Re-engineering the Semiconductor Supply Chain with Intel CEO Lip Bu Tan

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...

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.

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.

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.

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.

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, 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.

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.

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, 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.

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.

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, 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.

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...

Thank you, thank you. It's just enjoy building it and but more important I look at is first of all on the investment side I always look at where is the bottleneck, what are you trying to solve. And for example I invest in a company called Celestial Semiconductor, Australa Lab is this interconnect become the bottleneck so I decide to back and also I back Celestial AI, you know, optical sign and then because speed become more important in the interconnect in the cluster. So I think optical become very important. Look at Jensen he invests in almost every company is photonic related. And then the other part I looking at is, you know, okay what are the solution that need like for example we talk about design and then the complexity and also the cost. Can you find some using AI machine learning to drive better design and better solution? So a couple of new startup actually go into the EDA related area to drive performance improvement. I think it's a gold mine to do that. And then the other part you look at the new material and we talk about, you know, this, you know, indium phosphide that's why I invest in Inphi and then well bought it and then then you invest into some of the new material that gallium nitride and then silicon carbide and then some of the company starting to being acquired include one of them, you know, doing power management and ADI just bought Empower. And so again this IVR that's a very very good area in power management become bottleneck in terms of converting from 40 volt down to one volt and then those in terms of that conversion you lost a lot of power and how you do drive the power improvement so I think power thermal those become the bottleneck. So I think I always look at from what is the problem we try to solve, is it real, is customer crying for it and then I starting to invest. The next thing is look at it's very important from day one you'll have to target the first customer and usually I like the customer is hyperscale. They have the skill. If they like what you have, they're willing to pay million of dollars next few years and even giving some warrant is worth it because you have a big one customer you can scale. So I always look at some of the formula how do you do that and then where do you get the talent and then, yeah, you know, sometime it's very important to find the talent. That's why I'm very interested in US and then Silicon Valley and then some Austin and then the other part is Israel a lot of talent so I back quite a few quite a significant amount my investment in Israel and then because they have very disruptive innovative entrepreneur and they work really hard even in this wartime they still have conference call and sometime they say okay there's a warning I have to go to underground and then the internet may not be good maybe we does use voice. In some way it's kind of fun the kind of resilient entrepreneurship I really enjoy. So I think all in all I felt that there's a lot of opportunity and especially in the AI and then right now beside the agentic AI now you're looking at physical AI next a mix big frontier. And then you had to really look at the full stack that's why I'm still involved with a lot of this frontier model that we very familiar and some of the investment I back because I really like open-source frontier, you know, technology for physical AI. I think that's a gold mine.

Yeah, I think, you know, for almost 15 years with Cadence and I'm so happy one of my highlight is able to find my successor on the road and I train him and he becomes super great CEO and then he really embracing the AI, you know, driving the agentic AI to drive more efficient. But there good part I think Synopsis, Sashin also tried to do that and they have investment from, you know, Nvidia 2 billion I think helping him to do a lot and he acquire Ansys to move into the whole system design. So I think all in all they all do the best thing they can but also some opportunity for startup to do some of the more disruptive and then eventually they can go public or being acquired by both of them or Siemens to acquire them. So I think there's opportunity for all depend on what the entrepreneur vision and then as long as I always have philosophy if entrepreneur want to sell the company and this quicker way for exit you don't have a lock up you don't have to worry about quarter to quarter earning and then some entrepreneur they from day one they want to go IPO, you know, for being a VC I think three of you with three of us we all VC we support the entrepreneur their dream and then help them to fulfill their dream.

Yeah, I think so. I think first of all back to Sara your question about capital intensive and a little bit unpredictable and cyclical. So you have to kind of put that into factor into your decision making investment. You know, I usually like to go in very early put a team together it's kind of fun to do that, I think you you also do that and then secondly you try to find the right investor that can co-partner with you. It's not just the whatever the brand firm, I usually go for the individual and then whoever the individual that really knowledgeable in this space you can the most important to find a partner to difficult time and good time. A lot of the time people are very enjoyable working with you is a good time. When the company trouble they just walk away. I like to have partner that really work through a lot of successful company they have multiple time almost bank club that eventually take off. So I think it's both important to find a partner willing to do that and then the other part is look at what are the strategic investor that can help you either in manufacturing or memory connectivity or various way to add value to the company and also have couple of friend they are in the growth stage and also in the hedge fund and I really enjoy them because they have a different perspective, they know about the public market, he can guide the company entrepreneur where not to go and so those can be very helpful. So I think all, you know, I think is just fun to do that and then just realize is a engineering for startup is like problem solving each step of the way you have to find people to help you to solve the problem and then if you trigger that then great next frontier to work on. And then frankly speaking I look back nine of the 10 company I invest halfway they change their business plan because market have changed. So I like to have entrepreneur as team not just one person. Secondly open mind. Yeah. Willing to listen and listen, you know, getting coaching from us and then eventually they formulate their own plan. It's not just do what I want. It's more they figure out the best thing is you give them enough feedback they draw their own conclusion that you exactly what you like and or different that you can embrace is the right decision. That's kind of fun of doing startup. you know, they can much faster. So back your question if you look at it 10 years from now what will be the winning company this is just my personal view: the one that articulate and laser focus on one niche area and also find the right partner and also able to scale the company and so in some way and back to my point about full stack. So in the way you need to have a full stack solution and so it can be big company they re, you know, transform themselves to be looking at big platform like Jensen I admire him, you know, he focus on CUDA, he focus on InfiniBand, I want to be a platform company and he did it and so in some way you can do that or startup company like Anthropic, OpenAI they find a way to do it in a more elegant way they change the game and and then it start up move fast, you know, speed of light you can really become a dominant player and hopefully Intel can play the role because we have the XPU and we have the advanced packaging and we have foundry if you put that all together can build some of the purpose-built silicon for different workload. I think that's where I'm going.

Good question. I think, you know, the as a back to that crawl, walk, and run. So I think crawl you basically try to I recruit some of the best talent in the semiconductor industry and then now I starting to look at what are the software talent I need to bring on board and in order to build a full stack and now I starting to look at, you know, my average age of my team in the 40 late 40, 50. I need to bring in some new talent and then so they're understanding the workload, understanding the frontier model, open source, that is important. So I found out that my son become my teacher now. So every time he invite me to go to his house, we're playing to grandkids. I starting to tap on him on all the AI machine learning, he's more plugged in than me. So I learned a lot and then try to understand investing and then bring some of the talent to come in. So we are changing Intel used to be a very old legacy spreadsheet company. Now I'm transform it to become AI and not AI enable using some of our design and also across all the engine all the organization embracing AI and then so they become less less depend on the spreadsheet and label to do that and you're going to combine the two talent plus the best AI tool that I can use not only for my organization not only for my sales and then now exciting to look at not just marketing and now the design and then to embrace that.

Good question. So I think, you know, clearly, you know, for capital intensive business and infrastructure play, you need to access to the capital and then in some way I think for our early day venture capital investment, you know, now starting become very capital intensive. And some of the venture firm willing to put 1 billion into some company is very unheard of in the VC business now it's happening. And so in some way you just have to be, you know, I like this kind of bell curve either you go in very early and then because you're starting to do the series A is over one billion valuations and so you had to go and pre-money pre-seed to go into that kind of a 20 30 billion valuation is very rare right now. So you just have to do that pick the right one and then the other part is able to find capital to scale and that's why some of this mutual fund they also like to move into the pre-market early states to join join me to investing. I delight them because they are very less sensitive of whether I had to own 20% of the company there's not too many 20% to give so you have to find the right investor to come in and then in terms of the capital intensive like AI, you know, factory and also the foundry and then you really need to tap either government funding or some sovereign fund and also some very big capital, you know, there are some big fund they're doing that and they really the fund they've organized is basically support the infrastructure and we like to tap into some of them and then to make sure that they can scale our operation so I think in overall government sovereign fund become very important and also as a public company. I also purposely want to focus on some of the investor that are more long-term growth oriented and so that they can help me to grow the business and then rather than short-term asking capital allocation, you know, where do you going to, you know, buy back your shares those are good question but meanwhile I also had to build the business. And so I think it's kind of that balance is important.

Quite a few things. First of all, I think, you know, as a back to this crawl, run and walk. Last four month I crawl and then but people starting to recognize that potential of it and so the other part is very important. We need to really get the best product out either PC client we still have a market share but we really need to really build more perform better performance. So that's why I'm quietly building up the CPU architect, GPU architect and the software architect so that we can leapfrog just like I look at Intel I want to be a multiple of startup culture so that we move fast and we can leapfrog using better technology and then the other part is beside the product there are some new energy coming in like agentic AI, the physical AI that's a lot of area that we can invest market is huge that's on the product side and the foundry side we are very distant from TSMC and then in terms of their performance so there we have to be humble looking at building the building block like I mentioned earlier the IP the yield the defect density and the cycle time to make it more efficient and more reliable is a trust business people want to trust you before they give you the wafer to count on you so those are the thing will take longer time but I think by 2030 2032 31 32 I think I was starting to surface up people may not understand how big potential I can be in terms of product, you know, the PC client that's our bread and butter and we moved up to the edge and move into the physical AI and agentic AI and because not right now in the past you basically provide the server provide the PC for human. Now you're starting to have another different dimension is millions of agent they need to access to the compute they access into the the software stack. So I think that part I think we have a chance to really play the game is not over yet. We can play on the in the agentic AI and also the physical AI. So that's kind of where I'm going and the AI is just a beginning. you know, you have the training that Jensen own and the in the edge and also, you know, in terms of agentic AI with agents and also physical AI I think is the jumbo everybody have a chance so I think that's part that I want to go for it and so I think hopefully the investor will know even though in 14 month, you know, we make six time return to the shareholder they just a beginning we still have a lot of room to go.

Yeah, so, you know, I always look for 10x, you know, being a venture at heart. You want to look for 10x and know at Cadence when I step down as a CEO I think we make about close to 76 time, you know, starting from interim CEO $242 and then when I retire executive chairman about 85 time return to the shareholder so it hard to do that the Intel because the base is bigger so I kind of say okay let's do it at 10x, you know, and then and five year, ten years if we can do 10x X I think is a good return being a venture capital at heart that's kind of my goal.

Yeah, I think, you know, that's a very good question. You know the right now there's a massive buildup in terms of the AI, you know, the I think it's the right thing to do. I don't see there anything to slow it down because the workload is increasing a lot and then I think the question mark is how we are supply constraint. We're supply constraint. So I think anything slow down is the supply constraint. But I think the other part is I always look at all this infrastructure build up at the end you have to look at what is the solution, what is the application you want to drive and I'm more focused on application. So if you can identify the application that is humongous or add up a few application to become meaningful and you focus on that it's not everybody build going to be winning and so some going to be winning big time and some going to lose over time or go sideways. So, you know, just like internet you can see some of them turn out to be very big like Amazon like the Netflix and then some of them is kind of go sideways and disappeared or being acquired. And so I think to me it's the same approach. Then they really focus on what application they try to serve and that application how big is that and whether it's sustainable or not or is very crowded. So if it's too crowded, you know, maybe one or two may survive the other maybe just consolidate. So I think this industry go through that big growth and then then starting to consolidate maybe eventually one or two become the real winner. So I think that's kind of a we've watched the movie before so it's not surprise to me but focus on application like Netflix is application, you know, Amazon is a real application that to me they're winning.

Exactly.

Exactly.

Yes, yes. I think I more my investment thesis is find a problem that is really need to solve and secondly who will be the player that you can partner with. And then thirdly, look at the application. How big is that application? Is that sustainable? And if it's really big, you believe in it, double, triple down.

Okay, it's amazing.

Thanks, Lip-bu.