Latest / Best of Business / Sam Dickie: Fisher Funds expert on the rise and fall of Intel

Transcript

Sam Dickie: Fisher Funds expert on the rise and fall of Intel · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks'd be follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: Now.
• 0:17
  Speaker 3: Intel was once a high flying market darling back in
• 0:19
  Speaker 3: the day, and it used to dominate the computer chip
• 0:21
  Speaker 3: industry and so on with more than eighty percent share
• 0:23
  Speaker 3: market and PCs and servers. But that's all changed now
• 0:27
  Speaker 3: and the company's now on its knees and at risk
• 0:28
  Speaker 3: of being acquired on the cheap by rivals. To took
• 0:31
  Speaker 3: us through what's going on here is Fisher Fund, Sam
• 0:33
  Speaker 3: Dickey Hay Sam.
• 0:34
  Speaker 2: Here that good evening.
• 0:35
  Speaker 3: Take us back to the start.
• 0:37
  Speaker 2: Sam.
• 0:37
  Speaker 3: How did Intel actually become big? And then what happened
• 0:40
  Speaker 3: for it to fall away like this?
• 0:43
  Speaker 2: It was It did nothing for the first twenty years
• 0:45
  Speaker 2: of its life, from the seventies of the nineties, and
• 0:47
  Speaker 2: it took off when the PC boom took off. So
• 0:50
  Speaker 2: remember what it was. It dominated the design and manufacturing
• 0:53
  Speaker 2: of PC laptop and server computer chips, and it dominated
• 0:57
  Speaker 2: the software wrapped around that. So it had the whole
• 0:59
  Speaker 2: shooting match and the stoff went up about seventyfold or
• 1:03
  Speaker 2: seven percent of the nineteen nineties, and it kind of
• 1:06
  Speaker 2: peaked in the early two thousands, and that when the
• 1:08
  Speaker 2: rots set out so sadly, there was quite a few
• 1:11
  Speaker 2: things that went wrong, but sadly the most high profile
• 1:14
  Speaker 2: one is they decided against producing chips for the first iPhone,
• 1:18
  Speaker 2: and years later the company admitted that their forecast was
• 1:21
  Speaker 2: wrong and the actual volume of iPhones relative to their
• 1:24
  Speaker 2: business case was one hundred times what they expected. So
• 1:27
  Speaker 2: on top of that, they made a few other missteps.
• 1:30
  Speaker 2: But one notable one is if you think about computer
• 1:33
  Speaker 2: chips and how far we've come, they used to have
• 1:34
  Speaker 2: a few thousand transistors or tiny electrical switches on them,
• 1:38
  Speaker 2: and that the iPhone you've probably got on your desk
• 1:41
  Speaker 2: there here there has got tens of billions of these
• 1:43
  Speaker 2: tiny electrical switches jammed on top of them, and that
• 1:46
  Speaker 2: requires extremely efficient manufacturing, and Intel just couldn't keep up
• 1:51
  Speaker 2: with the prowess of the tiny So the Taiwanese chip
• 1:54
  Speaker 2: manufacturing giant TCMC. And because of all that and all
• 1:58
  Speaker 2: those missteps and several more, the stock underperform the US
• 2:00
  Speaker 2: stock market by about ninety percent over the last quarter century.
• 2:04
  Speaker 3: Is that what we talk about when we talk about
• 2:06
  Speaker 3: the chip war was just that they're like the the
• 2:08
  Speaker 3: development and the fine tuning of these chips.
• 2:12
  Speaker 2: I think that's what's underpinning there. But the chip wars
• 2:15
  Speaker 2: is really that, I guess, the cold chip wars, and
• 2:17
  Speaker 2: there's a book written about this. But if given the
• 2:20
  Speaker 2: fact that these that the manufacturer of these advanced computer
• 2:23
  Speaker 2: chips is considered the most complex and precise manufacturing processed
• 2:28
  Speaker 2: humors have ever undertaken, and given those chips underpins every
• 2:31
  Speaker 2: bit of technology we touch, and they underpin economies and militaries,
• 2:35
  Speaker 2: it's no wonder there is a big power struggle. So
• 2:37
  Speaker 2: a few factors to put that those chip wars in context.
• 2:42
  Speaker 2: China imports more in chips that it doesn't oil, so
• 2:45
  Speaker 2: has a natural disadvantage there. And then you've got Taiwan
• 2:48
  Speaker 2: or TCMC, which controls ninety percent of high end chip manufacturing.
• 2:53
  Speaker 2: And then you move back to the US, and they
• 2:55
  Speaker 2: even have an active government called the Chips Act, which
• 2:58
  Speaker 2: is funneling billions of dollars into US based chip designers
• 3:01
  Speaker 2: and manufacturers to make sure they win this war. So
• 3:04
  Speaker 2: some pretty big picture stuff there. And the fact that
• 3:06
  Speaker 2: Intel that the US darling is falling behind is a
• 3:09
  Speaker 2: big deal for the US as a whole.
• 3:11
  Speaker 3: So why has the company been slashing costs and cutting
• 3:14
  Speaker 3: expansion plans more recently?
• 3:17
  Speaker 2: Yeah, I mean it's announced it's laying on fifteen percent
• 3:20
  Speaker 2: of its workforce, cutting costs by ten billion, delaying opening
• 3:22
  Speaker 2: new chip factories in Germany and Poland arguably in favor
• 3:26
  Speaker 2: of opening up domestic putting more money into domestic chip
• 3:31
  Speaker 2: designer manufacturing facilities. But that's all to stop the bleeding
• 3:34
  Speaker 2: of I mean, they're making losses because of all these
• 3:38
  Speaker 2: poor decisions they've made. And on top of that, it's
• 3:40
  Speaker 2: been given around twelve billion dollars of funding under the
• 3:43
  Speaker 2: US Chips Act to try and shore it up.
• 3:46
  Speaker 3: Okay, who's bidding for Intel?
• 3:47
  Speaker 2: By the way, it's rumors only so far. So Qualcom,
• 3:52
  Speaker 2: a US based mobile phone chip designer, is rumored to
• 3:55
  Speaker 2: be buying Intel. And then why would anyone want to
• 3:57
  Speaker 2: buy this company after all these missteps? Presumably potential suitors see,
• 4:02
  Speaker 2: Intel is a cheap company that still has an enormous
• 4:04
  Speaker 2: amount of IP and valuable assets that are critical and
• 4:07
  Speaker 2: this chips wars that we talked about.
• 4:09
  Speaker 3: And so what does it mean if this purchase goes ahead?
• 4:12
  Speaker 3: What does this mean for the chip WARS.
• 4:15
  Speaker 2: I think it could create a much larger US based
• 4:17
  Speaker 2: chip design and manufacturing company that might just might be
• 4:20
  Speaker 2: able to compete against the likes of TARCMC in Taiwan.
• 4:24
  Speaker 2: And if it is true it is Qualcom, who's a
• 4:27
  Speaker 2: US based company, I'm sure that the combined entity would
• 4:30
  Speaker 2: still qualify for the You know that the hefty tailwind
• 4:34
  Speaker 2: of US government grants under that US Chips Act.
• 4:37
  Speaker 3: Okay, so what do investors need to consider when they're
• 4:39
  Speaker 3: thinking about this.
• 4:41
  Speaker 2: It's a lot going on there isn't that it's not
• 4:42
  Speaker 2: the first changing of the guard, and this this sort
• 4:44
  Speaker 2: of pointy end technology computer chip design. Man, So if
• 4:48
  Speaker 2: you remember back to mainframe computers, computers that were as
• 4:50
  Speaker 2: big as a small house, IBM dominated those chips until
• 4:55
  Speaker 2: we talked about that, dominated PCs and service for data centers.
• 4:58
  Speaker 2: ARM and Apple dominated the mobile chipset chip set WARS
• 5:01
  Speaker 2: and now in Nvidia is dominating the design of AI chips.
• 5:05
  Speaker 2: The only constantly, by the way, is TARSMC, the Cowheni's giant,
• 5:09
  Speaker 2: has dominated manufacturing for decades. So the point is, if
• 5:13
  Speaker 2: you're an investor at this point and you need to
• 5:14
  Speaker 2: be really careful, companies are not being left behind. So
• 5:17
  Speaker 2: make sure they have a healthy degree of paranoia about
• 5:20
  Speaker 2: disruption or competition, make sure they're not underspending on research
• 5:24
  Speaker 2: and development, and just make sure those companies are not
• 5:26
  Speaker 2: resting on their laurels, which is potentially what Intel did
• 5:29
  Speaker 2: back in the day.
• 5:30
  Speaker 3: Yes, such a good point, hey, Sam, as always thank you,
• 5:32
  Speaker 3: Sam de Kia fisherpons.
• 5:33
  Speaker 1: For more from News Talks B listen live on air
• 5:36
  Speaker 1: or online, and keep our shows with you wherever you
• 5:39
  Speaker 1: go with our podcasts on iHeartRadio