(Yicai Global) May 7 -- Intel's new Chief Executive Bob Swan aims to enhance the capacity of the firm's executives to hone the strategy of moving toward a more data-centered approach in the chipmaking market where he envisions USD300 billion prospects. Swan sat down with Yicai Global in an exclusive interview that was his first with the Chinese media since taking office in the Californian firm in January.
Biggest Challenge: Unleash Intel's Full Potential
Yicai Global: What was your first thought when you became the CEO of Intel and what did you do?
Bob Swan: I had several thoughts: Excited, honored, thrilled. Maybe even a little overwhelmed. And my first thought was to put that on paper and share it with all the employees in the company about how honored I was to step into this position in one of the best companies in the world and how I was going to need their help to ensure that we could achieve the ambitions that we set out for the company.
YG: So what was the first thing you did?
BS: I wrote a note to the 107,000 employees about how excited, how thrilled, how honored, how humbled I was to step into this big role. How excited I was about the future of the company and how we would engage collectively to make the whole of Intel much greater than the sum of its one hundred and seven thousand people.
YG: Most of your working experience involves financial management, which is different from Intel's core business and tradition. What changes will you bring to Intel in terms of the way it is managed?
BS: I have a background in a variety of different experiences. Coming to Intel has been an incredible, exciting opportunity for me. I think in essence, my challenge and opportunity is how do we begin to redefine and reshape the role that we can play in the industry going forward. We have built incredible market share positions in a fairly narrow market, because we have the best engineers in the world. My challenge is to get the engineers to see bigger opportunities.
What that's gonna take inside our company is really spread across four key things: Customer obsession in everything that we do. We have 107,000 people around the globe working together. And when we work together as a company, the things we can accomplish are unbelievable. Thirdly, open transparent communications, free flow of information. So we can make a big company act like a small company, and be innovative and iterative in terms of the things that we do. And fourth, in terms of our evolution in this wonderful culture is to take more risk. Our dreams and our ambitions are as big as they have ever been. Our challenge will be to take more risk and learn fast when those things don't materialize, to enable or increase the likelihood of success about the next risk-taking venture. So as a leader of this wonderful company with incredible people, my role is to simply tap into their ambitions, and allow or help them to achieve things they thought are possible.
YG: Since Intel is such a mature company, how will you reshape it?
BS: So the idea is we have a USD70 billion company and the amount of change in the industry around us is at an all-time high. The innovation that's happening, the rate of it is growing and growing. Our challenge is to leverage the benefits of size and scale that make us special, but also be nimble and quick to capitalize on markets and opportunities.
In simple words, there are two things that I highlight. One is redefining the market you are planning to expand. Because when you do that, it opens up your ideas, aspirations and creativity inside the company to take advantage of new things. And secondly, if your ambitions are big, and you want to have a bigger and bigger impact, you need to be comfortable with taking more risks. And those two things we think will allow us to play a bigger and bigger role with key technology inflections and have a bigger impact on the success of our customers, and continue to grow the profitability of the company. That's what we're focused on.
YG: What's the biggest challenge for you in terms of managing this company?
BS: For me personally? The biggest opportunity and challenge for me is to unleash the full potential inside Intel. We have 107,000 of the smartest people on the planet and my biggest challenge is how to unleash them at a time when we've been extremely successful for the last 50 years. But the opportunities for us to play a bigger and bigger role in the next ten years is as great as it's ever been. So unleash the full potential in the spirit of Intel employees and engineers to have a bigger impact on the world when they've already had quite a big impact so far.
YG: Is there a reason behind why you highlight execution?
BS: The execution for us is important as it's ever been, because the role we want to play in the success of our customers is much bigger than it's ever been. So as we redefine our service market and want to build technologies much broader than simply the central processing unit inside a PC or a data center, playing a bigger role in the lives of our customers means that they are very dependent on our ability to execute flawlessly. So most importantly as we think about playing a bigger role in our customers' success, it means that we need to ensure that we execute, we deliver on the promises that we make to them.
The World Is Increasingly Data-Centric
YG: In your open letter upon becoming CEO, you said Intel is moving toward its most successful transformation in corporate history. How do you define success and what's your plan to bring Intel to the next level?
BS: Yes, we did talk about one of the most successful transformations. And when we say that, in essence, what we mean is, historically, the company has predominantly focused on the technology that powers the PC. As we look forward in our transformation, it's about developing Intel technologies that power everything. Because when we look at the world today, almost everything seems to be a computer, not just a PC, not just a data center, not just an automobile, not just a factory, not just a retail store, but increasingly, everything seems to be a computer. And our ambition and our transformation in this increasingly data-centric world is to build the technologies that will power industries around the globe.
YG: As a CEO, what's your next priority?
BS: To make it all happen. To continue to accelerate the development of innovative technologies that will be used in more and more devices, with the billions of connected devices that exist around the world. And have Intel's technologies power those devices to enable an increasingly data-centric environment.
YG: Intel achieved its financial goals in the past three years when you were the chief financial officer. But especially the first quarter this year, figures seem to be disappointing, especially in Intel's data center business. So what happened? Does it mean that Intel will slow down the pace of growth in the future?
BS: The last year was our 50th anniversary as a company, and our 48th, our 49th and our 50th year were record years for the company in a long history of very good years. So we're very excited about the prospects we have as a company. In 2019 -- we just updated our investors last week with what they can expect from us -- and what our numbers imply, it will be the second-best year in a storage of a 51-year history. So our ambitions and our focus is on delivering our promises to our customers in 2019. So it will be the second-best year in the Intel storage history.
YG: So you don't think it will have a bad impact on the future?
BS: When we look at our end markets, the things that drive demand for compute capacity, they're as strong around the globe as they've ever been. And think about your daily activities, they demand data. Whether it's on your device in your hand, behind your computer, or in the car that you're driving, there's this incredible insatiable demand for data. It's stronger now than it's ever been. Intel builds the technologies that enable that data to be stored, processed, analyzed, and it is therefore increasingly relevant. So the end markets are as strong as they've ever been, and the technologies that we're building are as broad as they've ever been as well. So we're extremely excited about how we see the role Intel will play in those end markets.
Over time, we'll see very good periods and not-so-good periods based on the consumption of the technologies we deliver. In 2019, what we indicated last week was where to stand after a record 2018. A lot of our customers are just beginning to deploy some of the technologies that they acquired last year. So it's a bit of a digestion period in 2019. But our expectations for end market demand are as strong as they've ever been, and that's what we're focused on.
How to Make Sure the Transformation Succeeds?
YG: Considering that 2019 will be a very tough year for you, what does it take to achieve the successful transformation?
BS: When we look at end markets, the growth of silicon total addressable market is expected to be 5 percent to 7 percent over the course of the next five years. Our ambitions are to grow the role that we play in that much larger TAM by developing these key technologies that we think we are gonna continue to drive demand for Intel's technology.
YG: The Microsoft-Intel alliance defined the PC era but some may argue that both of you lag behind in the smartphone era. With Satya Nadella, Microsoft has made great achievements. So what's your view on that? Will the board of directors have the same kinds of expectations for you?
BS: Microsoft and Satya, in particular, had an incredible transformation of their company. So it's an opportunity for us to learn, to think about how they have evolved from a PC-centric company or a Wintel one, combining the Windows operating system with Intel microprocessors. How they've involved, what kind of opportunities that creates for us, and how can we learn from them along with our other partners? How to continue to expand and grow your horizons? And I'm sure, I hope, the expectations of Intel's board of directors on me are as big as Microsoft's expectations for Satya and his team.
YG: What have you learned about that matter so far?
BS: Just how to maneuver a big company. And they've done a fantastic transformation where they were extremely successful when the PC had tons of growth, and how they evolved their culture and their transformation to take advantage of bigger and bigger opportunities.
YG: How will you deal with the failures and risks in the process of transformation?
BS: Learn fast. When there's a failure, you embrace it, understand it, understand why it didn't work out and use those learnings so that second time, you take more risks. And your ability to take risks, adjust and adapt from your experiences is critical to make a very large company become a very quick nimble innovative company with entrepreneurialism inside of our four walls.
Three Technology Inflections: Artificial Intelligence, 5G and Autonomy
YG: Intel has identified a market opportunity worth USD300 billion. What share of this market do you expect to gain?
BS: More. We used to define the role that we play intact, having a roughly 90 percent market share of central processing units inside of PCs and data centers. That's not the way we look at the world today. Given these end needs for more and more computation power, and the appetite to have information more and more readily available and relevant, we see our total addressable market, or our served market, to be almost USD300 billion today. As I indicated before, it's not just about the CPU. It's about the technologies, CPUS, graphics processing units, field-programmable gate arrays, artificial intelligence, fifth-generation wireless, and autonomy. It's about all these different technologies that we can deploy. So today we define our role in that much bigger market with very attractive demand signals to be a market share merely between 20 percent and 25 percent. And our ambitions over time is to continue to grow the role that we play, where Intel's technologies increasingly power the world.
YG: So you don't have a very specific target?
BS: The opportunities for our company to deploy our technologies in more and more devices are enormous. And our focus and our intensity are on bringing those technologies to life. So we can play a bigger and bigger role in the success of our customers. So that means more market share, becoming more relevant in the eyes of our customers as well as benefiting our shareholders.
YG: AI and 5G bring a lot of opportunities, but those are very competitive fields now. What are Intel's advantages?
BS: It's a very exciting time to be in the semiconductor industry. Because of these key inflections, these key technology inflections that are creating new opportunities. So whether it's 5G, whether it's AI, whether it's autonomy, these are the three key technologies and inflections that we think create significant opportunities in driving, computation, analytics, storage and data retrieval. So that's how we see these key technology inflections, and our intention is across these technologies to lead. So our efforts in 5G and AI in conjunction with our partners is to continue to build AI in every chip that we make. Our ambitions in autonomy, particularly through the acquisition of Mobileye, is to play an increasingly big role and improve safety in transportation in cities around the globe by deploying Mobileye technologies and assisted driving.
YG: Since you announced that Intel is excited about 5G smartphone business, there's quite a lot of speculation about how you will deal with this business, including the end of the partnership with China's Unisoc Communications. How do you respond to that?
BS: So first, when we talk about expanding our TAM and the opportunities we go after, we really think about three key criteria regarding markets that are more and more important to us. First, is it a differentiated technology that we have a unique position to win? Second, does it allow us to play a bigger, more important role in the success of our customers? And third, does it allow us to make more money?
So in the 5G world, our answer to all three of those questions is 'absolutely yes'. But particularly as it relates to network infrastructure and edge devices. Regarding 5G smartphones, in particular, we announced our intent to exit the market, because we didn't see the ability to actually make money in that market. But for smartphones, in particular, we don't really see the opportunity for us to make money, and therefore, we're redoubling our efforts on network infrastructure, on autonomy and other technologies.
YG: But there are potential buyers, no?
BS: We've spent a number of years developing a very powerful intellectual property and patent portfolio related to 5G. What we're gonna do with that technology is evaluate a range of alternatives, including how we can win in terms of 5G modems in non-smartphone applications, in IOT edge devices. We're evaluating those opportunities now. And the fact that our teams of engineers have built some incredible technology in a wonderful patent portfolio gives us a lot of optionality to evaluate as we think about the role we'll play going forward.
YG: In recent years, Intel acquired numerous companies trying to expand its capabilities and coverage. Are you satisfied with the outcome of these acquisitions?
BS: We've made some very important acquisitions and they fit into that the criteria I spelled out before. As we think about emerging technologies and expanding the role that we can play in the industry, we look at either building things ourselves, or the opportunities to acquire those who have accomplished extremely special things, those that either fill gaps that we have in our portfolio or expand the role that we can play.
And that includes key things. I talked about technologies at inflection points. When we look at AI, we build AI into all of our chips. But we also saw an interesting technology of computer vision with a team called Mobius. We acquired them and they're a key part of our company with key technology. We acquired Nervana Systems that builds neural computing. The role Nervana plays in our company is increasing and more important. Third, we believe that field-programmable gate arrays are gonna be a bigger and bigger part of the role that we can play inside of our big data center business. That was the acquisition of Altera we made a number of years ago. Fourth is the deployment of computer vision and technologies inside an automobile. We think it's gonna be bigger and bigger going forward. We acquired a leading player in the field, Mobileye, because they have done wonderful things in deploying technology in the early stages of autonomous driving.
So we look at opportunities to expand our horizons, key technology inflections, the role that we can play in the success of our customers and our ability to make money. I feel great about the acquisitions we've made and the role that they will play.
YG: Do you have plans to change Intel's investment strategy?
BS: I think we'll do a lot of the same. As we think about deploying capital, we spend a significant amount of money in research and development, roughly USD13.5 billion. We allocated USD15 billion to build facilities to manufacture high-performance computing. Thirdly, we deploy our capital to acquire, to fill gaps and expand our served market, as well as return capital to our shareholders, in ways that we deem appropriate. So those things that we've been doing I expect to continue.
Go Hand in Hand With China
YG: How do you see China and its industrial ecosystem?
BS: Last year was our 50th anniversary and we've been in China for almost 35 years out of our 50 years of existence. So a lot of the success of Intel has a lot to do with the success of Intel in China. It's a huge market for us. It's growing. It's increasingly important. The customers we have here, the relationships we have built over time. We have a manufacturing presence. We have an assembly and testing presence. And we have some wonderful engineers. We have an Intel Capital portfolio linked to innovation that exists here. So the role that Intel and China have goes hand in hand with the role of Intel overall. It's been a critical part of our success over the last 35 years and our expectations of playing a bigger role going forward.
YG: Will you make any strategic adjustments in Intel's business in China?
BS: Strategic adjustments, I don't think so. I think it's been a really important part of the growth and success of our company, and my challenge is to make that a continued, bigger better part for the company going forward.
YG: How do you collaborate with Chinese stakeholders?
BS: Because we've been here for so long, we've built extremely important relationships over that time frame with original equipment manufacturers around the globe that have a very big presence here. We have very important customers here in China, whether it's Alibaba Group Holding, whether it's Tencent Holdings, whether it's JD.Com, whether it's Baidu, whether it's Huawei Technologies, whether it's ZTE. We have a number of customers that have been partners with us regarding how technologies get deployed in this market. So we continue to leverage those relationships and try to expand those relationships as we think about the role Intel can play with our partners in China to bring Intel technologies deployed across the world.
Editor: Emmi Laine