Intel in slide: a chipmaker on the ropes

0:02The Economist

0:10Hello and welcome to The Intelligence from The Economist. I'm your host, Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world.

0:24It's been a busy year for the International Criminal Court, issuing arrest warrants for Vladimir Putin and then Benjamin Netanyahu. We examine a quieter and legally unusual ICC case. Lithuania is accusing Belarus of cross-border crimes against humanity. And sometimes a viral video is only that. Sometimes, though, it has real-world consequences, like running an entire country out of cucumbers. Our correspondent looks at how the Internet is changing how people cook and how they relate to food.

1:02But first...

1:09At one time, if you cracked open a personal computer, you had a 9 in 10 chance of finding... Intel inside. Boy, how things change. Last month, the firm behind the world's first microprocessor posted a$16.5 billion quarterly loss. Clearly, different segments of the market, like the desktop products. We weren't quite as strong this quarter. But overall, we're on it for the AIPC, our leadership there. Very strong launch. Intel's boss, Pat Gelsinger, tried to put on a brave face. But weeks later, he was on the way out. From world beating to taking a beating, at a time when chip making isn't just a question of business, but also of national security and sovereignty.

1:55How can Intel get back on track? When Pat Gelsinger took over Intel in 2021, it still dominated the market for chips in data centers and personal computers. Shailesh Chitnis is a global business writer for The Economist. Nearly four years later, the stock is down three-fifths and the company is laying off around 15 % of its staff. Now, Pat Gelsinger didn't have an easy job coming in, but whoever takes over will have an even trickier job, getting the company on an even keel. Well, let's start looking into the problems. I mean, how did Intel fall this far already? So the seeds of Intel's problems go way back.

2:37It has missed multiple changes in the technology sector. So for example, in 2006-2007, it missed the entire mobile phone revolution that started with the iPhone. somewhere around 2016 or 17, it also missed the transition that was happening from central processing units to graphical processing units due to the boom in machine learning. And then on the fabrication of these chips, it also fell behind TSMC, which is a large Taiwanese chip manufacturer. So it's a combination of these different things that we are now starting to see show up in the numbers for Intel. So Mr. Gelsinger, though, must have seen all of this dynamic playing out when he took the reins?

3:18Yes, he did. And he did have a pretty good plan at the time, which is to essentially split Intel into two companies, still under the same umbrella of Intel. The first part would be the chip design business, which would actually design the CPUs and different processors, while the other part would be what is known as a foundry, similar to TSMC, which would make chips not just for Intel, but also for external customers as well. Unfortunately, the strategy has fallen apart spectacularly. And even when Intel is splurging over$100 billion across new fabs in Arizona, upgrading its fabs in Oregon, so on and so forth, its revenues have been dropping.

3:59And so to plug the gap, what Intel has been doing is it has turned to external sources of financing. It has announced deals with private equity firms. and it has also looked to the American government via the Chips Act to get subsidies for its chip factories. And to make it easier for it to raise money from outside investors, it actually said in September that it would turn its foundry business into an entirely independent entity, which would allow it to raise capital separate from its chip design business. So is that going to do it? To your mind, is that what Intel needs to get back on an even queue?

4:35So honestly, there are no good answers here. Pat Gelsinger's strategy was sound. Unfortunately, the level of investment as well as the time horizon of the investment needed to be able to build out those fabrication plants and be able to run them at volume is just really long. And it sounds like the board ran out of patience while its core business was faltering. So looking ahead, it's likely that Mr. Gelsinger's successor will have to be more radical. Now, during Intel's troubles, many companies have been circling, trying to acquire different bits of the company, but the size and complexity of acquiring a company like Intel has turned many of them off.

5:16Qualcomm, which is another chip designing company that makes chips for smartphones, has been mentioned frequently in the news. But what complicates this is any acquirer will have to have a good plan on what to do with the chip design business and the foundry business. The chip design business, as we've been talking about, has been losing market share. And the foundry business needs a lot of investments before it can actually start to see returns on those. And as if this was not complicated enough, the CHIPS Act, which is the government-funded subsidy that Intel has looked to, also has certain provisions that restrict or place certain requirements on the acquirer.

5:54And giving a more complicated layer on top of all this is the geopolitics, which is Intel is an American company. TSMC, a Taiwanese company, even though it is building fabs in America, has been mentioned by Donald Trump, the new president-elect. He has accused Taiwan of stealing his chip industry. When you put all of it together, it does become very, very complicated for a potential acquirer to kind of deal with all these different issues. So what do you think Mr. Trump will do when he takes office again? And after all, the CHIPS Act is designed to tackle these very questions, isn't it? Yes, it is.

6:29But to predict Mr. Trump's position is a bit difficult, but there are early indications. So Vivek Ramaswamy, who leads the Department of Government Efficiency alongside Elon Musk, he criticized the Biden administration when they awarded funds to Intel sometime in November, right before the new administration comes in. There were also indications from some members of Congress that the CHIPS Act was wasteful. and they subsequently walked back on it. But what position Mr. Trump takes with the CHIPS Act is still to be seen, though he has said in the past that tariffs, imposing tariffs on chips coming into the U.S.

7:06are a far more effective strategy than subsidizing these companies. Now, complicating this is the fact that the only viable company for America to produce chips in the U.S. is TSMC. And by early next year, TSMC is going to move into volume production for their newest fab in Arizona. And so that's a decision for Mr. Trump and his administration at that point is how much do they continue to invest in Intel as the American chip maker? And how much effort do they put behind TSMC, which has actually shown it can produce those chips in America at scale and at economies as well. And asking you to hang on to your crystal ball for one more moment.

7:49I mean, how do you see this playing out? What are you watching for in 2025 and how might Intel's fortunes change? So the immediate thing we'll be looking at is who's the new leader that's going to come into Intel. Now, there have been a few names mentioned. One of them is Lib Bhutan, who was previously a board member at Intel and quite an experienced semiconductor industry leader. Another is Matt Murphy, who's the CEO of Marvel, which is another chip design company. Now, regardless of who comes in, as we've talked about, they'll need to make some pretty tough decisions. One thing I think that is working in Intel's favor is with increased US-China tensions, the fact that Intel is the only American company that can make advanced chips works in its favor to be able to attract the funds, to be able to attract the attention and the support of the government to build chips in America.

8:40And as much as the company is in trouble, it is unlikely that any administration would allow it to fold, given kind of the place it has in the semiconductor supply chain. Too big to fail or too few of them for the one big one to fail. Yes, it is. Because if you think about advanced chip making, there are only three firms that can make it. The first is TSMC that we've talked about. Second is Intel. And third is Samsung, which is a Korean electronics firm. Now, both Intel and Samsung have had financial difficulties, which has led them to pull back on some of their investments for advanced chip making, which leads TSMC as kind of the sole supplier, so to speak, of chips which are so critical to the supply chain.

9:21And that I don't think is something that TSMC's customers would want, which is having only one supplier or any American administration would want either. And that is why I think it makes the Intel story that much more important and that much more relevant. Shailesh, thank you very much for your time. Thank you for having me.

9:54On an upcoming special Christmas show, our writers and editors will be discussing the books they've been reading that best predict what the future will look like. We want your recommendations too for books that you think tell us what's coming. In particular, we'd like to hear from our female listeners who have so far been keeping their prognosticating prose to themselves and recommendations for books by female authors. They could be fiction, nonfiction, recently published, or centuries old. Send us an email or, even better, a voice note to podcasts at economist.com with your recommendations.

10:34We face an historic opportunity to provide the missing link in international criminal law by creating a strong, competent and capable court that can put an end to a global culture of impunity. In 1998, with the signing of the Rome Statute, the International Criminal Court was founded. It was to be a global court of last resort, to prosecute the worst crimes when the jurisdiction or the will of national governments fell short. It's now indicted more than five dozen people, including Omar al-Bashir of Sudan, Omar Gaddafi of Libya, President Vladimir Putin. And last month, Israel's Prime Minister Benjamin Netanyahu and former Defense Minister Yoav Gallant joined the list, accused of overseeing war crimes during the war in Gaza.

11:29But earlier this year, an unusual case started quietly making its way through the court, filed by a legal team representing Lithuania and alleging crimes against humanity committed by the regime in Belarus. Broadly speaking, let's say that post-collapse of the Soviet Union, Belarus never really took that whole path to democracy that people might have hoped. But in the last few years, it's gotten a lot worse. Sarah Larniuk is a senior producer for the intelligence. Belarusian President Alexander Lukashenko has been in power since 1994. And a crackdown on freedoms has really escalated since the 2020 election campaign.

12:07And now people want some accountability. But accountability for what exactly? What are the allegations here? So the specific allegations that they're arguing constitute crimes against humanity are threefold. Threefold, forced deportations, persecution, and other inhumane acts carried out against the civilian population. And the referral states that these acts are carried out at the behest of the senior Belarusian political, law enforcement, and military officials. One of the things that distinguishes this case is that Belarus is not a signatory to the Rome statute, but Lithuania is. But in order for Lithuania to get involved here at all, they can't be making allegations about actions carried out solely on the territory of Belarus because they're not a signatory.

12:58So rather any of the crimes that they're alleging in this referral, they have to at least partially take place in Lithuanian jurisdiction. So that's why deportation is one of the allegations here. Forced deportation, of course, can't be fully completed until a person has landed in another territory. So from a law point of view, there is something novel here. If there were cases of torture taking place in Belarus, that can't be referred on that basis because they're not signatories. But a few weeks ago, you were reporting on the exiled independent press corps from Belarus, having created circumstances where basically journalists are forced to leave the country en masse.

13:34That's an example then? So yeah, that would exactly be one of the cases that they would use, not just journalists though. I mean, this ranges from everything from athletes to politicians to journalists. So then beneath those umbrella crimes that they've listed, so like deportation, persecution, and other inhumane acts, which is so broad, they also talk about a long list of underlying acts. So all of the things that would have led to that forced deportation, things like the systematic and prolonged use of torture, sexual violence, forced labor, and forced disappearances. So these acts then go forward to make up why people would leave, why they were considered to be persecuted.

14:16And that is the underlying basis here. And it's not like Belarus has responded at this point to these claims made by the Lithuanian legal team. However, there are many NGOs that are working to prove that a lot of these underlying acts are occurring. This is what the legal representative for the Lithuanian team, Arif Abraham, had to say when the referral was filed. This was part of this campaign waged by the regime has forcibly displaced hundreds of thousands, if not more, of lawful residents of Belarus into neighboring states' parties without grounds permitted under international law. and such displacement has occurred precisely because of these underlying unlawful acts and they were perpetrated on political prowess.

15:06So according to the Lithuanians, three million Belarusians have moved across their border since 2020 with 70 ,000 of them actually being granted visas in Lithuania, which for a country that is smaller than three million people, that's caused a real toll. And then from here, the ICC prosecutor Karim Khan will conduct a preliminary examination. That's all that's guaranteed at this point. But then if this case falls within the court's jurisdiction, meets a few other requirements, and a full investigation, if it meets that threshold, will be pursued. So this is different from the way things normally work with the ICC, where the prosecutor takes it upon him or herself to start these.

15:45This is essentially the Lithuanians compelling the prosecutor to look into this. Yes. So the Lithuanian team does compel him to at least start the examination. here, right? But what makes this case even more unusual is that the crimes committed are alleged to have been committed by a non-member state. And there's not very many cases where that's happened. The most similar case is the situation where Bangladesh referred Myanmar for their treatment of the Rohingya people. Because Myanmar was not a member state, Bangladesh could, as a member state and a signatory to the Rome Statute, bring forward that case and again, and compel the ICC to look into this situation that they could have previously argued wasn't within their jurisdiction.

16:32But that kind of set the bar for the fact that non-member states can be brought into the ICC, and that justice can stretch beyond the original boundaries that was imagined when the Rome Statute was brought into existence. I wonder if that does the ICC any favors in the sense that we've talked a lot on the show about how it has fallen short of its goals or not been taken seriously or its rulings not been followed. Does expanding its footprint in this way make it any more credible as a means to achieve justice? So I did ask specifically this question of the Lithuanian legal team. What does success look like when justice can grind on for years and there's no guarantee of success here?

17:19Even if this is brought to an investigation and arrest warrants are issued for, let's say, Belarusian President Alexander Lukashenko, let's say that all happens. There is no guarantee that justice ever comes here. But this is what the Lithuanian Vice Justice Minister Gabiha Gragete Dogride said when I asked her exactly this. Kofianen called it the Gimtokho for future generations when this court was established. So this is a very important gift. I think our initiative sends a very clear and strong signal. I see it as a catalyst for other countries to understand that actually maybe the time has come not to forget and forgive.

18:03What the vice justice minister said there did stand out to me, where she is arguing that as a global community, the liberal minded have let too much pass, have let too many injustices fall by the wayside. And I think because the world is becoming so precarious, she's arguing at least that we stop doing that. And as for the Belarusians, those who have been exiled, those who have been watching all this go on, what do they make of this prosecution? Do we have a sense? Yeah, so they definitely have a lot of support from the exiled opposition. So Vietlana Tihanoskaya, she was present when they filed this paperwork and she was incredibly supportive.

18:45There are so many things going on. Belarus has felt forgotten, particularly in the midst of the pandemic. And then after the war on Ukraine was launched from Belarus's borders, they just felt left behind. Every day I'm asked by Belarusian people, why this regime still kills impunity? They are beaten, they are torturing Belarusians, and they are still treated as normal people by the democratic world. why so? And so many people asking me, do international justice system work? So this is the day when we can clearly say that we are not alone, we are not abandoned. Sarah, thanks very much for your time.

19:28Thanks, Jason.

19:42So what happens is, for some mysterious reason, a recipe will go viral. And that has led to real-world shortages. You've seen runs on feta cheese. You've seen caviar sales rise. There was a viral cucumber salad recipe earlier this year that caused a cucumber shortage in Iceland. John Fasman is a senior culture correspondent at The Economist. And what that testifies to is the popularity of food online. Food is the fourth most popular subject on the internet. People love talking about it. People love sharing pictures of their meals. And what this all is doing is making cooking a more social activity and it's changing career paths in the food world.

20:24And changing the bottom lines of, say, the cucumber importers of Iceland, I suppose. I imagine the cucumber importers of Iceland were very happy with this trend. There are tens of millions of people who watch food content online. And what this has done, it has turned YouTube food influencers into stars. Now, the way things used to work is to get a food show on TV, you would have to have written a book. You'd have to have worked in a restaurant. Think of people like Julia Child, who turned her book on French cooking into a culinary stardom. Now you have people like Nick DiGiovanni, who I spoke to for this story.

20:56I got a huge container of caviar. Let's eat it. Caviar on the chip creme fraiche, egg yolk, egg white, chives, and a kiss of lemon. He's a 28-year-old Harvard-educated food personality, and 21 million people subscribe to his YouTube channel. It's about as many as subscribe to Gordon Ramsay's channel. Ramsay, of course, is an established chef with many restaurants and books under his belt. Today, Nick DiGiovanni employs half a dozen people and can spend more than$50 ,000 on a single video, but he earns many, many times that from ad revenues on his YouTube channel. And do you say what happens is for some unknown reason, something goes viral?

21:37Do we not have any idea? There must be some hallmarks of what is a viral food. As with everything else, these algorithms are sort of a black box. But one thing I found is that approachable food tends to do really well. I think one reason that cucumber salad recipe went viral, and there's also a viral recipe for baked feta pasta that was popular, I think, in 2023, is that it's really easy to melt cheese, make pasta, and slice a cucumber. And so the internet really valorizes these sorts of things that everyone can do. It makes it easy to get in on the trend yourself for any level of cook. Well, and because everybody's got a sort of video production studio in their pocket these days, I guess.

22:14Yeah, and it's really easy to achieve high production value. You know, in the case of Nick DiGiovanni, one of his first popular videos was him making a chocolate bar from a cacao pod. This is a cacao pod. It's kind of weird to think that it turns into this. it's a new day these have fermented stick these in the oven at 300 for a little over an hour let's remove all the shelves inside this shell is cacao nymphs now around 13 million people watch this but when i talked to him he said he was shocked because when he watches it now he can see the lighting isn't great the pacing isn't perfect so you learn as you go but it's really easy to learn as you go the barrier to entry is really really low everyone has a phone in their pocket that people like videos that emphasize authenticity and don't look too professional.

23:01I mean, you say it's approachable foods, it's easy foods. The stuff that I've seen is sometimes pretty out there, pretty extravagant. Well, that's the other side of it, is that people like to watch people making things that are extravagant. So my son, for instance, is in love with the idea of serving caviar over fried chicken because he's seen these people make that with a giant tub of caviar that costs more than I'm willing to spend on a viral food trend. You've also seen Nick DiGiovanni. One of the videos of his that I like the most is he goes around tasting Japanese fast foods in Japan. He also showcases rare foods.

23:35He sampled the type of water that had been collected from Amazon air rivers that appeared to taste a lot like regular water. So there are these two aspects of viral food trends. One is things that everyone can get in on. And the other is things that are sort of aspirational that you watch because you can't ever do it yourself. Okay, I would put forth a third category because keen listeners will remember that the last time I talked about viral food on the show, it was something that I would have to describe as absolutely repugnant. So tell me what it was. It was a hollowed out pickle and there were some crunchy snack foods jammed inside.

24:08It was wrapped with a sort of a fruit roll up kind of thing and had some sort of obscure hot sauce poured on it. And honestly, I couldn't get through a whole bite. That sounds like the sort of thing you would be forced to eat if you were pledging a fraternity at an American college. I think a lot of... It's a dare. Yeah, it's a dare, not a food. I think a lot of viral foods can be kind of stunt adjacent. Is this also good for food in your mind as a food writer? Well, as a food writer, I try to keep a pretty open mind. So anything that gets people interested in and talking about food is grist for my mill.

24:38So even though I don't myself participate in a lot of these viral food trends. I tend to be pretty set in my ways. I think it's unquestionably a good thing. It's interesting. Break with the wallet and get some caviar, you cheapskate. Hell will freeze over first. John, always a pleasure to talk to you. Thanks. Jason, always great to talk to you too.

25:11That's all for this episode of The Intelligence. We'll see you back here tomorrow.