In this podcast, Motley Fool analyst Tim Beyers and contributor Jose Najarro discuss:
- Intel's big restructuring plans.
- Predictions for when Intel Foundry may finally be profitable.
- The seven links of the semiconductor value chain.
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A full transcript is below.
This podcast was recorded on July 27, 2025.
Tim Beyers: Intel is cutting again. You are listening to Motley Fool Money.
Welcome to Motley Fool Money. I'm Tim Beyers, your host. With me today, Jose Najarro who is one of our expert semiconductor and chip analysts. Jose, how are you feeling today? What do you think of the Intel news? We had Intel earnings. We had a release. I'm not sure it was such a great release, Jose, but what did you make of it?
Jose Najarro: Intel earnings were crazy, Tim. I think this is going to be the quarter that two or three years from now we see as the complete shift point of determining if Intel turned the ship around or did not. I believe this is that crucial quarter that is going to be looked back as the moment it all happened.
Tim Beyers: Look, this is super interesting. I'm quoting from the release now, Intel will no longer move forward with planned projects in Germany and Poland. The company also intends to consolidate its assembly and test operations in Costa Rica into its larger sites in Vietnam and Malaysia. In addition, Intel will further slow the pace of construction in Ohio. Just everything it is like a big stop sign is on display at Intel headquarters here. What do you expect in terms of sharpening spend for Intel? What is Lip-Bu Tan really after here?
Jose Najarro: First, and to put those into numbers, future construction was expected to be around $50 billion. Now, with all those delays and all those haltings, some were delayed, some were pushed back, like you mentioned, that 50 billion dropped down to 35 billion. Just a massive $15 billion in reduction on future construction. Now, Lip-Bu Tan, I think he mentioned it pretty well. The same day as earnings release, he actually had employee letter sent out to his team, which you can actually also find on the investor presentation website. I think he shared it with the community as well. The main concept, Tim, that was going is prior management seemed to have an open check on building all these different fabs and buying all these different equipment because they expected demand to eventually pick up. Lip-Bu Tan is like, I want to do it a little bit different. I'm only going to approve checks or approve these investments if we have the demand lined up. It makes perfect sense. Maybe prior management just got a little bit too excited about themselves and the future of it. Lip-Bu Tan still wants to continue with this market, but he wants to do it at what I consider a smart way of expansion.
Tim Beyers: Well, he's certainly being more cautious, isn't he? A couple of other stats for you here, $1.9 billion in restructuring charges, and this was just in Q2, and 800 million of non-cash impairment and accelerated depreciation. I thought this was really telling, Jose. Talking about being smart and moving in the direction, one of the things he seems to be doing is getting rid of the stuff that was not working. These charges, particularly that accelerated depreciation, are apparently for excess tools with no identified reuse. That is brutal, meaning we wasted $800 million out the door. Add to that, the cash burn for the first two quarters of this year, is about six billion dollars, and that's before you account for 1.35 billion in stock-based compensation over that period. The cutbacks, the reframing, what do you think this says about the durability of Intel for the long-term?
Jose Najarro: I think Lip-Bu Tan is trying. Obviously, I think when you start off as a CEO, you have the opportunity to do the massive restart button or touch that button right off the bat, because I guess that's your main job at starting off. That's what he did. He definitely hit the restart button pretty hard. He even talked a little bit about the target workforce. Intel, typically, for the past 5, 6, 7 years, Tim, has had over 100,000 employees. He wants to drop that down to 75,000 by the end of this year. That alone completely reshapes Intel.
Tim Beyers: It's a big cut.
Jose Najarro: Now, with those restructuring costs, the great thing is, there might be a little bit of light within there, is what he's doing is there was a lot of older equipment that still had, in theory, plenty of life available to itself if they had the demand. They had purchased a lot of new equipment for some other A18, A14. What he wants to do is, look, even though this older equipment, in theory, still has life available to it, let's push that old equipment out and we got to use this new equipment instead because we bought it. We got it new. It has better yield rates. Now we have to write off that older equipment that still had its life to it because we don't have the demand for it. The restructuring definitely was painful, but at least it was more on older equipment, opposed to equipment that just got bought a year or two ago.
Tim Beyers: Fair enough. This restructuring is going to be ongoing. You mentioned there, 18A and 14A. These are the newest and smallest form factor manufacturing platforms for chips, and this is where they're going to build their most advanced AI chips, for example. Make a prediction for me, Jose. You're looking ahead, big investments in Intel Foundry, trying to streamline, trying to restructure. In what year do you think Intel Foundry, as a functional part of this business, is going to turn profitable? When do you think it's going to happen?
Jose Najarro: Let's see. I think this is how I would say my optimistic timeline would be. Right now, Intel is releasing 18A for internal usage, and it's going to stay for internal usage. The actual chips won't come out until later this year. The consumer and everybody is not going to see how strong 18A is until 2026. 2026 is going to be that era or that time when we validate, at least Intel as a strong manufacturing player. Then that will potentially give customers a reason to try out maybe 14A in the future, but that takes some time. If I was to get some form of profitability, it would definitely be, well, 2028, maybe even 2029. It's definitely going to be at the end of this. If it happens, it's most likely to happen at the end of this decade, not within the next two years or so.
Tim Beyers: I'm going to go 2030. We're going to take a quick break here. Up next, is now the right time to be investing in the semiconductor industry?
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Tim Beyers: We're back. I'm here with Jose Najarro, and we are talking about semiconductors. We just talked about the Intel earnings, Jose, and lots of things to improve there. They have a lot of restructuring underway, a lot to do, and not a very long time to do it. But there were other earnings. We had earnings from ASML, and despite the top and bottom line expectations beating on both those counts, the company now says the tariffs have made forecasting impossible for the moment. How concerned are you about that? Didn't we just get a deal with the EU over the weekend?
Jose Najarro: Hopefully, the deal with the EU helps improve the commentary from leadership from ASML. I think with ASML, looking at it in the whole semiconductor market, is maybe not the best approach, because ASML at the end of the day, only really has a handful of big customers, Tim, it has the only ones. For those that are not familiar, ASML makes these important critical machines that are used for the manufacturing of semiconductors. Only manufacturers go out there and buy ASML machines. Those are your TSMCs, your Intels, like we just talked about in the prior segment, and your Samsung. Those are usually the top three giants. If any of them see any hiccup in maybe, I don't need to build a new supply chain line right now, you're going to see those bookings, those revenue really fluctuate. As we heard from Intel, they're slowing down on CapEx. That definitely can be seen as a negative take for ASML. Now, on the other hand, we did have some great earnings from TSMC, which prompt that they are going to increase capital expenditure. I think for ASML, the long-term thesis is still pretty much intact.
By 2030, they still believe that they can expect somewhere between €44-60 billion by fiscal year. I think most recently last 12 months is about 32 billion. There's still a nice growth opportunity. I think that's still in place. I think right now it's just the short-term of how manufacturers are going to look at this consumer demand for semiconductors. I think we might see a bit of a hiccup this year, maybe even next year, but I think the long-term tailwind for long-term investors is still pretty much in the good side of ASML.
Tim Beyers: Do yourself a favor, Fools. If you want to get a sense of what ASML makes, go look up a short video or get a picture of one of these big EUV machines. They are giant. They look like they belong in a supervillain's layer. They are enormous. But you did mention Taiwan Semiconductor. Net revenue was up 44% year-over-year, and that missed expectations. What the heck is going on here? This is my other question for you, Jose. Are the expectations baked into semiconductor stocks too high at this moment?
Jose Najarro: First, let's talk about that expectations baked thing. I think for AI semiconductor companies, the answer is yes. We've seen a lot of great sentiments on AMD, on NVIDIA, and some of these other players. I think on other segments, there are semiconductor players in the automotive space, in the analog, in the industrial robotics, industrial markets. All those are still pretty weak, so there's not much expectations there. Another one, there's not much expectations in, Tim, are the equipment players. We saw it from ASML. There's not much expectations right now in the short-term for those companies, but I do believe those sectors in the long-term, have a good opportunity, even though the short-term automotive, we don't know when that market will pick up, but I do believe we're going to get smarter vehicles. We're going to need more vehicles, electrified vehicles, a little bit autonomous vehicles in the next five years. Growth opportunities for a lot of markets. I think the one that's running hot and might have too much expectations would be more the AI chip market.
Tim Beyers: I think that's fair. We have some data from the Semiconductor Industry Association, just to take this a little further. They said that annual global sales across all semiconductors are on track to grow 11.2% in 2025 and global sales in 2026 are going to grow 8.5%. A little bit of deceleration there. Is that at all surprising to you or is this just part of the cycle? Because this has historically been a cyclical business.
Jose Najarro: I think it's part of the cycle, Tim. We still have uncertainties of how consumers are going to be doing with bending with any random events that might come with tariffs or which are outside job market or anything. I do believe maybe a lot of these short-term expectations are somewhat a little bit conservative or cautious to make sure they try to account some of those random events that could occur that could bring some of the consumer market down. In the long-term, I think by 2030, we still have a lot of firms believing that the semiconductor market will hit a trillion dollars. For 2030, trillion dollars, how we get there in the short-term might be a little bit wonky, but as you're seeing more demand for AI, eventually, we're going to have AI products entering the consumer space. You need more chips on your phone, more chips on if we have augmented AI glasses, autonomous vehicles, and the list goes on. So many products that you can start to add AI to, and we're already seeing that in place. When is the consumer going to pick that up? I don't know, but definitely before 2030.
Tim Beyers: Next, we're going to do a bit of trivia, and then we're going to do a ranking of some of the best semiconductor stocks across the value chain. Up next, a little trivia about the semiconductor value chain, and we're going to rank some stocks in that value chain.
Jose, as I tend to do on these shows, we like to have a little trivia, something to educate, as well as maybe inform and get a little laughs from time to time. But this one, I think is going to be interesting. Fools, if you don't know this, the semiconductor value chain is pretty extensive. It's also global. Jose, here and Fools get in your answers. Let us know what you think in comments to this podcast. Can you name all the links in the semiconductor industry value chain, and my hint to you, which you probably don't need, but there are seven. This is from Gemini Advanced. It gave me seven links in the semiconductor value chain. What do you got for me?
Jose Najarro: Hopefully, I get this right, Tim, and hopefully Gemini didn't hallucinate with us here. But for me, let me just say, I would think the first when I think of semiconductors is your materials. Your silicon, your gold, copper, whatever is needed to make that semiconductor product. Those materials needed for the manufacturing process.
Tim Beyers: There you got one. I'll count them off as you get them.
Jose Najarro: Then after that is, what do you do with those materials? You make the products. But how can you make the products? The equipment? Your companies like ASML. The manufacturers of the equipment needed to make the semiconductors. Be it your ASML, your Lam Research. But overall, the equipment needed for manufacturing.
Tim Beyers: You're going to have to break up those manufacturing pieces. I'll give you a hint there, but I'll say that's two. Keep going.
Jose Najarro: We'll break that up, maybe in a bit. Then Number 3 would be who uses those equipment? It'll be the manufacturers themselves. It'd be your TSMC, your Intel, your Samsung, your advanced packaging players, your OSATs. That would be my Number 3 is materials, equipment makers.
Tim Beyers: You got that one.
Jose Najarro: Manufacturers. Then after that is, what are these players manufacturing, and how are they getting these designs? For me, the next would be that software, your EDA solutions, the way you build those blueprints. That'll be your Cadence, your Synopsys.
Tim Beyers: There's another. You got four.
Jose Najarro: Then after that is who's actually designing this? It'd be your fabless, your designers in theory, your NVIDIAs, your AMDs, everybody else. That would be the next on the list.
Tim Beyers: That's five.
Jose Najarro: The next thing is, once you have a semiconductor product, you still need to make the end good. Your OEMs or your ODMs who end up making the PCs, who end up making the AI servers, who end up making the phones with the semiconductor products. It would be however that gets built. Then after that, I would have to guess is the end user, either being maybe your consumer who buys the product or your Cloud server providers who are buying these servers to make the Cloud in space.
Tim Beyers: That's a fair argument, but it's not on the list.
Jose Najarro: No.
Tim Beyers: But I think you credibly got six there. I'll give you the list, and this is the order it goes in. EDA, electronic design automation. You got that one. Chip design, fabless companies. You got that one. Raw materials and equipment. That was the first thing you said. That's right. I told you they broke out some of the equipment manufacturing. The next one they had is wafer fabrication. You mentioned Lam Research. Wafers and then assembly packaging and testing. Again, breaking it out. But then you mentioned directly integrated device manufacturers. You mentioned them. Absolutely right. Then distribution and OEMs. I think you mostly nailed it there, but I want you to rank. Since we just talked about the value chain, let's rank a few companies on that value chain. I've got six for you. If you can give me a 1-6 and then we'll close things out here. I've got Cadence in EDA. Equipment, ASML, fabless design, NVIDIA, also Micron, similar, but in memory. Wafer manufacturing, Lam, because you mentioned them earlier. Then at the foundry level, we have distribution and manufacturing at scale, Taiwan Semi. Those six, Cadence, ASML, NVIDIA, Micron, Lam Research. In terms of ability to outperform over the next five years, give me your 1-6 ranking.
Jose Najarro: Obviously, I'm going to be looking at today's prices, and that's going to play a good role into this. I would say, Number 1 for me would be ASML, Tim. It's weird. The reason being is, I think the market is not expecting a lot from them, but I think the overall long-term tailwind is there.
Tim Beyers: Fair enough.
Jose Najarro: Number 2, I'm going to go with NVIDIA. I think while NVIDIA is probably the most expensive, four trillion dollar, I put it in two because I do believe the AI market is going to grow from here. We're still in early innings. We're just in the search and some research of it, but AI is going to do more than that. Number 3, I'm going to go back to a semiconductor equipment. I do like Lam Research. Lam Research has a little bit more unique play in the memory market. I do believe the memory market has a nice growth story ahead. It doesn't matter if NVIDIA is the winner or who is the winner. Lam Research provides equipment to build a lot of these HBM solutions. Number 3 would be Lam Research. Number 4, I think I would put Micron. I think Micron, while it is normally a little bit more risky play because of the cyclicality within the business. I think right now HBM, as long as they continue, and that's important. As long as they continue to innovate, I think Micron has a nice future from here. Number 5, I'm going to put TSM. The world can't run without TSM right now. We see Intel doesn't have the demand. Samsung is not doing too well either. TSMC continues to see nice strong growth.
Tim Beyers: They are the heavy.
Jose Najarro: While it is crucial, Number 6, I'm going to go with Cadence. I think Cadence is extremely important. I just do think valuations in some of these software EDA plays has maybe a little bit balloon that maybe don't make me too confident on market opportunities right now. But luckily, the market always gives us opportunities. If we had a better price point, Cadence would definitely be a little bit higher than it is in the list right now.
Tim Beyers: There you go. We have ASML, NVIDIA. Give it to me one more time. ASML NVIDIA, you put Micron fourth.
Jose Najarro: Lam Research.
Tim Beyers: Lam, Micron.
Jose Najarro: TSM.
Tim Beyers: Taiwan Semi.
Jose Najarro: Cadence.
Tim Beyers: Then Cadence. Great. Thanks for that, Jose.
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