Nine of the ten companies I invest in halfway change their business plan because the market has changed. So I like to have an entrepreneur team, not just one person. I always believe that when I was at Cadence and also at Intel, first of all, you crawl and then be humble, listen to the customer, and then the first step for me is to strengthen my balance sheets, focus on the products, and I really simplify the product, listen to the customer, and then drive the next generation leadership products. And then right now, the agentic AI and inference CPU become highly in demand, and so in some way, I'm happy right now the demand is very high for my CPU. Certainly very happy that Jensen Huang, my old friend, he also put five billion in investing and support me; five billion become twenty-five billion now. If you look at it, ten years from now, what will be the winning company? The one that...
Hi listeners, welcome back to No Priors. Today, Elad and I are here with Lip-bu Tan, the legendary investor from Walden, then CEO of Cadence, now CEO of Intel. We talk about his plan to transform Intel, having the US government as a major shareholder, how to be an amazing semiconductor investor, and whether or not we can make chips in the United States. Welcome, Lip-bu. Lip-bu, it's great to see you. We'll start with the obvious question. This is a really hard job to go be CEO of this incredibly important American semiconductor company. Why take the job at all?
It's a good question. I'm 66 and people say well you should retire rather than take on this hottest job in the industry. And so a couple reasons: one is this is an iconic company and it's so important for the semiconductor ecosystem and also so important for the United States. And so I decided to do one more after Cadence.
A lot has happened in this past year. What has been the most surprising to you?
Well, the most surprising thing that I don't learn from my previous job or even training is one day early morning President Trump asking me to resign and conflict of interest and there's no exceptions. And so I had to convince myself first of all, you know, I don't need this job, I do it purely to save Intel. And so take that personal issue out of the way, then I figure out what can I do to be helpful to Intel. And so good news is I have a meeting Thursday morning and then Monday I have the meeting and then he listen to me like I have a chance to explain myself: you know, born in Malaysia, grown up in Singapore, went to MIT and I live in US and never live outside country. And so something that I share and then somehow he listened very well and then he gave me the chance and so I'm delighted.
And now you have the chance to do the work. When you said you know the job is to save Intel, it's a really important company. What does that look like to you? What does Intel winning or thriving look like?
Yeah, I just passed 14 months. A lot of things happened in this 14 months. So, a couple of things. One is to change the culture and then clearly want to drive more accountability and also in terms of decision making had to be faster. You know I'm so used to startup culture and you move fast in the speed of light and going to have that bureaucracy layer of layer of meeting. And so something that I change the accountability, listen to the customer and the customer delighted. And also the other part from day one I decided all the engineering report to me. I'm being an engineer by training, I want to know what went wrong and what are the things that I need to correct. Listen to the customer and delight the customer and then make sure that we have the right product. Simplify our product line and really have the roadmap and the vision for the next five, ten years.
What is your vision of where Intel should be in 10 years?
Yeah, I think a couple of things. One, I always believe in when I was at Cadence and also at Intel is first of all you crawl and then be humble, listen to customer and then secondly deciding to walk and then finally deciding to run in sprint. So that's kind of my culture of step by step doing it. And then first step for me is to strengthen my balance sheets, and the balance sheet is really horrible in some way. So I'm delighted US government become a big shareholder. Just I explained to President Trump TSMC when they started, they have the Taiwan government as a shareholder. If you look at Japan, you look at Singapore, this is the infrastructure US government get to provide the support. Secondly, very happy that Jensen Huang, my old friend, he also put five billion in investing and support me and I'm glad I at least do some good work. His five billion become twenty-five billion now or more. And then the other part is Soft Bank Masason. I used to be at Soft Bank board and then he lend a hand to help me. So we strengthen the balance sheet and then focus on the products and I really simplify the product, listen to the customer and then drive the next generation leadership products. And then in some way it's very lucky right now the agentic AI and inference CPU become highly in demand and so you know versus one to eight in the training CPU to GPU now I can see one to four maybe one to... And I'm delighted CPU become important. I talked to some of the AI model and developer. They said about in terms of reinforced learning, in terms of the speed of orchestrating all the agents and turn up the CPU is actually is better. And so in some way I'm happy right now the demand is very high for my CPU. So I think overall build on the product on the data center server side. Then the other part is our foundry business and initially this is a capital intensive business and it's not easy and you really need to have a couple of things: you need to have all the right IP so that you can support the customer like for example if it is a mobile related you got to have low power IP set that you need to have without that you cannot serve them. It's a service business, it's a trust business if people want to give you orders to have wafer, if the yield not good they will be toast in terms of revenue miss. So with that I think it's very important to really focus on the yield, the defect density, the cycle time and then make sure that you really able to meet and serve the customer in high quality and reliable. And so those are the things that I really focus on and eventually you have to really move into a full stack. So not just a silicon, you need to have a software and some of the customer asked me give me the whole rack. So there's a system that you have to build and so I think those are the things that I quietly building step by step and recruit some of the best talent I can find. By the way, all the recruitment I do it myself no search firm helping and so I think sometime it's good to have a rolodex that you know who to reach out to call for.
I mean, you've been in the business for so long and you know, you've run Cadence for I think 12 years before this and so...
13 years. I'm sorry. Yeah. And then two more years as executive chairman. So 15 years I signed up for three months. Three months. So right now I be very careful the moment you said just do it for three months. It turned out to be 15 years.
Yeah. Well it seems like you have a lot of longevity ahead of you here as well. And so the other big initiative that has been sort of talked about is Terafab and working with Elon Musk on that. Can you tell us a bit more about how that came together and your involvement and how you all are collaborating?
Yeah, good. I mean, Elon Musk, I think we all agree is one of the best if not the best entrepreneur in this century. He and I we share the same view that the semiconductor infrastructure actually is not catch up with the AI growth and in terms of you need the capacity, you need to have the productivity and you have the dry efficiency and so those are the things that he and I we share that there's something missing. And then secondly, he just delighted to work with him and he is very I call it unconventional and he basically question every step and then why this traditional way of doing things and in some way it's very refreshing and I like that. I like people have different opinion and let's work together find what is the best route and we both going to learn a lot together and then I think clearly he have a vision that his robots and his car, he need a lot of silicon.
Yeah, could you actually explain what Terafab is for people who aren't familiar with it?
Terafab he decided he want to build his own fab and then meanwhile we are delighted to work with him and then make sure that we can work together and enable him to be faster and quicker to the production and then using some of our technology and some of our process and that's something that we both kind of collaborate together and he's a very good team that I work with weekly and it just refreshing to work with him.
And he's talked about things like he wants you to be able to smoke inside the clean room and all these things that normally are the barrier.
I think I don't go that far and maybe some part of the clean room you can do that but I think something that is open mind and then we are also listen and see whether we can do that.
Yeah, I mean it's very exciting to see how you're morphing in the business here in the US in terms of incrementally building out the foundry business, in terms of collaborating with things like Terafab. If you think about the global AI and semiconductor supply chain, so say that you were to look at the changes that AI is driving on a macro basis, country by country. And if I look at certain countries, when I look at the layoffs that are claimed from AI, for example, most of them I think are overstated right now. You know, most of the layoffs are actually just overhiring during 2020 COVID period. But the first things I see actually being cut are outsource firms where you'd rather cut external headcount versus internal. So you're cutting external customer support, you're cutting external IT and that has more of an impact I think for certain countries which have big BPOs, the Philippines, India, etc. and so they may be impacted in the short run by AI. And then if you ask how do companies participate in the future in a positive way in AI you have to almost go country by country. Right places with cheap energy will do data centers, places with the ability to train models will train models but it's probably only the US and one or two other places. How do you think about the shift in global supply chain for the semiconductor industry? Should certain countries invest more? Like should Israel be doing more given Mobileye and the Nvidia and Intel presence there and should they try to do more in semiconductors? Should other should the Philippines move back to more of a manufacturing base? Like how do you think about that on a global basis?
Yeah, good question. So I think clearly the AI is changing the whole landscape and I think the impact will be bigger than internet and it's more profound also. So I think the AI, you know, initially is able to help you to do things more efficiently and then with a lot of agent helping you to do things that is now kind of mundane that you need to do but now they can give it to you faster. So in some way I think it can drive a lot of efficiency even like semiconductor design how much you can drive the efficiency in terms of timing, how quickly can you come out and secondly the cost. And so I think those will be helping you to drive that. And then I think a couple of bottlenecks for the AI, you know, demand and growth: one is of course everybody knows power constraint, some country the power they just don't have that it get impacted. And then secondly, a lot of people didn't realize the helium impact can be also quite significant for semiconductor. And then thirdly is everybody know right now memory is a bigger shortage and everybody try to scramble for memory and then even though you have to build a fab to capacity increase it will take a couple of years to do that and same thing for CPU, GPU and all this will be highly demanded and I think the also the pricing also go up because we have to pass the price the cost to the customer. So I think those will be the impact the industry growth. And then I think overall I felt that, you know, the company that most impacted is you are not embracing AI. And because AI can help you to drive a lot of efficiency across all the different function of the enterprise. We should embrace and also find way to better use the AI for your prediction, for your design, for your, you know, all the different part of the workload and I think that's tremendous.
A number of people would say the simplistic argument against Terafab, against Intel foundry being competitive is really a question of, you know, there's all the factors internal to the building right you describe, IP and velocity of just how you're doing business. Then there are external factors and you know, Allad's talking about a number of them but one of them is the cost of labor and actually the manufacturing capacity. You know, in investing in the foundry business you obviously believe there's a version where you can manufacture domestically and Elon does too. Can you talk a little bit about that and you know how real that constraint is, the labor constraint?
Right, so I think, you know, when I decided whether should double down on foundry or should I get out of the foundry, and there's a lot of voices, a lot of voices in the marketplace as you can tell. It's very expensive. It's very expensive not going to work. But I finally decided this is very important for United States and also very important for the industry. And I'll give you the idea that, you know, this, we all live through this challenges of supply chain and it's very important for any of the big company in semiconductor and really have to think about the supply chains and you have to have a robust and resilient supply chain. You cannot just depend on one or two player in different geographic goal. And so I think, you know, the more and more people going to realize making in United States is critical. And then the most advanced process like for example we have the, you know, 14A is like 1.4 nanometer and we already starting to plan for 1 nanometer and 0.7 nanometer. It's getting smaller and smaller. So in a way it's much like our hair so thin. So it's a lot of complexity. It's not that easy to do and every step if you make a mistake that you just go down, you know, go down the drain. So in some way you have to be really precise and in that manufacturing. So in some way this is become more and more going to be the bottleneck. So we felt that we, you know, we have a lot of respect for TSMC. We are great partner and then the more important we both need to have more capacity to serve the customer. And then so I think we decided bite the bullet longer term I think is critical and then that's where I can create more value for the industry.
People have been talking for a long time about eventually hitting a point of resolution where you can't really miniaturize things further like the line width just gets too small to be able to keep going. When do you think we actually hit that limit?
Good question. So I think I can see, you know, right now we have 18A and then now to going the production of 14A, I can see 10 and seven and so I think that path I think we can get there but going to be more and more expensive and more difficult to do. And that's why we need partners, we cannot just do it ourselves alone, partner with the substrate vendor, partner with equipment vendors so that make sure that we can really drive those yield and performance. And then the other part also really become the bottleneck is packaging, the advanced packaging. And so we all know about CoWoS by TSMC, now we have a really good one called EMIB that is a really next generation. I had to make sure that it become able to do in the production yield that meet the customer requirement. And now silicon starting to run out of steam like you describe so right now I also look at some new material so become going back to the material size or the chemical table, so gallium nitride, silicon carbide and indium phosphide. So I invest in all three. And then looking at some of this new material, how can we really drive that? And then in terms of packaging, I starting to invest into glass. Glass is a very good heat insulator. So we I invest a venture site called 3DGS. Then I realized that Intel we have like 1,000 pattern on the module. So how the, you know, substrate and the module put it together and then we just announced a big program with Indian government to manufacturing in India plus in US in New Mexico. So I think this advanced packaging very important. I also starting to look at artificial diamond and that's another very good, you know, insulator. So I also invest into, you know, diamond foundry and that's something is the next generation to look at. So new material, new substrate material and new, you know, design methodology to drive that. So one thing good about being an engineers, you always hitting the wall then you find way to either jump over the wall or you work around the wall and then to get to the better result and that's what I being have been long time as a investor and building semiconductor from the EDA tool to design to manufacturing, it's kind of nice to have that experience now I can help find a way to make a small contribution to the industry.
Yeah, I it's very exciting and one of the reasons I'm asking about it as well is to your point there's always some things that you can vent around but there are also physical limits where once you hit seven nanometer or whatever the limitation is you start to run into, yeah, you need to find new materials or find other workarounds. And then the interesting question is, and we've been talking about this for a long time, I remember 20 years ago people were talking about how we'd eventually hit this hit a point where we ran out of space on this. Is do you run into some sort of asymptote that actually normalizes performance across different foundries or not?
Yeah, good question. In terms of like Moore's law is a double, you know. And then the power and the cost and then you can double the performance but you cannot double down on the cost and area. So those are the thing you have to give way unless you find some new way of material, new way of design and then become material science. I starting to hire more people in the material science. So that is kind of innovation in our area. How can we do that? And I still remember 18 years ago and I I still investing in semiconductor and actually most of the VC firm some of them were very nice tier one venture firm a good friend of mine and initially the partners meeting the whole partners in the room then after I talking about semiconductor half make excuse to run out of the room then eventually the other half they said available do you have any software service so then they left with only who sympathetically listen to me. So it's kind of the history have changed and now semiconductor if you look at it Jensen is a 5.3 trillion market cap company and then Broadcom and TSMC is two trillion market cap company and Lisa my good friend at AMD is almost 800 billion and I'm close to 600 billion. So in some way it's kind of semiconductor become hot again and it become essential because 15 years, 20 years ago when I invest in semiconductor no VC want to join me except, you know, some of the big corporation like Samsung, you know, ARM and soft bank and others and investing with me and then now I starting to see a lot of VC like to come investing in semi so I'm very happy.
Given the enormous interest in investing in this area that used to be considered too... Right. Yes. Um what do you think I mean you've been a venture investor with Walden for a very long time as well as an operator. You know the general fears I'm just going to list a bunch of them. Um the general fears have been it's very capital intensive. Um and you should tell me what I'm missing. It's very unpredictable in terms of, you know, shipping a design that works missing tape out. Um and you need to understand the workload very well. I think there's a there's another which is just like it's it's very high risk for the customer. Yes. To switch, right? I think, you know, we've been involved in companies together where, you know, there's a design win and then there's still the question of like scaling order volume. Um and then there's a cyclicality. Yes. Right. Of, you know, you you build hard manufacturing capacity and demand may may change or not in any any given year. Um what is your view on how a bunch of, you know, what makes it hard as an industry and then the the secular demand growth from a bunch of different areas, right? So you have the recognition of how important the a more diverse supply chain is and then you have this like explosive demand growth on the AI side. How do you you're still an investor and then you're making the biggest bet ever like go be CEO. How do you like think about these different risk and advise others about where to invest in this supply chain. I realize that's a very large question, but just given your your history with it, I I think there's a there's a lot of like YOLO action of like there's a memory shortage, buy memory stocks as well as, you know, just an unwillingness to take on things that have a 10-year timeline like material science.
Good. You have quite a broad range of questions. Let me try to explain that. So first of all I think, you know, the venture capital startup is in my blood and I really enjoy it and so I think this is not tied to brag about it and so there's some good exit, you know, I still have 159 IPO, 126, you know, M&A and that's include semiconductor. Just break down the semiconductor I invest over the years, 200 and 38% is in US. So what are actually look at some mechanisms...
