An Intel-GlobalFoundries deal could bring expertise to chipmaker, Bernstein's Rasgon

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FURTHER EVIDENT TO REMAIN
FURTHER EVIDENT TO REMAIN
FURTHER EVIDENT TO REMAIN NEGATIVE ON THE STOCK.
NEGATIVE ON THE STOCK.
NEGATIVE ON THE STOCK. STACEY, GOOD MORNING
STACEY, GOOD MORNING
STACEY, GOOD MORNING IS YOUR CALL ABOUT GLOBAL
IS YOUR CALL ABOUT GLOBAL
IS YOUR CALL ABOUT GLOBAL FOUNDRIES BEING THE WRONG ASSET,
FOUNDRIES BEING THE WRONG ASSET,
FOUNDRIES BEING THE WRONG ASSET, OR IS THIS BROADER, PAT
OR IS THIS BROADER, PAT
OR IS THIS BROADER, PAT GELSINGER'S STRATEGY TO PUSH
GELSINGER'S STRATEGY TO PUSH
GELSINGER'S STRATEGY TO PUSH DEEPER INTO MANUFACTURING?
DEEPER INTO MANUFACTURING?
DEEPER INTO MANUFACTURING? >> A LITTLE OF BOTH, I GUESS
>> A LITTLE OF BOTH, I GUESS
>> A LITTLE OF BOTH, I GUESS LOOK, I GET PAT'S PUSH INTO
LOOK, I GET PAT'S PUSH INTO
LOOK, I GET PAT'S PUSH INTO MANUFACTURING.
MANUFACTURING.
MANUFACTURING. IT'S SORT OF FUNNY, THE BULL
IT'S SORT OF FUNNY, THE BULL
IT'S SORT OF FUNNY, THE BULL CALL ON THE STOCK FOUR OR FIVE
CALL ON THE STOCK FOUR OR FIVE
CALL ON THE STOCK FOUR OR FIVE MONTH AGO WAS INTEL WAS GOING TO
MONTH AGO WAS INTEL WAS GOING TO
MONTH AGO WAS INTEL WAS GOING TO GO LIGHT AND GET OUT OF
GO LIGHT AND GET OUT OF
GO LIGHT AND GET OUT OF MANUFACTURING.
MANUFACTURING.
MANUFACTURING. PAT KIND OF PUT THE KIBOSH ON
PAT KIND OF PUT THE KIBOSH ON
PAT KIND OF PUT THE KIBOSH ON THAT
THAT
THAT THEY HAVE BEEN BUILDING UP OR
THEY HAVE BEEN BUILDING UP OR
THEY HAVE BEEN BUILDING UP OR ATTEMPTING TO BUILD UP THEIR OWN
ATTEMPTING TO BUILD UP THEIR OWN
ATTEMPTING TO BUILD UP THEIR OWN LEADING EDGE FOUNDRY BUSINESS.
LEADING EDGE FOUNDRY BUSINESS.
LEADING EDGE FOUNDRY BUSINESS. PART OF THE PROBLEM, THOUGH, IS
PART OF THE PROBLEM, THOUGH, IS
PART OF THE PROBLEM, THOUGH, IS INTEL HAS NOT BEEN A FOUNDRY
INTEL HAS NOT BEEN A FOUNDRY
INTEL HAS NOT BEEN A FOUNDRY THEY DON'T KNOW HOW TO BE A
THEY DON'T KNOW HOW TO BE A
THEY DON'T KNOW HOW TO BE A FOUNDRY NECESSARILY.
FOUNDRY NECESSARILY.
FOUNDRY NECESSARILY. IF YOU'RE THINKING ABOUT THE WAY
IF YOU'RE THINKING ABOUT THE WAY
IF YOU'RE THINKING ABOUT THE WAY THEY COULD ADD TO IT, IT WOULD
THEY COULD ADD TO IT, IT WOULD
THEY COULD ADD TO IT, IT WOULD BRING THEM A FOUNDRY CUSTOMER
BRING THEM A FOUNDRY CUSTOMER
BRING THEM A FOUNDRY CUSTOMER BASE
BASE
BASE IT'S NOT LEADING, IT'S LAGGING
IT'S NOT LEADING, IT'S LAGGING
IT'S NOT LEADING, IT'S LAGGING IT WOULD BRING THEM A CUSTOMER
IT WOULD BRING THEM A CUSTOMER
IT WOULD BRING THEM A CUSTOMER BASE AND POTENTIALLY GIVE THEM
BASE AND POTENTIALLY GIVE THEM
BASE AND POTENTIALLY GIVE THEM EXPERTISE IN HOW TO RUN A
EXPERTISE IN HOW TO RUN A
EXPERTISE IN HOW TO RUN A FOUNDRY, WHICH HISTORICALLY,
FOUNDRY, WHICH HISTORICALLY,
FOUNDRY, WHICH HISTORICALLY, THEY HAVE BEEN BAD IF THEY DON'T
THEY HAVE BEEN BAD IF THEY DON'T
THEY HAVE BEEN BAD IF THEY DON'T KNOW HOW TO DO IT.
KNOW HOW TO DO IT.
KNOW HOW TO DO IT. AT THE SAME TIME, YOU KNOW, IF
AT THE SAME TIME, YOU KNOW, IF
AT THE SAME TIME, YOU KNOW, IF YOU THINK ABOUT THE FOUNDRY,
YOU THINK ABOUT THE FOUNDRY,
YOU THINK ABOUT THE FOUNDRY, TSMC IS REALLY THE ONLY ONE, THE
TSMC IS REALLY THE ONLY ONE, THE
TSMC IS REALLY THE ONLY ONE, THE 800-POUND GORILLA.
800-POUND GORILLA.
800-POUND GORILLA. THEY MAKE A TON OF MONEY
THEY MAKE A TON OF MONEY
THEY MAKE A TON OF MONEY THE OTHER ONES ARE KIND OF
THE OTHER ONES ARE KIND OF
THE OTHER ONES ARE KIND OF MARGINAL AND OF THE OTHER
MARGINAL AND OF THE OTHER
MARGINAL AND OF THE OTHER PLAYERS, UMC, SMICK, GLOBAL
PLAYERS, UMC, SMICK, GLOBAL
PLAYERS, UMC, SMICK, GLOBAL FOUNDRIES IS PROBABLY THE WORST.
FOUNDRIES IS PROBABLY THE WORST.
FOUNDRIES IS PROBABLY THE WORST. THEY HAVE BEEN LOUSY
THEY HAVE BEEN LOUSY
THEY HAVE BEEN LOUSY YOU KNOW, THEY HAVE BEEN TRYING
YOU KNOW, THEY HAVE BEEN TRYING
YOU KNOW, THEY HAVE BEEN TRYING TO DRESS IT UP, TRYING TO DO AN
TO DRESS IT UP, TRYING TO DO AN
TO DRESS IT UP, TRYING TO DO AN IPO, BUT THE ECONOMICS ARE STILL
IPO, BUT THE ECONOMICS ARE STILL
IPO, BUT THE ECONOMICS ARE STILL LOUSY.
LOUSY.
LOUSY. THE MARGINS ARE DILUTIVE
THE MARGINS ARE DILUTIVE
THE MARGINS ARE DILUTIVE YOU LOOK AT WHAT THEY HAVE BEEN
YOU LOOK AT WHAT THEY HAVE BEEN
YOU LOOK AT WHAT THEY HAVE BEEN PAYING FOR IT.
PAYING FOR IT.
PAYING FOR IT. YOU SORT OF THINK ABOUT IT, IF
YOU SORT OF THINK ABOUT IT, IF
YOU SORT OF THINK ABOUT IT, IF THEY SPEND $30 BILLION FOR THAT
THEY SPEND $30 BILLION FOR THAT
THEY SPEND $30 BILLION FOR THAT AND $20 BILLION FOR ARIZONA,
AND $20 BILLION FOR ARIZONA,
AND $20 BILLION FOR ARIZONA, THAT'S $50 BILLION TOTAL
THAT'S $50 BILLION TOTAL
THAT'S $50 BILLION TOTAL THAT WOULD BE COMING OUT OF
THAT WOULD BE COMING OUT OF
THAT WOULD BE COMING OUT OF INTEL, THE ENTIRETY OF THE
INTEL, THE ENTIRETY OF THE
INTEL, THE ENTIRETY OF THE SUBSIDIES THAT THE U.S.
SUBSIDIES THAT THE U.S.
SUBSIDIES THAT THE U.S. GOVERNMENT IS TALKING ABOUT FOR
GOVERNMENT IS TALKING ABOUT FOR
GOVERNMENT IS TALKING ABOUT FOR THE ENTIRE INDUSTRY IS $52
THE ENTIRE INDUSTRY IS $52
THE ENTIRE INDUSTRY IS $52 BILLION.
BILLION.
BILLION. IT KIND OF GIVES YOU AN IDEA OF
IT KIND OF GIVES YOU AN IDEA OF
IT KIND OF GIVES YOU AN IDEA OF THE SCALE THAT PAT IS THINKING
THE SCALE THAT PAT IS THINKING
THE SCALE THAT PAT IS THINKING ABOUT IN TERMS OF INVESTING.
ABOUT IN TERMS OF INVESTING.
ABOUT IN TERMS OF INVESTING. >> SO STACEY, WHAT PRICE TAG FOR
>> SO STACEY, WHAT PRICE TAG FOR
>> SO STACEY, WHAT PRICE TAG FOR GLOBAL FOUNDRIES DO YOU THINK
GLOBAL FOUNDRIES DO YOU THINK
GLOBAL FOUNDRIES DO YOU THINK WOULD MAKE SENSE, IF NOT $30
WOULD MAKE SENSE, IF NOT $30
WOULD MAKE SENSE, IF NOT $30 BILLION?
BILLION?
BILLION? AND WHAT ARE THE OTHER ASSETS
AND WHAT ARE THE OTHER ASSETS
AND WHAT ARE THE OTHER ASSETS YOU THINK INTEL SHOULD BUY
YOU THINK INTEL SHOULD BUY
YOU THINK INTEL SHOULD BUY INSTEAD?
INSTEAD?
INSTEAD? >> I DON'T KNOW.
>> I DON'T KNOW.
>> I DON'T KNOW. LOOK, SO I'M NOT GOING TO SET
LOOK, SO I'M NOT GOING TO SET
LOOK, SO I'M NOT GOING TO SET PRICE TARGETS ON GLOFO
PRICE TARGETS ON GLOFO
PRICE TARGETS ON GLOFO IF THE $30 BILLION IS CORRECT,
IF THE $30 BILLION IS CORRECT,
IF THE $30 BILLION IS CORRECT, THAT'S FIVE OR SIX TIMES ON
THAT'S FIVE OR SIX TIMES ON
THAT'S FIVE OR SIX TIMES ON SALES.
SALES.
SALES. TSMC RIGHT NOW SELLS FOR ABOUT
TSMC RIGHT NOW SELLS FOR ABOUT
TSMC RIGHT NOW SELLS FOR ABOUT TEN TIMES SALES.
TEN TIMES SALES.
TEN TIMES SALES. SMICK IS IN CHINA, THEY'RE ABOUT
SMICK IS IN CHINA, THEY'RE ABOUT
SMICK IS IN CHINA, THEY'RE ABOUT SEVEN TIMES SALES.
SEVEN TIMES SALES.
SEVEN TIMES SALES. FOR SOME CONTEXT, UMC'S NET
FOR SOME CONTEXT, UMC'S NET
FOR SOME CONTEXT, UMC'S NET MARGIN IS ABOUT 15% AND IT'S
MARGIN IS ABOUT 15% AND IT'S
MARGIN IS ABOUT 15% AND IT'S PROBABLY PRETTY PEAKISH.
PROBABLY PRETTY PEAKISH.
PROBABLY PRETTY PEAKISH. GLOBAL FOUNDRY IS LOSING MONEY
GLOBAL FOUNDRY IS LOSING MONEY
GLOBAL FOUNDRY IS LOSING MONEY AND THEY WOULD BE SPENDING TWICE
AND THEY WOULD BE SPENDING TWICE
AND THEY WOULD BE SPENDING TWICE AS MUCH.
AS MUCH.
AS MUCH. AS FAR AS WHAT ELSE THEY SHOULD
AS FAR AS WHAT ELSE THEY SHOULD
AS FAR AS WHAT ELSE THEY SHOULD BUY, I DON'T KNOW.
BUY, I DON'T KNOW.
BUY, I DON'T KNOW. IF THE GOAL IS TO GET INTO
IF THE GOAL IS TO GET INTO
IF THE GOAL IS TO GET INTO FOUNDRY, IS THAT IS THE
FOUNDRY, IS THAT IS THE
FOUNDRY, IS THAT IS THE STRATEGY, THERE'S NOT A WHOLE
STRATEGY, THERE'S NOT A WHOLE
STRATEGY, THERE'S NOT A WHOLE LOT ELSE OUT THERE
LOT ELSE OUT THERE
LOT ELSE OUT THERE GLOFO MAKES SENSE, AND THEY'RE
GLOFO MAKES SENSE, AND THEY'RE
GLOFO MAKES SENSE, AND THEY'RE HEADQUARTERED HERE IN THE U.S.,
HEADQUARTERED HERE IN THE U.S.,
HEADQUARTERED HERE IN THE U.S., VERSUS THE OTHER ONES WHICH ARE
VERSUS THE OTHER ONES WHICH ARE
VERSUS THE OTHER ONES WHICH ARE TAIWANESE AND CHINESE AND
TAIWANESE AND CHINESE AND
TAIWANESE AND CHINESE AND COREEN
COREEN
COREEN IF THAT'S THE GOAL TO TRY TO
IF THAT'S THE GOAL TO TRY TO
IF THAT'S THE GOAL TO TRY TO BUILD A BUSINESS AND GET SOME OF
BUILD A BUSINESS AND GET SOME OF
BUILD A BUSINESS AND GET SOME OF THE EXPERTISE, GLOFO IS KIND OF
THE EXPERTISE, GLOFO IS KIND OF
THE EXPERTISE, GLOFO IS KIND OF IT, BUT MAYBE THAT'S WHY THEY
IT, BUT MAYBE THAT'S WHY THEY
IT, BUT MAYBE THAT'S WHY THEY HAVE TO PAY UP IF THEY'RE
HAVE TO PAY UP IF THEY'RE
HAVE TO PAY UP IF THEY'RE SERIOUS ABOUT BUYING IT.
SERIOUS ABOUT BUYING IT.
SERIOUS ABOUT BUYING IT. >> I'M LOOKING AT THIS AND
>> I'M LOOKING AT THIS AND
>> I'M LOOKING AT THIS AND WONDERING WHAT IS PAT GELSINGER
WONDERING WHAT IS PAT GELSINGER
WONDERING WHAT IS PAT GELSINGER SITTING IN HIS OFFICE MOST
SITTING IN HIS OFFICE MOST
SITTING IN HIS OFFICE MOST WORRIED ABOUT AND WHY IS HE
WORRIED ABOUT AND WHY IS HE
WORRIED ABOUT AND WHY IS HE LOOKING AT EYEING THIS COMPANY
LOOKING AT EYEING THIS COMPANY
LOOKING AT EYEING THIS COMPANY IF YOU'RE HIM, SITTING IN THE
IF YOU'RE HIM, SITTING IN THE
IF YOU'RE HIM, SITTING IN THE OFFICE, WHY?
OFFICE, WHY?
OFFICE, WHY? >> I DON'T THINK IT'S -- GLOFO
>> I DON'T THINK IT'S -- GLOFO
>> I DON'T THINK IT'S -- GLOFO IS A PIECE OF A BROADER
IS A PIECE OF A BROADER
IS A PIECE OF A BROADER STRATEGY
STRATEGY
STRATEGY THE QUESTION IS WHY IS HE
THE QUESTION IS WHY IS HE
THE QUESTION IS WHY IS HE LOOKING TO GET WHOLE HEARTED
LOOKING TO GET WHOLE HEARTED
LOOKING TO GET WHOLE HEARTED INTO THE FOUNDRY INDUSTRY.
INTO THE FOUNDRY INDUSTRY.
INTO THE FOUNDRY INDUSTRY. THERE D COULD BE A FEW REASONS
THERE D COULD BE A FEW REASONS
THERE D COULD BE A FEW REASONS THEIR OWN CORE BUSINESS IS UNDER
THEIR OWN CORE BUSINESS IS UNDER
THEIR OWN CORE BUSINESS IS UNDER ATTACK
ATTACK
ATTACK IF THEY THINK THERE ARE ASSETS
IF THEY THINK THERE ARE ASSETS
IF THEY THINK THERE ARE ASSETS THEY COULD LEVERAGE AGAINST A
THEY COULD LEVERAGE AGAINST A
THEY COULD LEVERAGE AGAINST A PLAYER, I GUESS THAT'S A WAY TO
PLAYER, I GUESS THAT'S A WAY TO
PLAYER, I GUESS THAT'S A WAY TO GO
GO
GO OBVIOUSLY, THERE'S THIS HUGE
OBVIOUSLY, THERE'S THIS HUGE
OBVIOUSLY, THERE'S THIS HUGE CONCERN ABOUT THE U.S. IN
CONCERN ABOUT THE U.S. IN
CONCERN ABOUT THE U.S. IN GENERAL BEING TOO DEPENDENT ON
GENERAL BEING TOO DEPENDENT ON
GENERAL BEING TOO DEPENDENT ON TAIWAN FOR MANUFACTURING, SO
TAIWAN FOR MANUFACTURING, SO
TAIWAN FOR MANUFACTURING, SO THIS IS POTENTIALLY A MECHANISM
THIS IS POTENTIALLY A MECHANISM
THIS IS POTENTIALLY A MECHANISM TO UNLOCK SOME OF THOSE
TO UNLOCK SOME OF THOSE
TO UNLOCK SOME OF THOSE SUBSIDIES IF PAT CAN GO TO
SUBSIDIES IF PAT CAN GO TO
SUBSIDIES IF PAT CAN GO TO CONGRESS AND SAY WE WILL BE THE
CONGRESS AND SAY WE WILL BE THE
CONGRESS AND SAY WE WILL BE THE NATIONAL CHAMPION.
NATIONAL CHAMPION.
NATIONAL CHAMPION. WE'RE THE ONLY U.S. COMPANY
WE'RE THE ONLY U.S. COMPANY
WE'RE THE ONLY U.S. COMPANY CAPABLE OF QUOTE/UNQUOTE
CAPABLE OF QUOTE/UNQUOTE
CAPABLE OF QUOTE/UNQUOTE MANUFACTURING, AND WE NEED TO
MANUFACTURING, AND WE NEED TO
MANUFACTURING, AND WE NEED TO BUILD A THIRD-PARTY FOUNDRY
BUILD A THIRD-PARTY FOUNDRY
BUILD A THIRD-PARTY FOUNDRY INDUSTRY HERE.
INDUSTRY HERE.
INDUSTRY HERE. OBVIOUSLY, THAT'S A DRIVER
OBVIOUSLY, THAT'S A DRIVER
OBVIOUSLY, THAT'S A DRIVER THE OTHER IS, IF YOU THINK ABOUT
THE OTHER IS, IF YOU THINK ABOUT
THE OTHER IS, IF YOU THINK ABOUT SOME OF THE THREATS FROM THE
SOME OF THE THREATS FROM THE
SOME OF THE THREATS FROM THE CORE BUSINESS, YOU HAVE AMD
CORE BUSINESS, YOU HAVE AMD
CORE BUSINESS, YOU HAVE AMD TAKING SHARE
TAKING SHARE
TAKING SHARE YOU HAVE OTHER ARCHITECTURES
YOU HAVE OTHER ARCHITECTURES
YOU HAVE OTHER ARCHITECTURES THAT ARE STARTING TO EAT IN.
THAT ARE STARTING TO EAT IN.
THAT ARE STARTING TO EAT IN. IF THAT HAPPENS, IF THEY HAVE A
IF THAT HAPPENS, IF THEY HAVE A
IF THAT HAPPENS, IF THEY HAVE A MANUFACTURING BUSINESS, A
MANUFACTURING BUSINESS, A
MANUFACTURING BUSINESS, A THIRD-PARTY MANUFACTURING
THIRD-PARTY MANUFACTURING
THIRD-PARTY MANUFACTURING BUSINESS, THEY COULD IN THEORY
BUSINESS, THEY COULD IN THEORY
BUSINESS, THEY COULD IN THEORY STILL MAKE PARTS FOR OTHER
STILL MAKE PARTS FOR OTHER
STILL MAKE PARTS FOR OTHER PLAYERS AND STILL CAPTURE SOME
PLAYERS AND STILL CAPTURE SOME
PLAYERS AND STILL CAPTURE SOME OF THAT OPPORTUNITY EVEN IF,
OF THAT OPPORTUNITY EVEN IF,
OF THAT OPPORTUNITY EVEN IF, LIKE, THEIR OWN BUSINESS IS
LIKE, THEIR OWN BUSINESS IS
LIKE, THEIR OWN BUSINESS IS MOVING AWAY.
MOVING AWAY.
MOVING AWAY. IT WOULD GIVE THEM A
IT WOULD GIVE THEM A
IT WOULD GIVE THEM A INTO SOME