Intel. We're taking one broken company and we're creating two distinct companies inside of Intel a Manufacturing in a foundry company and a product and fabulous company inside of one. Thank you Now you will refer to artificial intelligence and This one chip factor. I don't want to mention the name who is very much talked about because Hey, so it's chips are particularly related to AI. Yes, could you explain and Are you also in this area or what what is the What is special about AI? Yeah, and you know this idea of you know high performance Accelerated computing right and I give credit to my friend Jensen, right, you know that hey They have pursued that domain pretty consistently for 20 years, you know high performance throughput computing and then he got lucky with AI Really lucky, but he had steadfastly pursued that Architectural's pursuit of high performance computing largely in graphics, you know for a period of time and then AI happened And remember AI is an overnight 50-year success Right the foundations of AI, you know were in the late 60s, right? And then for over 40 years nothing happened, right when I was the architect of the 46 right in the 80s I was gonna make it a great AI chip. What happened in the 80s and AI? Nothing, right and then all of a sudden the compute got big enough the data got big enough the algorithms got good enough and We've seen this explosion of AI right and right now We're seeing these very large systems for training, right and we think about you know GPT and open AI and so on but the next several years of AI won't be around big model training You know for hundreds of billions and trillions of parameters the next several years of AI and my estimation is how do we use those models? Right, how do we deploy them? How do we inference them and how do we move them out of the big data centers into every device that we use? We've just launched what we call the AI PC, right? How do we make you know instead of having a hundred billion parameters in the cloud? How can I put ten billion parameters of your data on your PC that you're operating? Locally and I call it the three laws of edge and AI, you know one is the laws of economics If it's on your device locally much more cost-effective ten hundred times cheaper Your second is the laws of physics if I have to round trip to the cloud The speed of light is still the speed of light right versus doing it locally and the third is the laws of the land Right the regulatory requirements am I going to take my real-time factory data to somebody else's cloud environment for local inferencing in my Manufacturing line absolutely not 80% of the data is still on-premise and privately held So because of that we see this idea of going from training which still has exciting science in front of it to much more inferencing deployment and edge You know applications and that's why I'm you know quite excited because it's going to be both We're going to continue to see the science of AI evolve, you know But very much the deployment and utilization of it was where we believe, you know The primary action will be for the next couple of years So the research comes mainly from inside the companies not from university and from the scientific world today because At the origin it was mainly the scientific world which drove the semiconductor development Yeah, and of course you are with you big beneficiary. You are in your first stage of career Yeah, you were very much at the one of those drivers. Yeah, but today. Can you tell us how much? The research is driven by industry and how much by the scientific world Yeah, you know and we've seen this shift of more and more of the research and development to industry Over a sustained period of time, you know one piece of the chips act was you know the establishment of nstc in the u.s You know, we had hollowed out that leading edge research and one of the things I believe you know needs to you know for you know Western You know democratic oriented countries. We must rebuild that long-term research You know long-term research is 30 plus years AI took over 40 years to maturity the transistor took over 30 years Tip maturity, you know, we must keep that long-term investment and that's Primarily, you know from governments public sectors DARPA like things we have lost that because Businesses like mine were sort of like 15 years or less in the R&D and we've seen that shift over time I think that's very unfortunate and now as we think about the science of AI, you know in particular You know today, you know, you remember Daniel Kahneman's book thinking fast thinking slow You know all of our AI systems today are thinking fast. We haven't brought reasoning into AI It's a huge area of research and most of the foundations of that, you know We're seeds planted 20 30 years ago about how we can prove correctness of systems today Our systems hallucinate tomorrow if we're going to use them broadly they have to be right So how can they be fast and right right just like you know? We've seen thinking fast and thinking slow huge areas of research in front of us huge areas You know as I like to say until the periodic tables exhausted. We're not done You know what we have about two-thirds of the periodic table to go still lots of new science new materials to be discovered You know into the future. This is you know what I think for a technologist the next couple of decades I just wish I was still in my 20s, right? The next couple of decades are going to be absolutely Spectacular the exponential face now. Oh my gosh. It's gonna be so good class, you know, right? You know, how old are you you and I need to find a way to get younger because it's gonna be a thrilling few decades We keep you But how does it come that come back to this 80 20? semiconductors are essential element for national defense and national security Why did C us particularly but also you have it slipping out Yeah, I think people were somewhat asleep at the wheel from the policy perspective There were you know a few people, you know raising the Concerns, but remember we were in an era, you know, where I you know, it was all about lowest cost supply chains You know, hey, we don't care if we manufacture, you know We're gonna create an intellectual property real will invent the algorithms will write the software, right? You know, we're sort of happy to bring other countries in the world into that Manufacturing that's hard. That's low-end. We really don't want to work, right? You know, we want to invent, right? And I think that was the overall general views, right? Literally of the Western world for a couple of decades and all of a sudden we realized in critical industries, right? And I think the automotive industry is facing this right now You know, we could lose the entire automotive industry because we've lost the supply chain, right? And the semiconductor industry, you know, literally, you know We were on the hair's edge of never being able to recover the manufacturing of this industry You know, I've you know said to some that you know had I started the rebuilding of Intel a year later I don't think I could have accomplished it, right? It was that much on the edge that we would have outsourced too many generations of technologies and Never been able to rebuild it in the future because particularly for semiconductors R&D and manufacturing are commingled Right, you know a factory without R&D in the semiconductor industry, you know Essentially becomes a boat anchor within six months, right? You know, what is that? You know the tech because you're constantly doing research in the factory in the manufacturing You know process itself R&D and manufacturing are inextricable in this industry What is the dependence of the industry on rare materials? It's actually a limiting factor, you know, it's actually surprisingly not that terribly constrained Right in that sense, you know, we don't use that many materials. Remember God's gift to mankind was silicon, right? Sand the most prevalent material on earth, right as our core material So he gave us lots of it, right, you know in the refining of its in, you know Japan and Asia right in Europe, you know So the core materials are actually not that severely limited other portions of the supply chain But silicon itself isn't that bad, but we are taking steps to make sure we have built resilience and sustainability You know the environmental aspects of the chemicals and that we use as a super important, you know factor to us You know Intel is decades ahead of anybody else in terms of the sustainability, you know We've committed to you know by 2030, you know full You know hundred percent renewable in our factories in our type one and type two, you know full sustainability of our water use 2040 net zero, you know So it's a huge and important topic, you know for us over time and any place we find, you know Critical material limitations is how do we go? You know expand that because remember most of the critical minerals issues are not minerals issues They're refining issues Right, you know where the minerals, you know, they're usually fairly available It's where are they refined are the key points of constraint, but could energy be a limiting factor because some people are concerned about the high consumption of Electricity yeah, and today, you know when you think about the IT industry as a whole different studies But probably somewhere in the three to five percent range of energy consumption, you know goes for IT infrastructure today Different studies would indicate, you know, and particularly with the surge of AI, you know that that could triple or quadruple Right over the next decade. So that could become quite constraining, you know to build these big massive data centers Which by the way puts pressure on us How do we keep reducing the power requirements of our chips as well as you know things like water cooling, right? So that we can increase the efficiency of them as well another area of significant research I come back to China When do you think China will? Have caught up with it really with the frontiers of chip technologies Yeah, you know the export policies that have been put in place, you know And recently we've seen the Dutch in particular, you know in place the US policies Japanese policies Etc. It sort of puts a floor in the 10 to 7 nanometer range Right, you know for it and you know we you know We're racing to go below two nanometers and then one and a half and you know We see no end to that in sight, you know, and I see the policies in place, you know And it's not like China is not going to keep innovating, but this is a highly interconnected industry You know the staging of Trump's right the mirrors of Zeiss, you know the equipment assembly of ASML the chemicals and resist in Japan the mass making of Intel all of those together You know, I think this is a 10-year gap And I think it's just it's a sustainable 10-year gap with the export policies that have been put in place today, you know And I do believe that that portends well for the policies that have been established in the world, you know, right? For export and competitiveness right in this environment and you know, we're leaning hard into making sure that's the case now There's so many investments going on like in MacBook against one. I think sir plans in France are plans in Ireland additional ones aren't you afraid about Because every country wants to have now its own Asset Aren't you afraid about overall capacity? Well, if you go back to the beginning of this discussion, right? You have this Hey, we're making a you know five and eight year investments and we have cyclicality quarters I mean, you can't even tell me what the demand is next quarter, you know, much less, you know five years from now that said, you know I think fundamentally compute an AI in particular are going to be like the gas law They will expand to consume every amount of compute capacity that is economically available You know, so I believe that becomes such a driver of demand that I think advanced logic capabilities You know, I have no concern in this at all now Of course when I explain to my board my crazy capital requests, I of course have to say that not only say that but say it with conviction Now we have I think five minutes to go. Let me see. Mr. Say is any question here in the room So must be yeah, please I Limit a is that true and the second Question I have is I am equally told that when Morris Chang establishes a foundry in Arizona or elsewhere He does not have the confidence that that foundry can reach the same level of expertise as his own in Taiwan For reasons of human capital. So can you explain when you're producing something? 80,000 times bigger than a human hair. Why is the human skills so important? Yeah So, you know on the first topic the way I like to describe it is Moore's law is like driving down the road on a foggy night Right, you maybe see a hundred meters in front of you when you've gone 20 or 30 meters down the road You see about a hundred meters in front of you and Moore's law We see about a decade in front of us, right? And I've been in the industry and now for 42 years, right? You know almost embarrassing to say it's been that long, but you know with it, right? You know, I've heard about the death of Moore's law, you know for about three decades Right, and I sit here today telling you I know how to build a trillion transistor chip by the end of the decade Moore's law is alive and well and we're gonna keep making it true because it's not a law of physics Right as you suggest when you get to one nanometer, you know, you know It's a law of innovation of commitment of economic pouring into the criticality of this technology And we as a company Intel are gonna keep making it true second on, you know, you know TSMC is an extraordinary company, you know, they have refined a Manufacturing capability and a customer orientation that is really unmatched in the industry However, they do R&D and manufacturing in one place Taiwan right Intel has operated with the distributed Manufacturing footprint for over four decades. We know how to operate in different segments of the world We know how to do this. We're about you know, I see my my best friend Senator Portman here from Ohio We're about to start the Silicon Heartland In the center of the you of the United States bringing Manufacturing back to the heartland of America, you know with it We know how to operate distributed manufacturing. They don't yet, right? And this idea of tethering of R&D and manufacturing, right? He's right They only have one place of R&D, you know, I have a distributed R&D model I have a center of R&D in Oregon and Arizona that are extraordinary in the world. We're absolutely convinced we know how to do this let the race continue They're a great company, but we're committed to being back to unquestioned technology leadership in the world And I think by 2025 we will have proven that to the world with Manufacturing of sub two nanometer chips that are simply the best in the world, you know Based on Western technology and we're pretty proud to be in that race How many people do you have in research and development? You know, we're on the order of 50,000 engineers total right in the TD space, you know In the core technology space in the order of 20,000, you know, so yeah, this is, you know Yeah, yeah, this is at scale R&D. All right. Let me we have time for one last question Any anybody? You know some of the portman there Well the difference that ships acts makes and as a co-sponsor of that bill and having heard from a lot of my Republican colleagues about Industrial policy and how that's not our direction Some of them thought we were overreaching and doing too much. The reality is there will still be considerable dependency Even when you combine the EU in the US and you touch on that a little bit But if you could talk a little more about that now I think when about 37% of ships 30 years ago to about 12% today and even after 52 billion dollars and about 39 billion on the manufacturing side my understanding is who will only be At what number in terms of the percentage? Yeah, we'll be calling our way back into the 30s, right, you know with chips one, you know I do believe they'll need to be a chips to At some point to continue building those policy decisions and remember these were bad policy decisions in the US and tax Policy right and capital investment policy long-term R&D investments all of those Aggregately caused us to go from 80 to 20 Right to rebuild that we're not going to do that in one act as good as it was Thank You senator right, you know in a few years this will take decades to rebuild this industry But I really believe that chips one chips to fundamental industrial policy, you know improvements in R&D improvements in manufacturing, you know capital policies, you know Rethinking of some of the financial requirements long-term, you know human capital development I firmly believe that we can rebuild this industry and it's the right thing for our economies It's the right thing for our industries and it's the right thing for our national security And we're deeply committed to help drive that, you know simply put it's the right thing for the heritage of Intel It's the right thing for the technology industry, and it is the right thing for the world. We're gonna make it happen Thank you Pat we have come to to an end of this discussion And I think what we have seen is a leader with With something which we so much need today when we talk about leadership. It's conceptual thinking And you are in one of the most complex areas high-tech at the at the edge and I Think we all leave this with a better knowledge about the industry and impressed by your by your leadership. Thank you very much Thank you