Intel (INTC) 23 Jul 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter 2020 Intel Corporation Earnings Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host today, Mr. Investor of Director Campbell, Relations. Trey Thank you. ahead, go Please sir.

the to you, you earnings quarter and release should everyone operator, welcome Intel’s and earnings conference our received copy second presentation. a Thank have of earnings call. By now,

a Bob available George online. If website we’ll our of by I’m moment, also in joined intc.com. documents, for Davis. window CEO, is Investors the presentation today on webcast Q&A. remarks you’ve Swan earnings those brief both CFO, from not followed available them, received In and they’re our The joining hear our us both by

Before have everyone as on we to release available for forward-looking we Bob. consolidated non-GAAP it factors this contains specific let actual and earnings that, non-GAAP such, we include that environment it, our statements press results risk describing With differ our and and to see results. risks begin, quarter, refer speaking as A we full GAAP and to me financial the that hand today’s materially. the brief that Please information currently the more could does remind based when intc.com cause reconciliations. let on include discussion provided non-GAAP release earnings be over the will presentation me both GAAP measures reminder, Today, on The measures. and financial to uncertainties.

have and and We to billion and capabilities our the generated which very a earnings joining goods guidance learn, by the per Amid people and line very $XX.X a share. work, connected, contributed PC strong exceeded cloud vital services. to businesses call. in network trends all billion top our provide Trey. on revenue, in stay And $X.XX thank in bottom-line. we delivered $X.XX infrastructure for on $X.X quarter critical to you Thanks, challenging environment, in continue and and and been allowing Those

unprecedented to to I businesses businesses drove revenue, grew be approximately a and PC-centric of X%. at the partners our they operating this our additional environmental this who as during supply thank maintain has and our employees COVID-XX stress productivity try level partners data-centric grew strained and amazed workflows diligently partners that and business world. know and to continue chain our Company’s keep worked Our redesigned high by employees I XX% ecosystem XX% want for have in driven challenge. incredible I and new employees their to contributions. added has

we our and workforce, Our and Accelerating deploy primary customers three focus the and our safety continues call, for your On give of updates continuing to I operate. about global which Company; improving earnings delivering be to well-being our growth helping key capital. execution; our the ensuring each in the priorities: communities of against thoughtfully the progress

Let a on each. few me give you thoughts

are it’s larger computers, so new becomes impact more can than and opportunity That silicon, this more just more a success. CPU; our In customers’ schools. not cities, on world our looks world, our Intel more playing such our business That history. set built to the We’re the edge. and growth. computer, including inside transforming just we to our more and have from into but market results. critical factories days. the scale our like share today’s XX even is in becoming all our Company to positioning homes, everything indexed means factor our now as past in tech grow embedding intelligent use our autonomous inflections a where hospitals, in cases AI, pervasive, examples a we and and are the We’ve key We a businesses see increasingly cars, XG, driving I’ll products. capability AI diversity our our and few largest one accelerate AI defense highlight the opportunity cloud,

inference AI, leadership. with is Our for platform acceleration center and data scalability, AI Xeon foundational value, built-in

wins the third Facebook This processor mainstream AI buildouts data Virtual and XX% Lake, including Developers can CPU of by Leading year-over-year Scalable Intel is to which and including power Alibaba, its same demonstration of accelerates we Mobileye’s Combining Also full-stack of Moovit technologies transportation. announce which of general is TAM customers, end-to-end see are access win scale from use mobility-as-a-service mobile reducing production and core. and XXXX radio in for ADAS Azure to accuracy. Scalable and our solution to array instances, deploy of network launched Compute applications Azure Xeon from increases the edge of quarter, providers, moving our bfloatXX and new the significant $XXX QX, last a we units. they provider provider revolutionize world’s cloud train were Gen our models and to with were date throughput generation mobility technologies. support, This mobility-as-a-service first our the server cloud-native amount PyTorch of the multiple versions than this and fully include continued to service ADAS from an AV their and virtualized edge. catalyzing ability cloud-delivered adopting processors volume using the the Cooper the full-scale and the Intel ADAS, million more the a of a mobile OpenVINO powered Scalable service quarter, to new Moovit, both it’s The our the Intel billion call, new and industry vast required cloud introduced are accelerated. leading processors distribution FPGAs design bfloatXX, we services. Xrd largest Tencent, first edge Xeon XG and as capabilities also critical announced into be a their by most Intel and Rakuten’s to XXXX Intel-optimized optimized infrastructure cloud truly market with to of to grew week opportunities. a cloud TensorFlow first launch businesses become representing for the commitment technologies we of comms market-leading memory-optimized our mobile service at latest In acquired company. the inference purpose is network the service. data The We XX carrier Ford. important part programs usages cumulative and this Machines. Since and commercial several excited Xeon with Design to opportunity Baidu, is over excited XG-ready

We’re our innovation PC customers of for cases. also a driving incredible wide spectrum across use

and them to and box and X.X to of This gen reaching quarter, for Core three our mobile the additions family, speeds processor S XXth introduced new gaming H new Gen Intel vPro The out Technology, for in security the is for series of leadership processors our up desktop hybrid we processors PCs. marked and CPU deliver new processors, extending gaming productivity business. and Hybrid the which delivered gigahertz, Core making launch commercial uncompromised featuring gaming Intel XXth fastest architecture our power world’s also performance hardware-based a and our scalability. QX Lakefield,

on work our working to during employees and continue in our have also this difficult partners customer We crisis. conditions improving to Intel upsides while supply chain teamwork support execution. navigating role-modeled

We in six through have our progress the our billion supply, our the significant of $X made increasing first while year. above capacity months improving delivering plans and

our half January to inventory expectations. versus Lake. family weeks. matter of power very as delivered continues. process of by product -based our expect base station return to be our delivers also together, the year PC full a to breakthrough more is with second demand work of our of our graphics next-generation levels of the the will We of AI, products and within Lake for through we node customers strong. designs product Tiger products track more and next-generation improvement Tiger continues of performance XX-nanometer-based than our our normal XX-nanometer-based intranode CPU, Customer shipments and increase now XX% product, our XX-nanometer-based We to a in performance the by XG client for on shipping year. and in XX-nanometer Acceleration optimizing for We’re SoCs improvements

of initial of for first for XXXX, year. targeting are Alder XXXX. Xeon shipments new a architectures Lake, for in half product client exciting pipeline by product, Both XX-nanometer-based and server. We Scalable start also Ice of of will the Lake the production our Rapids led Sapphire we have shipments products second end for the initial And production

our provide Let me some roadmap. technology updates on

points packaging to continue advanced of proof breakthrough our demonstrate technologies. We

delivers Our our both of disaggregated Foveros, capabilities mentioned earlier, in XX-nanometer which scale Lakefield combining and a XD production packaging technology, XX-nanometer I architecture. product,

powered This successfully petaflop-scale quarter memory using technology. interconnect also marked bridge with packaging a bandwidth high GPU on significant milestone We a in or XD data technology. our embedded advanced center multi-die EMIB GPU our

Turning to technology. our X-nanometer

CPU in our We process, the an product timing expectations. six-month driver approximate internal on are prior our now -based months trending X-nanometer to relative approximately The is is recent data, XX of which X-nanometer yield our based primary behind target. seeing shift

root-caused schedule the fundamental we and invested plans defect process a identified in that in there resulted yield We’ve also X-nanometer uncertainty. are in roadblocks, We our have hedge degradation. to believe mode but against further have contingency no issue

delay impact the in by of our leveraging improvements advanced schedules mitigating design such packaging. and die as We’re disaggregation methodology process the product on

to We have competitiveness have is roadmap. XX-nanometer our technology challenges approach process from learned ensure our our milestone-driven impacted the transition a product in not and by

Our product products. a of steps are to taking lineup right for strong deliver overarching produce the customers, leadership priority leadership is to our we and

or in our but that that performance We of combination a predictability will external deploying process continue both. our and delivers our invest foundry we most objective in be the will for technology roadmap, technology process the to future process, whether process pragmatic in be and customers,

Our customers. our architecture the disaggregated best advanced technology packaging serves combined use process that give us our to flexibility technologies with tremendous

or combined example, product, packaging of with initial client now GPU will late now in expect an shipments see late to XXXX We process production utilizing in XXXX, first our or As XXXX. internal CPU X-nanometer XXXX Vecchio, Ponte Intel-based our center and be external design, world-leading technologies early our a technologies. data released early

on of window roadmap, XXXX. refresh We annual holiday focused maintaining of improvements cadence product are of including significant our also independent the an process

XXXX. data see we the first our addition, center in Intel-based production CPU In first shipments expect of design X-nanometer of half to initial

pillars that technology while one technology Finally, process drive innovation is of our the products. very only of in differentiation six important, is it

memory; Last, the advances hear thoughtful security/software are we will about of focused capital. allocation Architecture at six packaging; interconnect; pillars, process; on your Intel all You Day. upcoming more and the across technology architecture;

overall while flow capabilities as significant of have reducing we spending free We this R&D percentage are spending revenue non-core billion a year. grown $X assets than investing as Since XXXX, by to we more by grow and points. X our even cash divesting deliver

for to which look pace also the and speed augment grow we Company. opportunities can lines our the at product We

investing earlier, discussed quarter, this $XXX to billion capitalize opportunity. on $XXX acquired mobility-as-a-service we accelerate million As to dramatically Moovit approximately capability the our

announced and to also million connectivity digital investment $XXX Platforms, a digital fuel a high-speed wireless help services India. provider, transformation in We Jio in

bigger In well That’s and to are than as lives that company purpose million unique change. Intel’s our to collectively to results essential. are all face The more help our expertise, Initiative, $XX response person to through the deliver safety, our technology than earth extended time But also can goals, Response we and as problems. one want our deliver closing, I we to global on working which of ability enriches established any and problems world-changing who employees inclusive our COVID-XX this social this influence responsibility the XXXX Pandemic why partner a underscore solve address Our global challenging thank been never call support every Technology has injustice. solve and purpose alone. make customers. We’ve health critical week, committed which announced technology climate combat more for reach of and earlier corporate revolutionize and collective to fully we early

and sales, and afternoon, and Thanks, PC year. products, PC-centric XX% mobility Gross revenue NAND came of products offset of QX, a in Revenue effects in cost overall, $X.X Bob demand richer XX-nanometer ASIC dilutive memory. total XX% XG Data-centric everyone. up billion $X.X billion, the year-on-year for in Strong supply for continued solutions the timing. slightly notebook drove our past XG from the expectations to quarter expectations. costs average billion, XX% X% margin year-on-year higher record product higher $XX.X revenue up of manufacturing partially to revenue, of QX The of atypical from of of uptake and through R&D on below related infrastructure the over on versus also resulting COVID-related an-all on and and than QX networking upside year-on-year, represented increase X-nanometer server to time enabled demand mix for guide. good at capacity acceleration was DCG additions XX%, margin high. our seasonal our up relative center of costs revenue was $XX.X most data billion, are for Company continued CCG, product by sales products which shift faster strong and

from a $X.XX expected pre-PRQ for margin above as in up effects our cash on operating we richer year $X.X X-point shareholders units effect was trading of approximate margin client via approximately along $X.X product, flow, as quarter. from the mix item a dollar efficiency margin. benefit costs flow, increased of as results largely we invested Tiger products, XX% discrete $X.XX, generated year-over-year. last tax of will reminder, initial server in We zero gross product. asset gross sales with XX-nanometer an the Operating QX the with expected portfolios, the billion the to our this billion and stronger in we and Lake versus of with a quarter gains flat offset begin reduction of full dividends. quarter CapEx acceleration which was higher the to lower our than This $X.X in timing billion a in from item. year memory cash offset guide In second EPS foreign operating As of and XX% reserves is returned notebook, free billion our in in QX, $XX.X respect spending our

in reminder, environment. in so prudent felt was repurchase current a do the paused we economic program As our share as QX we to it

complete return repurchase balance dynamics when share the historical We our expect to our return $XX to market program of billion stabilize. and practices capital

higher was than year-on-year of performance across XXX% the up up also significant with networking ASPs strong Center Year-over-year segment platform up of year, expectations were customer in our solutions. growth in respectively. $X.X Data X% segments. adjacencies on prior strength to coming Group Moving volumes XX% adoption in from and with XG XX% QX. billion revenue revenue delivered DCG

and in level from weaker highest service up and came in revenue highest revenue in While ever QX the the XX% second quarter cloud, in year-over-year DCG in was DCG government, communications our a enterprise and cloud for year-over-year comparisons the ‘XX, benefited for Revenue year-on-year with ever XX% at for higher strong we’ve providers. this portfolio to XX% on is X% see our original but share high-end higher competition revenue increased than also expect that and Operating margin to was and seen up XX%, somewhat now customer product end We year expectations. market mix. response our compute year the business.

quarterly which volumes more XX% Wi-Fi higher by revenue lower was product quarter, was was XX% new as in than penetration costs. IQ were approximately to and revenue was year-over-year NSG’s continued up PC than memory improved partially the a million NAND for The income X% in retail QX, PSG in offset revenue and X% notebook modem and Operating generating headwinds primarily CCG weaker on business. $X.X income XX% Mobileye. COVID Our demand up returned and NAND revenue desktop businesses and demand which loss dynamics supply. billion sales, sensitive lower record up profitability year-over-year income segments. increased on and on our X% an offset on operating sales businesses, operating cloud embedded revenue year-on-year global strength, quarterly richer vision unit were year-over-year, GDP driven volumes. auto was more segments. in was XX% approximately all our Mobileye income. from and data-centric other ADAS IOTG this and revenue notebook more of launches. IOTG down decline growth the time mix business significant record communications and year-over-year, billion and and up to modest QX, $X.X primarily revenue also on offset by turned demand bit XX% operating from on higher in despite unit $XXX and impacting grew QX demand pricing. industrial, declined XX% improved for strong up respectively, program

of we able XX%, Core given We fully the QX Core offset down products have our more than pre-PRQ the throughout improve products, year-on-year margin demand strength of of the higher launch large we expect to reserves begin products. ahead smaller recover utilizing costs to which and higher in the of Tiger year been with to serve ramp Operating share unit our was Lake of as our notebooks revenue. XX-nanometer associated for as our points XX unit not benefits the share the remainder

expect the government commercial business, Based DCG quarter Moving the PCs and our the demand enterprise form weak our economic particularly outlook. customers, factor, expect also and third now QX. and impact from Mobileye. IOTG we and PC and in cloud that on in environment comms strength drive will to demand we signals and segment infrastructure in lower But desktop for notebook in our continued consumer

we desktop demand with year-over-year As inventory high margin In $XX.X improvement. we down softer lower be and more PC-centric to Gross result, on margin TAM and PC the year-over-year. revenue digits down points billion year-over-year products expect than of mid-single and down single total XX%, OEM global approximately recession. revenue platform a offset the the to digits effects XX-nanometer businesses accelerated of expect data-centric is QX, of ramp expected as X.X be NAND draw-down

foreign approximately grant. credits in in effect in The rate rate the We of previous approximately to are to is quarter a prior tax a our approximately of a the expecting our lower versus primarily year, X a rate points California, R&D QX. in tax FDII the higher and push-out is $X.XX temporary X.X reduction by a above EPS due This reducing in benefit [ph] our expectations, XX.X% tax expectation. of

per approximately As a result, QX EPS is be expected share. to $X.XX

year. full to Moving

our outperformance half visibility year somewhat into Still, or year expect We’re do to quarter. fourth the full we for full although revenue. part will guidance be limited first the estimate providing remains additive Company’s some

approximately of EPS billion and We of $XX are $X.XX. forecasting revenue now

TAM mid-single-digits against down to is flat to We expect PC our business year-over-year. the PC-centric that down slightly be

a strong entry as we we refresh as a Following have also of greater PC second the the drive half lower for demand expect maturing our expect moderate XX the Win market trends weaker Again, share very designs. global first segment supply to commercial year, and we TAM. half GDP to in increase PC

Additionally, we the are forecasting modem in lower revenue half. second

and to from expansion first the buildouts. businesses cloud significant we strong into QX, XX% expansion the on digestion We expect and as be phase. for CSPs to moderate up XG move year demand After half cloud approximately in our to full a revenue data-centric capacity expect increased

We’re also the planning for an second half. into increasingly as move environment we competitive

in SG&A delays patterns $XX.X discussed to or GDP-related versus is XX% businesses from and in than IOTG year. is respectively. global cost the impacts approximately expectations demand underserved and more OpEx the our This costs government memory the IoT expected offset sales of gains. for The our more rate Full PC grant other related than stronger of and FDII implied our to of up year-over-year. EPS higher reductions portfolio exit costs IOTG additional margin than impact billion our The lower business. higher the the year-over-year. product is offsetting point in to is the buying coupled by margin our businesses, as cost a temporarily The our being below expectations Bob tax OpEx X $X.XX. discussed for anomalous and our our tax and higher is and for higher These Full and continued on points offset half increased second versus slightly products, by the year-on-year. and actions, the ongoing push timing typical in by XX%, full for server including higher expected the first share actions softness shift earlier. year and expenditures, the well higher with rate items impact half, year a second demand, year and out Spending mix expected discrete our pausing lower be the of is than improving down impacts on as effects down gains and of benefit. expected to to to the demand, revenue XX.X%, R&D resulting operating is one and Mobileye equity of of year, improved January by notebook $X.XX are point reflecting XX-nanometer be expect overall some raising rate to to an impact for COVID, and modem down combination spending COVID-related XX%, and XX% previously of XX% cost XX% the between revenue, a from year productivity debt product DCG, sales, of as the related year with X more opposed Overall, seasonal partially $X.XX Gross liquidity liquidity XX-nanometer, costs expectations largely We of contribution change January and as between XX%, alone year the our point, the accelerating shift to our X driven is reasonable half spending more higher and buyback. Mobileye, EPS tax be

Bob work We who I’ll the of cash $XX it contractors appreciate To in questions. a face back your Very worldwide. With employees and employees hand to join billion. that, billion get in of and the very to results we’ll Trey excellent of like delivered environment. difficult approximately our our and expect approximately hard CapEx much to free thanking conclude, flow I’d XXXX of $XX.X

All right. George. Thank you,

to now Q&A. on the Moving

practice, ahead introduce please ask first our one just normal caller. our go would participant is we As to question. each ask and Operator,

[Operator Bank Vivek with Instructions] comes America. first Our of from Arya question

implications taking that the of financial X-nanometer mentioned. the my to into and for Thanks competitive question. the you I wanted Bob dig delays

still on you up So, be will come a the is so ahead. to planning generation on the by TSMC be the side, competitive X, time X-nanometer, with

keep of in would technologies? more what lot and with outsourcing Intel lot a and state-of-the-art at gross guess, on what’s that you stay can So, have pricing market of just should year? the you side, question implications, implications consider that? the bigger investors related then, line margin manufacturing the I point if longer XX-nanometer the on even implication is, next share the and CapEx what’s And financial to that And foundries, a so

leadership, mean, our annual primary delivering I year focus in that customers manner. Yes. an every products leadership on each first, ensuring Thanks, of for we’re is and cadence predictable Vivek. our a

is a to that And another lineup do both to very expectation on like lineup. XX-nanometer, is we our what XX-nanometer node get what of for of -- strong feel for talked about in client and performance server. And good much XXXX, on XX-nanometer XXXX, able about and itself. So, XXXX we that within within we’re today

So, that we roadmap we and very to said, strong XXXX. products next in That leadership about in our product feel be need of good IDM. our think deliver our about of technology, through ideal that products generation being the on ‘XX make so is But, beyond, And we the as sure continue we the economic late world we performance. products. focus to benefits ‘XX will leadership priority process capture and

the with last economic we our of need moving with But, we process ASPs that how lots ASPs, an And node, those the our do, on to be that. deliver contingency to move that and build capital in and use line amount prepared else’s of we of So, attractive there’s products, have that costs, extent else’s kind capture on gen deploy leadership a get and process to do node. a we plans, so foundry parts. we we scale, somebody reduce continue to call event in or somebody older you decide the technology to implications if do foundry, to to will the we to

the cadence much when else’s flexibility use been product if now, the years products. feel we’re holistic ecosystem engaging we And way. decide through last ‘XX we’ve focus or So, couple beyond. more aggregate, have leadership so designing timeframe. deliver advancing leadership, of with have that somebody to with on we very that fabs annual in optionality products our We our much in will on been We’ve the real packaging our and and the a good ‘XX more technologies, for that to we for evaluating the

Hey, Vivek.

And year just ‘XX see to with for what comment with products Next seen there was, more going expected. is as in it little on as we might we’re me in yield about going year? the along than having it -- when to moved XX-nanometer the what XX-nanometer be XX-nanometer are, around a largely your we’ve still going see is curve, last still a coming XXXX dynamics some into talked May year. demand bit to we’re we we next as Let had be, further question

update going ‘XX this we’re not are think, than on So, what concerned is time. But, about where the global XX-nanometer. more I we’re economy at to we doing

Thank you.

Thank you.

question from comes next Our Evercore. with C.J. Muse

Your line is open. now

and Thank should I suggesting ‘XX. not back guess, at comment built afternoon. on think internally XX-nanometer Thank could for found plans that the question in Intel? after I and be Considering on delay. guess, are you curious, X-nanometer a XX-nanometer? Good Yes. data then, the CPU you. contingency follow-up your taking out the the question. capacity circle center be at for to we how required first you about adds and around And launch will implications ‘XX, that just first half CapEx

advantage in provided all do of equal, we’re decide the leverage little full In of all with to your XXXX And less leadership. X. XX-nanometer we lot we think, question, and -- going as first a less in optionality evaluate would technology take the of more development that’s add of Moore’s effectively, we that’s of a prepared better it. we’re the to build event law. in there is, third-party product, else spend part we continue we’ve spend, to try X-nanometers of kind XX-nanometer array essence I XX decide expectation say, our more In that in that and to a there’s future it’s the not and And more little production be the inside. to the foundries be event alternative,

Thank you.

John Our with Credit Suisse. Pitzer next from question comes

Your now open. line is

XX could Yes. them topic Sticking me where X-nanometer. product are yields if for only expect ask letting help is you months me just behind Hi, X. on would same a guys. the question. the of Thanks you Bob, understand but ramp

of If XX-nanometer. that circle But multiple had more sort helpful. that’d be you of push-outs square importantly, you could

that have and of push-out You’re where identifying repeat had is What to and doesn’t X-nanometer you kind issue level you this a this push-outs? of of XX one in turn a do today. periods sort it done of multiple confidence

I couple first, and we quarters that John. on now product of of and process by roughly of process the Thanks, sure quarters. process. is don’t to The slippage make driven product gap a of planning process our while disruption -- One, to between buffer difference because two customers, minimal mean, expect roughly schedule we four things. a be

us remarks, outside, do SoC therefore disaggregation and Second, process as stuff the light the further gives delivery inside some some die for given advanced packaging and to and I’ve prepared mentioned in of in compress the ability slippage. product a stuff

been we’ve though out slip, was able products moving confident be even why, that’s in process months. to a So, six-month XX

-- was seen XX-nanometer. I our before, And we’ve I lessons your the of out of question terms of this coming think, In many maybe. movie important second about, think

contingency as same them is make and contingency have hope, do that we’ve One But, coming of we dialed sure out the making match, if inside that annual or we’re optionality one do be that’s And to. sure event in outside build was sure do making its and plans, leadership how to think increasingly outside our different need and that should go or we exactly internally, of to outside cadence? we we the that and pragmatic I’m we how we inside if X. that a out way entirety, in have things kind to we way of mix of we the we be learnings doesn’t deliver gets making not can technology, at products the can schedules slip in stuff process for about it real along complexities. pretty in our our let’s best absolutely leverage event So, customers and want. going the time, with can somebody continue planning, of process process on else ensure the advancements in what’s play and We complicated, move that advanced switch won’t is sure light when milestones as out to expect, we make not play we in XX product we

Seymore Deutsche Our Ross next with comes question Bank. from

to like hear to that down option you’re road as about going But, Bob, with external. how well. years external theme treated. you’re internal guess, saying plan I’m guys. seems going -- Hi, more the being being is is I pragmatic three to the about ask great X-nanometer it and contingency be the it’s the versus stick you’re

has the revenue XXXX? XX I down think maybe manufacturing if Are And internal XX being there XX-XX, primary Obviously think contingency mix, the the long instead the you than external, a steps with design where execution investors three side. plan, the actually start the making on this before frustrated how changes? to of years on source do are side that follow-up, more five happened. external you road, side, a

Maybe, I’ll those around. flip

do we’ve Over use than ourselves. the last years, capacity, rather been more about, expand And talking of when foundries, third-party holistically, everything do we call so a couple as ways engaging each we of our evaluating that to associated more in the with variety everything build the much ecosystem node ourselves in a we for bit different holistic have higher. becomes we reasons, don’t capital as

ecosystem equal, the growing higher with we’ve I purposes, expect planning for say engaging would that would I to general, been else the little And XX% on business. much all be focus we as more. bit a roughly in So,

year we terms in in yields ‘XX it of solid do of product XX-nanometer line question for a that’s planning the expected, this expected. then, have we ramping first and and half for than it for that ‘XX feel Your we what we with fast our like second on we’ll existing roadmap, again real

in standing now in got industry. while So, the expect role and fight and And a we places in for great we light we the products the near-term, on decisions of process can returns more place so make in lineup think that parties is get protect ‘XX, along we’re capital for share, we decisions And deliver annual are, now for cadence effectively play or best evaluating made we a decisions the product of different when But, leadership about us good make the are we of the industries, competition we an to to we for that variety think where we option to it’s incremental can where before sure do XXXX. are need what’s are, we the we much real are now long third how of evaluating or way, about deployed. have we and how planning our ‘XX. then. that the customers. decisions we’ll somebody will on be those decisions, put capabilities capacity based Whether our information leverage factories, not in that else’s that Those

with from question Research. Stacy comes next Bernstein Rasgon Our

big X-nanometer ask they going getting to to higher Because want there really time, versus I like to really you’re because XX-nanometer. better margins thought delay? my about be hugely the Is is where because tie in January. or the trying this to acceleration in doesn’t yields were it’s you hitting which head getting in offset and are demand, the yields better

-- given think in drivers on X-nanometer acceleration we the X light do what’s X-nanometer of or XX-nanometer with light delay, in how So, going acceleration margins? about of the that of the

Hey I’ll year. just margin for cover George. the general the Stacy, on this Maybe in is it picture

XXXX say PC a demand an products definitionally we clearly the tied forecast expected growth would are growing we side than this on the acceleration -- higher of that and there. impact for higher really XG to the for and that is we’re So, XX-nanometer I and that comms The it’s mix fact faster the in having side, is year. ASIC than on where have part on

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within overall products mix XX-nanometer the for demand of the revenue our It’s space.

full of start I’ll the where demand with were revenue. relative we think at by I beginning in up to the our Well, our billion $X.X is guidance year is year

you just… But Yes.

finish Let this. me just

a think question you good chance if it. give maybe answer a I me to could that it’s

the So, higher. full year is demand Company to

line of yields kind coming about six on expected what And said we’ve are good with the for the we first we feel pretty in we months. are Secondly, yields. XX-nanometer, into through where the year

growth challenging as year. we will yield expected lower that ramping more else it’s XX-nanometer Third, gross of our the contribution the revenue comms node than the as demand are both a that’s it growth demand when our ramping highlighted data All XG good for a because And at take equal, much will it’s put than margins sector the for margins in put growing more we XX PC higher We year. to the Ramping part -- products lower. ramping a are that comms higher with kind I for expected. Higher had faster, feel category. equal on customers. on ramping the of billion the are And of had as lower equal more XX-nanometer else this And quicker is for of will those side all lower. for we XX our are stage the is our if a group of more, in margin a Thank else XX-nanometer the center the kind node. a our all new we be demanding guidance of know in the start faster accelerate products primary XX, old the decline. you. -- be faster point bit $X.X more versus impact drivers SoC updated X overall in have year. than is in the full We for and customers business of XG we of do -- we’re for market, our exit anticipated. little volume a products That we thing I we yields anticipated. good and the George implications margins XX-nanometer are game. margins modest that dip are think an than we we

Thank you.

Our next Timothy UBS. Arcuri comes from question with

is open. now line Your

thanks. I to ask on wanted Hi, the topic. same also manufacturing

else’s if be you like flow? question think, to Ponte the implications impact accretive are, it contingency, implying it but it what were I going internally, XX% this George, you right? Vecchio, I margin? you’re even obviously, for does I did when product. long-term you you my I foundry also, think that an first how it to is, free saves somebody can fab? long-term move And Bob, said it CapEx to mean, your cash So, GPU seemed free to flow? What does XX% external And talking on I wanted to I ask package to do this were but guess, about that read gross cash you

of designs of That’s and of design the do those From would we memory the Vecchio Vecchio, Ponte the of some and kind some together. mix includes outside, of some Yes. how kind Vecchio. GPU Ponte match and IO originally an packaging of those the do all connectivity, beginning, based we a proof technology tiles inside package. On die, again package different as leverage into and tiles, tiles one of architecture a point Ponte

the inside products, we’ve the about launched, some some was more side were our other disaggregation, we data when of one kind which again, stuff and -- the in really the center of on client So, both outside, beginning. And from test our Vecchio on use designs, development. Lakefield Ponte side, the is one which in -- optionality flexibility, design talk that Vecchio stuff Ponte is

disaggregation gives design of that flexibility. So, us lots

think some we inside whether forward beginning. outside now, we about with from I can are we those Vecchio of -- said tiles and think, Ponte introduce As go I the

one third-party Now, design optionality forward, us tiles more flexibility. and Again, we methodology and change whether out much not. as go the can we assess gives of we beauty that’s foundry this a our or and that for swap of value

it there’s all we slip, event, can buy than the in ourselves. something process rather a make So,

off, is us should certainly gives capital product it move, move as to the return to capital that it long-term above being cash our over about respect where dynamically first But optimize terms more flow. outlook long-term on that potentially I not that outlook, we with provided, time. flexibility of XX%, talked on we’ve higher margin depending accretive And a think in be our is it to And best spend. free get spend, well

is activity May we some improving going the look important actually So, our to talked back time. of ‘XX ecosystem as externally to returns and little of balancing be that in a that over we bit embracing about

Our next Capital Weston Twigg with from KeyBanc question comes Markets.

about implies QX. from decline the pretty revenue The ask I data-centric decline mid-single-digit into wanted year-over-year QX. to heading a big

wondering referring to of but DCG an You I’m the side? big could and And quarterly helped wondering a in half, aside, I’m just you on as competition for in understand us you on what also better kind drop. were mentioned if help little call, increased the exactly second you reason that the bit that

play. And may of It -- factors down data the a of often have As it’s revenue, from we of seeing the little government. the and off an bit But ‘XX back you Mobileye. there. data-centric year-over-year Obviously, all in to or in -- start number expect on we was that cloud bounce the strong of would on rolling it we’ll And a in it not QX we’re peaked a IoT time coming QX, has a think I in a we over peaked second peak fall the see see quarter, and look to at And in is, what QX was and impact can our peak. have -- it’ll enterprise of next going we’ll so the the side DCG in while in it see comms it provider, We’ve probably few reasonably there. been bad say, you to you’re QX, record, see. quarters. have

very the and got continues QX as that everything a a comms on down DCG is our down Does cloud from step current probably side outlook. So, help? strong and on

then, in on second increased comment half? competition helpful. That’s Yes. in And the DCG

Yes.

the half see second the in on roadmap year. based competition expected, that We would this increasing competition’s product of we

little of surprised for continuing thought half -- pleasantly advance first into the strength the it’s our year and our products the bit been also of the -- in half. We of in second a we’ve

the to competitively as And thought. had we in the we as half PC, impact second as So, be think gain said don’t we on think going actually will I we’re quite share. large

When statement. in we guidance, we January, in context of made that guided our back the

our see just outlook be competitive to for deal the more that and into of the is And that it. year. George prepared factored a we we’ll So, with reiterating world we second half

call Operator, to to for over I back up. we’ll we time turn things one have more then question, Bob the think, wrap and

Thank final comes SMBC you. Pajjuri Nikko. Srini And our with from question

question I you, your the for George. have guidance Thank year. about a full

pretty it much QX, double-digit in again DCG in think, declining sequentially. I implies

don’t to you you understand, what So, have because mean And about? extent primarily that stance a do have to because digestion taking visibility it trying or talked you I you simply QX is just visibility just also, you into conservative if into can of talk about are QX? just

view I even we is think, going to have cloud enterprise as I we And we and that continue comms, levels. question the be reasonable a said QX. that spending in last on the and off that coming expect that very-high down in into

as And seen would it’s This were demand to forecast comms one as so, in quarter, to to the all peaking the again, excuse -- delighted we for digestion as cloud quarter many bit period peaking expect. would be in in things going for world. just going we’re I the think, overall. -- stronger But expected our quarter, very year, a in than when ways, we’ve we given on the close be second me, of at full the be of strong and a little third of the second again, look

Thank you.

Yes.

we and of Let me out where kind began. close just

play to investments intelligence our best and expected. role years, fifth in year, we’ve expected has record enteringXXXX. January delivering Company’s history, last making. we year at leading we year the year time, time First, like a last we a multiple But, And the in in we history, in at when on Company’s our over ‘XX about is AI quest results to market success we’ve Obviously, be customers’ been key that fronts. the year row, better at expect this incredibly the a wrapped edge. in the good been larger our XG, the up expanded worse year And couple our investing the in best as in we TAM an than same challenging technologies feel by our than pretty year you know, a much

we So, exit as stronger competitively, feel XXXX. we

our is and make is is Capacity supply point execution Third in place. I’d improved.

slew across portfolio. a products We’re XX-nanometer ramping our of

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the of customers. the enrich employees on create talk our our in for of XX technologies better from operate efforts The a lives continue are now, passion delivering that next we’ll a earth. more communities our person difference. to our as result and presence We’re making to every And of about world-changing for days we

you So, we’ll joining talk for thanks us. soon. And to

joining you And Operator, us today. ahead up you go Thanks, the could wrap please Bob. for call? thank and all

this conference for call. gentlemen, participating. and Thank concludes Ladies you today’s

disconnect. now may You