Intel CEO: I have no regrets on Mobileye acquisition

Intel CEO Robert Swan Photo; Liat Mendel

Robert Swan says Mobileye has doubled in size since Intel acquired it and is the leading player in Level 1 and 2 autonomous driving.

"We have invested $40 million in Israel over the years in research and development, in fabs, in Mobileye, and in Intel Capital, and we'll continue to invest," Intel CEO Robert Swan said yesterday in his first visit to Israel since being officially appointed to his position. Swan is in Israel for the launch of Intel's new startup accelerator in Israel, which will be named Ignite. Former Microsoft for Startups global manager Tzahi Weisfeld, who recently left the company, is being appointed CEO of Ignite. Swan held a press conference in which he answered questions about Intel's plans, the fab in Israel, Mobileye, and the acquisition by Nvidia of Mellanox, which Intel was a candidate to acquire.

Q: What plans does Intel have for future investment in Israel?

Swan: "We have been operating in Israel for 45 years, during which we have invested $40 billion, including in research and development, production, Mobileye, and the Intel Capital fund, which has substantial investment capability. It is an important part of the company, and will continue investing. But I assume that the question concerns production activity. Late last year, we announced that the company's growth rate and the opportunities we see - in a potential market of $300 billion - were higher than expected. This was good news. The challenge was that we did not have enough production capacity to meet the growing global demand for our products. So we said at the time, first of all, we will never put the customers who trust us in a position in which we limit their growth because we lack production capacity. This is a promise I gave customers all over the world. Accordingly, what we are about to do is to expand the production facilities in the US, Israel, and Ireland. Our big budget is waiting for production facilities around the world. This is our plan. We presented the business plan last December or January. Our plan is to expand the production capacity in our fabs in these three countries over time, so that we will not have to limit the growth of our customers."

The new startup program "will begin operations in Israel this year, with plans to scale to additional countries over time." According to Intel's announcement, the program is designated for "early-stage startup companies in Israel targeting key industry inflection points, including artificial intelligence (AI), autonomous systems and other data-centric technologies and business model. Following a rigorous selection process, Intel will host 10 to 15 top pre-seed to seed startups through a 20-week program where they will receive hands-on mentorship from Intel and industry experts in a variety of product, business, management and technical areas… Diversity will be an important guiding principle of Ignite, with startups established, owned and run by different representatives of Israel’s diversified social mix."

Weisfeld will report to Intel Israel general manager Yaniv Garty. Working together with Weisfeld will be Intel VP SoC architecture Avner Goren, who will be responsible for the connection between Ignite and the technical community within Intel. Intel said that it "has no plans to seek equity in or rights to intellectual property from these companies," but during the press conference, Garty stated, "The company is also likely to eventually invest in companies."

Intel formerly had a local startup program, which was closed down in 2015. In contrast to that program, the current program is global, with a physical site in Tel Aviv. Intel says that it differs from the previous program in that the connection within Intel is more substantial.

Intel has faced difficult challenges in recent years. The company missed out on the smartphone revolution; made unsuccessful investments, such as the acquisition of information security and anti-virus developer McAfee; repeatedly delayed the launching of chips with 10-nanometer architecture; and recently, after losing out to Nvidia in the bidding for Mellanox, also announced its abandonment of the 5G cellular modems segment. Intel also fell short of the forecasts in its recent financials, following which its share price took a sharp downturn that wiped out all of its gains in 2018. None of this prevented Swan from saying at the beginning of his remarks, "We celebrated our 50th anniversary last year, which was the best year ever for us. It was a great year for us."

In retrospect, don't you think that you may have paid too much for Mobileye, and what do you plan to do in order to make sure that this deal will be successful, unlike past deals, such as McAfee?

"I have absolutely no regrets about the acquisition of Mobileye. In two months, we will celebrate the second anniversary of the deal. During this time, the company has doubled in size. It is the leading player in Level 1 and 2 (out of 5) autonomous driving, and we are only beginning to take advantage of the opportunities for leveraging the data that their technology is generating. This will expand the role that Mobileye is playing in the industry. I will give a few examples. We are switching from driving with assistance systems to autonomous driving, and while we are doing this, we are adapting to a large volume of data. We can use this data in various ways, whether by expanding the role that we play in autonomous driving for things such as mobility as a service, or by using the data that we are gathering to help companies and authorities worldwide to use this data to improve infrastructure.

"For example, we recently announced a connection with a company in the UK that is responsible for adapting roads to traffic speeds. By using Mobileye's technology, they will be able to improve the infrastructure. So the reason that we bought them was because of the computing advantage, and in the future, the car will be another kind of computer. This is our opportunity - to embed Mobileye's technology in this large market. Now we are in the initial stages of penetrating the market, and then the role that we can play is very significant. To sum up, I am very satisfied."

Why did you let the acquisition of Mellanox go?

"We always examine technologies that can enhance the role that we play in our customers' success. We can reduce these to six things that are very important to us - the six pillars of technology. One is the 'packaging process,' which is in effect Moore's law. The second is architecture - not just CPUs, but also GPUs and field-programmable gate arrays (FPGAs) and AI chips. The third is the role that memory is going to play in facilitating the growing power of processors. The memory has to keep pace, because in order for the processed information to be relevant, there has to be high-speed access to the data. As more data are needed, the data must be moved more rapidly on the network. We are therefore examining various technologies along the way in order to see what is most suitable for Intel. For example, last week, we announced the acquisition of a connectivity company named Barefoot that is developing a component that we think is going to be very important. We are always out there looking for technologies."

AMD, your competitor, already has seven-nanometer processors, while you are still having problems with 10-nanometer chips. When will we see them?

"Intel's 10-nanometer processors and TSMC's (the Taiwanese processor manufacturer) seven-nanometer processors are more or less the same thing, but they launched the seven-nanometer chips before we launched the 10-nanometer chips. Our plant to launch the 10-nanometer chips was delayed several times. What we announced in April last year was that we would launch 10-nanometer products for private customers by the 2019 holiday season, and would then leverage the technology for our servers business in the first half of 2020. Since then, we have been revising this guidance and confirming that we are still on track. This is essentially a function of two things: consolidating the architecture and the performance, which is actually part of the objective of my visit - the fact that we just consolidated the architecture of the 10G processors a few weeks ago here in the development center in Israel. Secondly, the outputs of the fab in Kiryat Gat where the 10-nanometer chips are being produced are still being improved."

Why did you get out of the 5G modems business?

"What we announced several weeks ago was our intention of getting out of not 5G modems, but 5G modems for smartphones. 5G modems will be relevant to a variety of applications, especially for PCs. Whether we will manufacture them ourselves or buy them is something that has to be decided, and we will assess the progress in adoption of 5G modems outside the smartphone segment as time goes on.

"The reason that we left the segment is because of three criteria. When we make these investments in technology, the first criterion is that it should be a leading technology and we are in the forefront. This criterion is fulfilled. I feel good about the investment we made, we had a substantial market share in 4G, and we also invested substantially in 5G, so we feel good about the technology. The second criterion is whether the technology enables us to play a bigger role in the success of our customers. In this specific case, we had only one customer. So you know that we want to find technologies and products with a broad base of applications and a broad adoption base. In the smartphone segment, most of the players have their own technology. We had a large and important customer, but there was no broad applications base for these modems that we developed. The third criterion is that there's technology, and a broad customer base from which money can be made. We concluded that we had one customer, and we saw no route to profitability, so we decided to exit the segment."

What will you do with the technology you developed?

"We have a rich set of patents, and intellectual property that we developed along the way. We will make a strategic assessment of the most effective way to monetize this technology, and see the level of interest among players in the industry - about the possibility that they may want to buy it or buy licenses to use it in some way. In any case, we are only in the initial stage of this assessment process."

Published by Globes, Israel business news - en.globes.co.il - on June 17, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Intel CEO Robert Swan Photo; Liat Mendel
Intel CEO Robert Swan Photo; Liat Mendel
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