In this segment of "Semiconductor Revolution" on Motley Fool Live, recorded on Jan. 20, Fool contributor Will Healy discusses Intel's (INTC 0.32%) ambitious plans to compete with TSMC (TSM 0.70%) in the next three years.
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Will Healy: You might wonder what's changed with Intel because like I said earlier, they have struggled for years and they've been through multiple CEOs, they lost their technical lead sometime after the PC industry declined in the early part of the last decade.
I think the change is being driven by CEO Pat Gelsinger. Gelsinger differs from his predecessor in that his predecessor was a finance guy whereas Gelsinger is an engineer. He once worked in Intel, he was a former CTO, Chief Technology Officer. He went to VMware (VMW -0.28%) for a while and ran that company but now he is back with Intel. Having worked in the tech industry, I can tell you that engineers who are good managers are fairly rare.
But I still think that's necessary because like I said, it was run by a finance guy before, and while strong finances are important, an engineer is going to know better when to spend and when not to spend and I think that's critical if you want to orchestrate the kind of comeback that Intel is looking to orchestrate.
One thing, he has founded Intel Foundry Services. Now, Intel has made their own chips for decades, the difference here is they're going to make chips for other clients now, so they are going to compete with TSMC and Samsung and GlobalFoundries (GFS 0.76%), and others in that business.
On the technology side, like I said, he wants to catch up and eventually surpass TSMC. He claims he's going to catch up to them by 2024 and then surpass them that next year. However, investors need to keep in mind that chip development cycles take 3-5 years; we're not going to know yet whether Intel is actually going to succeed at this.
If you are buying Intel stock now, it is tempting to get 10 times earnings, but I think you have to treat it as a speculative play until you see more. However, the earnings report might reveal a little bit more in this, so it is worth watching from that standpoint.