Contrary Research: Intel foundry is America's only realistic path to semiconductor independence before 2027

asking. We're asking for we we got 100,000 H100s. It's an auction for who can deliver the lowest price. Exactly. Exactly. Anyway, we have our next guest in the Temple of Technology. We have Kyle from Contrary. How you doing, Kyle? Good to see you. Welcome to the stream. How's it going, guys? What's new in your world?

Break it down for us. Well, we're just uh we're just launching our latest deep dive from Contrary Research. Very cool. So, for folks who don't know, Contrary Research is our private markets research database we launched a couple years ago. Contrary is a venture fund, but our focus is on talent and on research.

So, finding the best ideas, best people, bringing them together. Um, and so Contra research has published research on 500 different companies. I think we've got most of your sponsors on the list. So we're working our way down. Um, but we just published our latest deep dive on building an American TSMC.

So TLDDR the piece is the idea that we're completely dependent on Taiwan for 90 plus% of of advanced semiconductors and it's probably the dumbest bottleneck that we could possibly be in.

And it feels like we're basically just hoping that it doesn't become a problem when it could become the most significant geopolitical flash point and effectively lead to World War II. And so it feels like there is something we should do about it.

And and so we kind of go through the options of do we build it from scratch? Do we borrow it from TSMC? Uh do we try and and buy it from from some willing sellers? It seems uh consensus that Intel is not the American TSMC, is TSMC the American TSMC? Is Samsung the American TSMC?

We've seen a lot of progress from both of those companies. Elon doing a big deal with Samsung. TSMC obviously seeing great results out in Arizona. What's your take on just porting or expanding the current uh set of fab companies that are doing quite well?

Our biggest takeaway from doing the research is that um a little bit that the ASMC is more of a mindset than a specific company. It's an ecosystem that we have to build a lot of different aspects of this.

Yeah, there's a ton of startups that are building a lot of advanced stuff in chip design and using AI and that TSMC is pouring 165 billion into the US more so there's a ton of things that we can take advantage of.

The biggest limitation is that when you try and build a lot of this stuff from scratch, you just don't get there quickly enough for it to make a difference, right?

There's a bunch of stuff like the folks at and they have this idea sort of internally of of China 27 where it's this idea of you know if if China is going to invade Taiwan it's probably going to happen over the next you know call it four or five years. Xi has talked about 2027 specifically.

So it this is an urgency thing. This is not a long-term bet. And so the question is how do we get to scale where if if China was to take Taiwan tomorrow is there something that we could do to have some capacity here?

The unfortunate reality is that the startup ecosystem, as great as it is, and as much as it can benefit us in the long run, it's not going to get there quick enough.

As much benefit as we get from TSMC partnering, a lot of the the results they're having in in uh in Arizona, um there's a huge cultural blowback in Taiwan because they have this Silicon Shield where they think of our dependence on them as their protection from China.

And so yes, TSMC wants to pour a bunch of resources here, but whether we get those sort of leading edge nodes that allow us to compete for things like AGI and to really compete with China, that is a much longer battle. And so despite the fact that Intel is is struggling is it's basically sending up emergency flares.

You guys talked about it on the show basically in their last quarterly earnings. They talked about, you know, we're going to do our best and if we don't get material customers, it may not be economical for us to continue to compete in leading edge nodes, which is going to be a huge hit for the US to stay competitive.

And so our thesis in the piece is that we we basically have to take Intel as our only hope of getting to scale quickly enough. Intel's not going to do it on their own. There's a bunch of stuff that we have to do to make that possible. Yeah. So, what's the biggest request from TSMC or Taiwan?

Like should we be pulling the hey we'll invest alongside you, we'll subsidize, we'll give you tax cuts to build the second, the third, the fourth fab in America, or should we be more focused on let's commit more defense resources, more government spending to Taiwan to create uh, you know, an American shield that's independent of the Silicon Shield.

Uh, or maybe both. Yeah, I mean there's definitely when you talk to all of the major defense companies, uh Palmer has a great line where he talks about turning Taiwan into a prickly porcupine that people don't want to step on.

That is absolutely priority number one to make them to give them all the capabilities that they need and and the folks at Anderol are on the ground in Taiwan all the time. So that's a huge component of of sharpening the partnership.

I also think that you need to emphasize um that American companies need to be the government needs to incentivize American companies to be purchasing Americanmade uh semiconductors as much as possible.

So as you reshore more of this stuff to whether it's TSMC efforts, whether we literally, you know, nationalize Intel and take it and take the foundry business private, right?

Like Dylan Patel, who you guys have had on the show and is an absolute rockstar, he has made it abundantly clear that the survival of Intel foundry is critical to America's economic and technological dominance. And so we have to take that seriously as well.

And there's a bunch of incentives that we can build in terms of making, you know, getting people access to uh semiconductors that are made by Intel in the US, by TSMC in the US.

We have to incentivize people to be using our own ecosystem so that we get the reps we need to get as as far away from dependence on Taiwan as possible. Do you think that Lip Bhutan is the right leader for this transition for Intel?

It seems like they need to with broader support reinvent themselves and yet hearing Lip Bhutan on earnings calls and and just talking through it just feels like cut after cut. He's good at firing people, but is he really good at firing? I haven't been I haven't been inspired by uh he's definitely not Karp on the mic.

Uh he's not not exactly inspiring people. Um so I'm curious. also has like 1,000 employees and I'm pretty sure Li Bhutan has like a 100,000 employees or something. Yeah, they so Intel has more employees than TSMC and Nvidia combined. Yeah. So, he's got he's got plenty of people that he can fire.

Uh the the biggest thing that is compelling about Intel is that they are already in this process of cultural change. Right.

You look at that I mean it's back to 2005 was the first time they had a CEO who wasn't an engineer by trade and basically they went through 15 years of financialization like it was literally the Jack Welch playbook of just dumping money into stock buybacks and and robbing R&D for for decades.

Um he you know those CEOs were the ones that put um them on the on the path sort of stumbling uh losing their lead. So like even even with Gellzinger like that transition is already in its way like putting engineer they talk about bringing the nerds back and that transition is already in it way which is important.

I think the cultural leadership that you should be paying more attention to is the leadership level at intel foundry specifically when you think about Intel's two core businesses. You have Intel products Intel Foundry.

Intel Foundry has had four different leaders over the last three years, like some of them lasting no more than two months, right? And what was compelling, this idea that like you you can you can have this sort of within a division leader who can be really inspirational.

I think the folks at Whimo, they have a co-CEO setup, but it's their former head of policy and then their former CTO. You have the technology, you have the the policy. Like that's a great duo for sort of the Whimo setup. something at Intel Foundry that could be similar could be really compelling.

The thing that's the biggest concern for me is that the first person they had once they started breaking out Intel Foundry into a separate P&L, the first CEO that they the first leader of the of Intel Foundry that they had, they called him the president of Intel Foundry, he d he reported directly to Galsinger.

Four leaders later, it's now this person is the general manager of Intel Foundry. They're also the chief global supply chain officer and the chief technology officer of Intel's core business. Meanwhile, like Intel products has its own dedicated CEO with the title of CEO.

I think the biggest problem is not necessarily even liutan, but it's more about are we actually acknowledging that that Intel foundry needs to be a growth engine that you can invest in to be able to build back dominance and that's absolutely not how they treat it.

Was I feel like earlier this year there was a rumor that Elon was kicking the tires on Intel. Is was how how real was that? Did he kick the tire? And it was it was the PJ tracking. That was how they all but the PJ but the PJ tracking felt like a bit silly cuz everybody was in Maron. Yeah. Everyone was there.

That's right. You can you could spin probably a lot of compelling narratives based on all of the people who were there at the same time. Right. Yeah.

Um in terms of like what is actually sort of official, the two things that you know for sure are there was talks that that TSMC was going to acquire Intel's Foundry business. their board flatly denied that that that wasn't true at all.

Then there was talks that they might invest heavily and run a joint venture where they take over operations of Intel's foundry business even if they're not buying it outright. And what's funny is that they did not deny that outright. They refused to comment.

And so the general census of folks is that that was a conversation that was active. Yeah, that makes sense. How much of the uh the race for American semiconductors is driven by the question of like founder mode? Just that abstract question of uh you know do we need Elon in the seat leading?

He said he was going to be walking the floor at Samsung. Um obviously like the founder mode pattern has seemed to work in so many stuck kind of stagnating worlds like rocketry, electric cars or Elon's gotten in and kind of jarred things loose.

Um but uh but is that is that something that we that we should be looking out for or optimizing for? 100%. I mean when you contrast Lipu versus Jensen, it's like night and day difference, right? You you do not have visionary leaders in chip manufacturing in the US because we don't do it anymore.

Like it's not a fundamental part of who we do of what we do. There's not a core DNA there. And so do you need somebody who is that visionary leader? Absolutely. And does Intel have any of that DNA? No.

And so when you think about what needs to change, I think our thesis and takeway after doing six months of research and drilling into all this stuff is that you cannot ignore the entire ecosystem.

And that leader that that visionary leader role is absolutely critical and that's that is an unanswered question like we don't have that like we don't have an you know somebody retweeted our our um our post today and said we just need an Elon Musk like you know herculean act of god to be able to make this possible.

And like the the takeaway is accurate. The how to do that is much more difficult. Yeah. Yeah. It can't be manufactured. Um but I mean green shoots all over the place. Lots of cause for optimism. But so hope hopefully the piece uh starts a conversation can be a catalyst for change.

What are you hoping to see out of like the immediately next quarter for Intel to get on the right track? The biggest opportunity is for Intel to stop treating Intel Foundry like it is an ugly stepchild.

like it is this like embarrassing accident that they happen to have and they're trying to distract people over to this other thing or dress it up like it's this fancy thing. And the biggest problem is and this goes back to this is a great conversation I've heard a couple of folks have.

They talk about the I think it was um Buck Buco Capital talking about like the the greatest thing that Elon Musk has built independent even even think Tesla, SpaceX, everything.

It is the investor base at Tesla is the is got to be the most incredible investor base any public company has ever had to let him do what he's doing and to have the vision and everything.

Intel is is just smattered with what Palmer would call Wall Street weenies is everybody's just thinking about it is how can we optimize this thing as effectively as possible and it's like that is not how you build the future nor is it how you build American dominance and so really you need that investor-based turnover and it feels like that comes from narrative where if you're telling the story of Intel foundry we can get a visionary leader we can have this opportunity they're already at scale they have a lot of the technology they've they have sort of caught back up in in many ways they're still failing operations pretty miserably.

And so the opportunity is like tell that story and get an investor base that is stoked to be investing in the ASMC. Well, thank you so much for joining. It's a pleasure catching up. We'll talk to you soon. Have a good rest of your day. Thanks for coming on, Kyle. Great work.

And speaking of Ander, our next guest works for Ander and uh she's the uh general manager of Ander RMS and we're excited to talk to her about uh the new rocket motor facility. But we'll let her