Sam Dickie: Fisher Funds expert on the rise and fall of Intel

Former industry giant Intel used to dominate the computer chip market - with significant presence in the world of PCs and servers.

However, the company's market share has plummeted and it runs the risk of being bought out by rivals.

Fisher Funds expert Sam Dickie explains what went wrong for the business.

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Episode Transcript

Speaker 1 (00:00):
Now.

Speaker 2 (00:00):
Intel was once a high flying market darling back in
the day, and it used to dominate the computer chip
industry and so on with more than eighty percent share
market and PCs and servers. But that's all changed now
and the company's now on its knees and at risk
of being acquired on the cheap by rivals. To took
us through what's going on here is Fisher Fund, Sam Dickey?

Speaker 1 (00:17):
Hey, Sam, here, that good evening.

Speaker 2 (00:19):
Take us back to the start, Sam. How did Intel
actually become big? And then what happened for it to
fall away like this?

Speaker 3 (00:26):
It was It did nothing for the first twenty years
of its life, from the seventies of the nineties, and
it took off when the PC boom took off. So
remember what it was. It dominated the design and manufacturing
of PC laptop and server computer chips, and it dominated
the software wrapped around that. So it had the whole
shooting match and the stoff went up about seventyfold or
seven percent of the nineteen nineties, and it kind of

(00:49):
peaked in the early two thousands, and that's when the
rots set out. So sadly there was quite a few
things that went wrong, but sadly, the most high profile
one is they decided against producing chips for the first iPhone,
and years later the company admitted that their forecast was
wrong and the actual volume of iPhones relative to their
business case was a hundred times.

Speaker 1 (01:09):
What they expected.

Speaker 3 (01:11):
So on top of that, they made a few other missteps.
But one notable one is if you think about computer
chips and how far we've come, they used to have
a few thousand transistors or tiny electrical switches on them,
and that the iPhone you've probably got on your desk
there here there has got tens of billions of these
tiny electrical switches jammed on top of them, and that
requires extremely efficient manufacturing, and Intel just couldn't keep up

(01:34):
with the prowess of the tiny So the Taiwanese chip
manufacturing giant TSEMC, And because of all that and all
those missteps and several more, the stock underperform the US
stock market by about ninety percent over the last quarter century.

Speaker 2 (01:47):
Is that what we talk about when we talk about
the chip wars, just that they're like the development and
the fine tuning of these chips.

Speaker 1 (01:55):
I think that's what's underpinning there.

Speaker 3 (01:57):
But the chip wars is really that I guess the
cold chip wars, and there's a book written about this.
But if given the fact that the manufacturer of these
advanced computer chips is considered the most complex and precise
manufacturing process humors have ever undertaken, and given those chips
underpin every bit of technology we touch, and they underpin
economies and militaries, it's no wonder there is a big

(02:20):
power struggle. So a few factors to put that those
chip wars in context. China imports more in chips than
it doesn't oil, so has a natural disadvantage there. And
then you've got Taiwan or TCMC, which controls ninety percent
of high.

Speaker 1 (02:35):
End chip manufacturing.

Speaker 3 (02:37):
And then you move back to the US, and they
even have an active government called the Chips Act, which
is funneling billions of dollars into US based chip designers
and manufacturers to make sure they win this war.

Speaker 1 (02:47):
So some pretty big picture stuff there.

Speaker 3 (02:49):
And the fact that Intel that the US darling is
falling behind is a big deal for the US as
a whole.

Speaker 2 (02:54):
So why has the company been slashing costs and cutting
expansion plans more recently?

Speaker 3 (03:00):
Yeah, I mean it's announced it's laying on fifteen percent
of its workforce, cutting Cross by ten billion, delaying opening
new chip factories in Germany and Poland, arguably in favor
of opening up domestic putting more money into domestic chip
designer manufacturing facilities. But that's all to stop the bleeding
of I mean, they're making losses because of all these

(03:21):
poor decisions they've made.

Speaker 1 (03:23):
And on top of that, it's been given around.

Speaker 3 (03:24):
Twelve billion dollars of funding under the US Chips Act
to try and shore it up.

Speaker 2 (03:29):
Okay, who's bidding for Intel?

Speaker 3 (03:31):
By the way, it's rumors only so far. So Qualcomm,
a US based mobile phone chip designer, is rumored to
be buying Intel. And and why would anyone want to buy
this company after all these missteps? Presumably potential suitors see
Intel is a cheap company that still has an enormous
amount of IP and valuable assets that are critical in
this chips wars that we talked about.

Speaker 2 (03:53):
And so what does it mean if this purchase goes ahead?
What does this mean for the chip wars?

Speaker 3 (03:58):
I think it could create a it's larger US based
chip design and manufacturing company that might just might be
able to compete against the likes of TESSEMC and Taiwan
And if it is true it is Qualcom, who's a
US based company, I'm sure that the combined entity would
still qualify for the You know that the hefty tailwind
of US government grants under that US Chips Act.

Speaker 2 (04:20):
Okay, So what do investors need to consider when they're
thinking about this.

Speaker 3 (04:24):
There's a lot going on there isn't that it's not
the first changing of the guard, and this this sort
of pointy end technology computer chip design. Man, So if
you remember back to mainframe computers, computers that were as
big as a small house, IBM dominated those chips until
we talked about that, dominated PCs and service for data centers.
ARM and Apple dominated the mobile chipset chipset wars, and

(04:45):
now in Nvidia is dominating the design of AI chips.
The only constantly, by the way, is TARSMC, the Taiwanese
giant has dominated manufacturing for decades. So the point is,
if you're an investor at this point a end, you
need to be really careful. Company are not being left behind,
So make sure they have a healthy degree of paranoia
about disruption or competition. Make sure they're not underspending on

(05:07):
research and development and just make sure those companies are
not resting on their laurels, which is potentially what Intel
did back in the day.

Speaker 2 (05:13):
Yes, such a good point, Hey Sam, As always thank you, Sam,
Dickia fisherpuns For.

Speaker 1 (05:17):
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Speaker 3 (05:19):
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