"There's a bit of an overreaction to Q1, but I don't run this business on 90 days and nobody should expect us to. These are long-term investments, and the transformation is well underway," Gelsinger explains.
Gelsinger goes on to detail Intel's expansion plans to match AI chip demand as tech innovators roll out new AI-powered PCs: "We just announced a new advanced packaging [plant] in New Mexico. We're well underway with our Arizona and Ohio expansions, as well as some of the international work that we're doing."
AI PC, expanding accelerator, improving product line. And super proud of the team and the momentum that the Intel team has delivered this year, and as that continues into this '24 outlook and beyond. This is overreaction but one that we are confident on the transformation journey of this great iconic company. We are on track to make that happen.
BRIAN SOZZI: All right. You did mention on the earnings call Pat that there will be improvement in the business in the second quarter compared to the first quarter and then sequentially after that. So let's go into the second quarter. What drives some of that sequential improvement?
PATRICK GELSINGER: Yeah, obviously, some of it is-- we talked about these one-time effects that we saw in areas like Mobileye, PSG and those start to get better. But overall, as we look to our product line, as we go through the year, normal seasonal behavior, and the strengthening of AI PC, of the ramping of our accelerator product line, the improving position we have with our data center products. And our foundry business is gaining momentum day by day as we get more and more customers coming into that.
So overall, we just see a lot of these things materialize as we go through the year. And this fundamental transformation of Intel as we have a world class product fabulous company and a world class fab and manufacturing company. As those effects take place, the financials improve with it as well. So overall, we are on track to deliver a great transformative journey for this company.
BRIAN SOZZI: I know you're very focused Pat on just continuing to build out that foundry business. It is one of the key areas that you identified early on in your leadership. Now we had the team over at Citi on this morning saying Intel shouldn't even be in the foundry business. To analysts like that are bearish on this potential opportunity for Intel, how much business, what's the line of sight to business for the foundry business and what's next in that area?
PATRICK GELSINGER: Yeah well, so they're wrong. And this is key to the strategy that we have for the company. We have to become a world class foundry. It becomes a key and seminal piece that not only helps our internal businesses as we get more disciplined, process, cost effectiveness, but we open up to be a world-class systems foundry as well.
And we saw three customers in our advanced packaging technology added to our portfolio in the fourth quarter. We added another leadership 18A customer, another Intel 3 customer. And one by one as those builds, we see this becoming a great portfolio of the business. And we announced a key partnership with UMC, Taiwan foundry company that we're going to extend the life and bring more capacity to the US consistent with the theme that we have of balance, resilient, supply chains for the world. So we're on track. This is making great progress.
And in February, Sozzi, we have our foundry day coming up where we'll talk about what's next after five nodes and four years of this incredible restorative journey that we've been on. Laying out key EDA and industry partnerships and additional customers participating and how they're going to take advantage of this great technology engine that we're building. So overall this is making great progress.
BRIAN SOZZI: To the noobs not familiar with the transformation story at Intel. When does that foundry business, Pat, start becoming a consistent moneymaker for a company like yours?
PATRICK GELSINGER: Yeah you're going to see revenue start to ramp in '25 and beyond. We talked about lifetime deal value now exceeding $10 billion in this quarter. So we're trying to give some forward-looking indicators to the financial markets as we see that business building. And we'll be giving updates on that periodically. But revenues here, you win a customer, and now they have to design, they have to move, and those supply chains have to build as they introduce their product. So it takes a couple of years for that revenue to really start to accrete that's why we want to give some forward indicators.
But overall, this is a long term business. And as we go through the decade, it's just going to keep accruing and accruing. And as I said by 2030, we're going to be the number two external foundry combined with our internal product capacities that we require, we're back to being one of the largest providers of semiconductor technology at the leading edge logic in the world, and we're on track to make that happen.
BRIAN SOZZI: Maybe this is just fresh in my head. I'm still trying to recover from the World Economic Forum in Davos, Pat. And we had a great conversation with Qualcomm CEO, Cristiano Amon. And he was talking about more AI arriving to actual physical devices, handsets, PCs you name it. This year how many chips will Intel sell that will help power these devices and how bullish are you about the AI hardware cycle?
PATRICK GELSINGER: Yeah. And the AI PC as we've called it is something we launched with our Core Ultra product line at the end of last year. And this year alone, we expect to ship 40 million AI PCs that are enhanced specifically for AI capabilities. And key application areas Microsoft, Adobe, Zoom, Teams all of those becoming AI enabled. And the ability to run these language models that you've heard about natively on the client so you don't need to be tethered to the cloud, pay cloud fees for that and control your own local data.
So this idea of edge and client AI is something we're powerful driving in the industry. And this is Intel at its best. Defining new categories, delivering volume solutions to the marketplace. And our roadmap for those products is already well underway. We have a 3X improvement coming later this year. And we're going to double that again next year in its AI capabilities. We're on track to drive this category definition, and we do believe AI comes everywhere, and that's the core of the Intel strategy.
BRIAN SOZZI: Will you be able to make enough chips to support the AI demand?
PATRICK GELSINGER: We believe so. And every day we're working that exact and we're building new factories and capabilities. We just announced the new advanced packaging in New Mexico. We're well underway with our Arizona and Ohio expansions as well as some of the international work that we're doing. We're also seeing tremendous interest and support.
The US chips office as you know we've laid out the chips program. Incredible support at the state level. Building the supply chains for the nation. When I stood on the stage with President Biden and announced the silicon heartland. I mean, just such a moving moment because the world is going more digital. Everything digital runs on semiconductors, and we want to have balanced and resilient supply chains rebuilding the manufacturing industry in the US. And we're the company that's leading the charge to accomplish exactly that.
BRIAN SOZZI: Pat before I let you go. I've been getting a lot of mixed reads. We're asking all leaders first and foremost, their thoughts going into the presidential election. And I get-- I'm getting a lot of mixed reads from leaders. Bill Gates, not to name drop, tells us that this administration has largely been friendly to the tech industry. You have Steve Schwarzman over at Blackstone saying it's become a tougher business environment for large companies to do business. Has this administration been friendly to Intel?
PATRICK GELSINGER: Well I think as any CEO should look at this, right, you're not looking at any one administration, you're looking at the policies that align with the right things for the nation and the right things for your business. And given that we accomplished what I believe is the most significant piece of industrial policy legislation since World War II under this administration and strong support from them, hey, we believe that was a major milestone.
That said, hey, there's a lot yet to be done. And whoever is sitting in the White House, we're going to work with them to keep driving these industrial policies because they are so essential. Long term research, leadership talent development and the rebuilding of the manufacturing base with good tax and investment policies.
Those are the right things for the nation, and we're going to keep driving those independent of who sits in the White House and who's in the Senate and the House respectively because that's the right thing for our country, the right thing for our business, and we're going to drive to make those happen.
BRIAN SOZZI: Just hearing you talk about AI PCs Pat it really reminds to me that my computer, I think, is really outdated and I'm about due for an upgrade soon.
PATRICK GELSINGER: I absolutely believe you do. And we have a great Core Ultra ready for you Sozzi.
BRIAN SOZZI: I'm sure you do. I'm sure you-- I'm sure you do. We'll take that offline. Intel CEO Pat Gelsinger. Always great to get some time with you. We appreciate it. We know these are busy days. We'll talk to you soon.
PATRICK GELSINGER: Thank you.
