Intel to make Qualcomm chips

Myles Udland, Brian Sozzi, and Julie Hyman discuss Intel’s plans to expand its new foundry business as it ramps up production of Qualcomm chips in order to compete with other chipmakers.

Video Transcript

MYLES UDLAND: [INAUDIBLE] one of those stocks that is off a little bit more than the overall market. Intel shares down about 3.5% here. Taking a look at the broader semi space. We see Intel is the laggard here among that group. Now, Brian Sozzi, you're getting set to talk to Intel CEO Pat Gelsinger, oh, in about an hour and 15 minutes or so here, as Gelsinger continues to sort of forge ahead with outlining what exactly his plan is going to be for the business.

BRIAN SOZZI: Yeah. And there still remains, I think, a lot of skepticism on the street regarding when will Intel start to turn around, when we'll might see better results out of its data center business, faster growth from the company here. And you're seeing that reflected in the stock price. Intel's stock price year to date is only up 5.5%. You have NASDAQ up close to about 14%. So lagging on a relative basis. But Intel coming out last night, putting out its product roadmap, really releasing four, new, key products over the next-- this year to 2024, with the goal of being the leader again, in terms of performance in chips by 2025 here.

But where it perhaps fell a little bit short here-- and we'll ask Gelsinger about this when we talk to him around noon today-- the margin structure. That was not included in this release. So as they start to release these new products, and should they expand into potentially buying one of their own foundries-- that was rumored with GlobalFoundries. [INAUDIBLE] spent $30 billion to buy this company to help make their own chips. What do the profit margins look like for this business?

JULIE HYMAN: So it sounds like as it starts to embark on this more emphasis on being a foundry-- it's signing on Qualcomm as one of its potential customers-- the company is going to release a new CPU-- Central Processing Unit-- for desktops this year, one for servers next year. I mean--

MYLES UDLAND: This is good stuff.

JULIE HYMAN: It's good stuff, sure.

BRIAN SOZZI: Should be.

JULIE HYMAN: If they can get them out on time and if people-- I mean, it seems like people are going to want to buy them. Chips are in high demand right now.

BRIAN SOZZI: It's still going to be-- as Intel ramps up its own innovation engine-- and that's how they describe it on that release-- I mean, the competitive environment is not going to get any easier. And you'll get evidence of that this evening when AMD reports here. Intel reported last week their data center servers group, those sales were down at close to, I believe, about 9%. It's in large part because of what AMD is doing. They've taken a lot of market share in that data center server space at the expense of Intel and some missteps operating wise at Intel pre-Gelsinger here. So AMD likely to have another strong report after the close today.

MYLES UDLAND: Yeah. You know-- well, there we go. Upside down logo.

[CHUCKLING]

You know. I just want to kind of talk about that capacity. And I'm sure you're going to ask Gelsinger about this. But in a Bloomberg story about Intel's announcement last night, right, so very nice basic outline here for chips. Smaller the number, the more technology, basically. You know, the more innovation you've had. TSMC went from building 5-nanometer to 3-nanometer. Intel's building 10. They're moving to 7. Intel wants to call the 10 a 7 and call the 7 a 4 to say that they're actually keeping pace, but it seems, Sozzi, that that's kind of playing some games here with what is happening maybe at Intel's fabs.

BRIAN SOZZI: Yeah. The naming has always been interesting in the chip space. AMD, not too long ago, they had a product called the Threadripper, which was always an interesting term to say. But that's just a lot of jargon here for the industry. It really boils down to, can Intel raise successfully its average selling prices on these new chips in an environment that is only going to get more competitive? And the number two, how big a business could a foundry business be for Intel? They signed up Qualcomm. They signed up Amazon. Who else do they have in the pipeline, and how much could those contracts be worth to the company? And then, secondarily, at what margin?

MYLES UDLAND: And AMD out with earnings tonight. Joining the party. That, of course, we've already outlined.