Intel’s VP Claims AI Strategy Will Be “Disruptive” and Predicts Foundry Will Achieve Break-Even With Minimal External Sales

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During a presentation at the Goldman Sachs Communacopia + Technology Conference, John Pitzer, Intel’s Vice President of Corporate Planning and Investor Relations, shared insights regarding CEO Lip-Bu Tan’s transformative strategies and the company’s AI initiatives. He highlighted that Intel’s 14A chip manufacturing process represents an innovative technological leap, developed with input from external clients from its inception.

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The discussion commenced with semiconductor analyst Jim Schneider from Goldman Sachs, who inquired about the significant changes brought on by CEO Lip-Bu Tan, particularly those that may not be immediately visible to investors. Pitzer emphasized that the real focus of Tan’s reforms is centered on reshaping Intel’s corporate culture.

Pitzer noted, “Many changes began in Q2 when we undertook restructuring. The previous restructuring was mainly a cost-cutting measure that did not alter our operational framework.” He elaborated that the recent changes have significantly impacted both the organizational structure and operational efficiency, resulting in substantial cost reductions.

A critical aspect of Tan’s strategy has been to address Intel’s extensive bureaucracy. Pitzer remarked that the former culture was too slow and led to poor decision-making. To enhance efficiency, Tan has cut the managerial hierarchy from 11 layers to half, aiming to create a more accountable and streamlined organization.

The push for change has also included a recent mandate requiring employees to return to the office, a directive implemented just last week, according to Pitzer.

When questioned about Intel’s priorities in the upcoming months, Pitzer outlined four key focuses: revitalizing the x86 chip business, innovating AI strategies, operationalizing the foundry business, and bolstering Intel’s financial health.

During earlier discussions, Intel’s CFO David Zinsner provided insights on strategies to enhance the company’s balance sheet. Pitzer reiterated the importance of a clear AI strategy, asserting that Intel owes its stakeholders a comprehensive understanding of its plans, with more information expected during the third-quarter earnings announcement.

In response to inquiries about Intel’s position in the AI accelerator sector for the next five years, Pitzer confidently stated:

“We want to establish a meaningful presence over the next five years. Fixing our core x86 business should enable consistent growth in the 3-5% range. However, Lip-Bu’s ambitions are even higher. To reach these goals, we need a stronger footprint in AI. We believe our x86 ecosystem adds valuable insights to this market, allowing us to create impactful innovations, particularly in inference related to power management. So, stay tuned.”

Intel foundry revenue and loss chart with Intel 18A progress updates and a person holding a wafer. — Intel’s presentation slide highlighting its Foundry performance in Q2.

Intel’s recent second-quarter earnings report raised concerns regarding the viability of its next-generation 14A manufacturing process. Management indicated that investment in this technology would depend on securing customer interest, prompting fears of potential multi-billion dollar write-offs and contributing to a significant 14% drop in stock prices following the announcement.

Pitzer reassured stakeholders that Intel is fully committed to advancing the 14A development, stating, “When we evaluate what external clients seek, two critical factors emerge: PDK readiness and the yield curve. We are optimistic about our progress in 14A.”

The Process Design Kit (PDK) and yield curve are essential indicators of process quality. Pitzer explained that Intel’s development process involves three stages: definitional, development, and high-volume manufacturing. For the 14A process, Intel is proactively engaging with external customers even at the definitional stage to refine the technology.

This approach allows Intel to better understand customer requirements and make informed investment decisions related to the technology’s roadmap, with expectations for design discussions to escalate towards the end of 2026 or the beginning of 2027.

Regarding the profitability of its foundry operations, Pitzer affirmed Intel’s goal to achieve breakeven profitability by the end of 2027 through increased production of the 18A manufacturing technology, primarily driven by Intel’s own product demands. According to him, “We don’t need substantial external foundry revenue to reach our profitability goals by the end of 2027.”

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