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Intel to Replace CEO Bob Swan With VMware Chief Pat Gelsinger




By Reuters | Updated: 14 January 2021

Chipmaker Intel said on Wednesday it would replace Chief Executive Officer Bob Swan with VMware Inc CEO Pat Gelsinger beginning February 15.

The company’s shares were up more than 8 percent in morning trading.

Intel, long the world leader in chip-making technology, has lost its manufacturing edge in recent years and is now debating whether to outsource some of it flagship central processor unit chips, or CPUs, slated for release in 2023. Activist investor Third Point LLC last month sent Intel’s board a letter asking it to consider whether to keep its chip design and manufacturing operations under one roof.

Gelsinger, a former Intel executive, has served as the CEO of VMware since 2012. During that time, he successfully guided the company, whose software helps companies squeeze more work out of data center servers, through the transition from privately owned data centers to public cloud providers, in part by striking a seminal deal with Amazon’s Amazon Web Services.

Gelsinger joined Intel when he was 18, and the company helped him attend Santa Clara University and Stanford University as he spent 30 years there. In a letter to Intel’s employees, Gelsinger likened the move to coming “home.”

“Having begun my career at Intel and learned at the feet of Grove, Noyce, and Moore, it’s my privilege and honour to return in this leadership capacity,” Gelsinger said in a statement. “I have tremendous regard for the company’s rich history and powerful technologies that have created the world’s digital infrastructure.”

Sources familiar with the matter told Reuters that Gelsinger had turned down the top Intel job before, and it was not immediately clear what had changed his mind.

Third Point’s Dan Loeb had sent a letter to Intel’s board of directors late last month urging the company to rein in an outflow of engineers to rival firms, though he stopped short of blaming Swan for the company’s troubles.

On January 4, Swan met with Third Point Chief Executive Dan Loeb and Intel Chairman Omar Ishrak, according to a person familiar with the matter. Loeb pushed Intel to find new executives and potential new board members and held at least one followup meeting.

VMware said it was initiating a CEO search and that Zane Rowe, the company’s chief financial officer, would serve as its interim chief after Gelsinger departs on February 12.

Intel on Wednesday also said that it expects to beat its financial forecast for the fourth quarter of 2020 and that it has made “strong progress” in addressing issues with its 7-nanometer chip manufacturing technology.

“From a credibility standpoint, he’s great – he’s probably the one at the top of most people’s list for who they would want to see,” Stacy Rasgon, an analyst at Bernstein, said of Gelsinger’s appointment.

“He had a long career there and he’s technical, so he can address both the technical issues and cultural issues. The issue is, what’s the ship look like that he’s going to be running? The next two or three years are set in stone regardless of who is there.”

Swan, a former chief financial officer from eBay, had served as Intel’s finance chief and was named its interim CEO when Brian Krzanich resigned in June 2018. Swan was made permanent chief in early 2019 after an extensive search failed to yield an external candidate.

© Thomson Reuters 2020


Apple Said to Lobby for India Incentives as It Plans iPad Assembly




By Reuters | Updated: 18 February 2021

Apple is angling to participate in a new scheme to boost India’s exports of computer products, part of what government and industry sources say are plans to bring iPad tablet manufacturing to the South Asian country.

India launched a $6.7 billion (roughly Rs. 48,690 crores) plan to boost smartphone exports last year, as Prime Minister Narendra Modi stepped up efforts to promote electronics manufacturing and create jobs.

Apple, which has steadily raised production of iPhone devices in India to lessen its dependence on Chinese manufacturing, took part in that scheme via its contract manufacturers.

Now the government is preparing to unveil another incentive to drive local manufacturing of IT products including tablets, laptops, and servers, three sources closely involved in the drafting of the plan told Reuters.

The new performance-linked incentive (PLI) scheme, which offers cash-back to manufacturers for exports, will have a budget of up to Rs. 7,000 crores over five years, the sources said. It’s expected to be launched by the end of February.

Apple, along with others, is lobbying for a bigger budgetary outlay of Rs. 20,000 crores before that plan is finalised, as India doesn’t yet have the scale or the supply chain for making IT products and competes with duty-free imports of tech products, two of the sources said.

Apple’s push comes at a time its iPhone supplier Wistron is just restarting operations at a southern Indian plant after angry workers went on a rampage last year. Apple is yet to take the Taiwan manufacturer off of probation.

Apple declined to comment for this story.

New Delhi is also planning another PLI, at a budget of roughly Rs. 50,000 crores over five years, to boost domestic manufacturing of wearable devices such as smartwatches, the sources said, adding the plan could be announced within two months.

All the sources declined to be named as the plans are not public.

India-made iPad

Apple assembles a bulk of its iPad gadgets in China, but is fast diversifying production to markets such as India and Vietnam to minimise the impact of the US-China trade war and the coronavirus crisis.

Its top supplier Foxconn is building assembly lines for iPad models and MacBook laptops in Vietnam, Reuters reported late last year. Other iPad assemblers include Taiwan’s Compal Electronics and China’s BYD Electronic International.

In India, Apple will likely have iPad’s assembled by one of its existing suppliers in the country as early as this year, two of the sources said, though its plans could get delayed as India makes the entry of BYD difficult amid its wariness to give new tech business to Chinese companies.

“The government is asking Apple to get iPads assembled by its contract manufacturers here, the non-Chinese companies” one of the sources, a government official said.

It was not immediately clear which of Apple’s three contractors in India – Foxconn, Wistron, and Pegatron – would assemble iPad models.

Pegatron and Wistron did not respond to requests for comment while Foxconn said it does not comment on specific operations or work for a customer.

India’s IT ministry also did not respond to a request for comment.

India last year banned more than 200 Chinese-origin mobile applications, saying they threatened the security of the country. It also announced new controls on telecoms gear purchases.

Cupertino, California-based Apple began the assembly of iPhone devices in India in 2017 and has since ramped up manufacturing operations via the local units of Foxconn and Wistron. Pegatron also set up a base in India last year.

Foxconn will invest up to $1 billion (roughly Rs. 7,270 crores) to expand a factory in southern India where the Taiwanese contract manufacturer assembles iPhone devices, Reuters reported previously.

The three Apple suppliers have also committed roughly $900 million (roughly Rs. 6,540 crores) over five years to make iPhone gadgets in India.

© Thomson Reuters 2021

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Alphabet, Microsoft, and Qualcomm Complain Against Nvidia Arm Acquisition; US FTC Opens Probe: Report




By Reuters | Updated: 13 February 2021

The US. Federal Trade Commission has opened an in-depth probe into Nvidia’s agreement to acquire Arm, Bloomberg reported on Friday, citing a source.

The FTC has sent information demands to third parties, according to Bloomberg.

The FTC and Nvidia did not respond to requests for comment outside regular working hours.

Nvidia struck a deal with Japan’s SoftBank Group in September to buy UK-based chip designer Arm Holdings for as much as $40 billion (roughly Rs. 2,90,365 crores).

In addition to the FTC probe, Alphabet, Qualcomm and Microsoft have complained to US antitrust regulators about the deal, the report added, citing people familiar with the process.

Arm Holdings supplies intellectual property to Apple, Qualcomm and a host of others for chips that power nearly all of the world’s smartphones.

Earlier in January, Britain’s Competition and Markets Authority said it would start an investigation into Nvidia’s deal to buy Arm.

© Thomson Reuters 2021

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Samsung Planning $17 Billion Chip-Making Plant in US




By Reuters | Updated: 6 February 2021

Samsung Electronics is considering Austin, Texas, as one of the sites for a new $17 billion chip plant that the South Korean firm said could create 1,800 jobs, according to documents filed with Texas state officials.

The tech giant is seeking combined tax abatements of $805.5 million over 20 years from Travis County and the city of Austin, among other tax breaks, according to the documents.

Samsung said in its filings that if Austin is selected, the company would break ground on the site in the second quarter of this year and that the plant will become operational in the third quarter of 2023.

“This project is highly competitive, and the company is looking at alternative sites in the US including Arizona and New York, as well as abroad in Korea…,” Samsung said in the documents, adding that it is taking into account access to talent, chip ecosystem and speed to market in its evaluation of the sites.

Samsung’s American customers for its contract manufacturing chip business include Tesla, Qualcomm and Nvidia.

Samsung’s filing said it plans to make “advanced logic devices,” meaning it would aim to make the smallest, fastest kinds of computing chips for customers. The company has an existing chip plant in Austin that makes computing chips.

In a statement to Reuters, Samsung confirmed it is considering expanding its chip facilities, but no decision has been made yet.

The documents say the project would involve building out 7 million square feet (650,000 square meters) of new space on a 640-acre (259-hectare) site that the company already owns.

US Senate Majority Leader Charles E. Schumer, called on Samsung to put a factory in his home state of New York, pledging to work to secure federal incentives for the facility, which he said are key for US to compete with China in boosting local chip production.

While Intel Corp makes such chips for itself in the United States, most contract manufacturers who make them for outside clients, such as Taiwan Semiconductor Manufacturing (TSMC) Co Ltd and Samsung, maintain most of their facilities in Taiwan and Korea, respectively.

TSMC, which counts Apple among its major customers, last year disclosed plans for a $12 billion chip plant in Arizona expected to come online in 2024.

The filings with Texas officials were earlier reported by the Austin American-Statesman newspaper.

© Thomson Reuters 2021

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Global Chip Sales Rose 6.5 Percent in 2020 After Year-End Rush: Report




By Reuters | Updated: 1 February 2021

Global semiconductor sales rose 6.5 percent overall in 2020, as a recovery during the last three months of the year helped offset a sharp dropoff in March and April, when pandemic stay-home orders rolled out around the world.

Global sales were $439 billion (roughly Rs. 32,08 lakh crores) in 2020, according to data from the Semiconductor Industry Association (SIA), a trade group that represents most US chipmakers along with many international firms. The group said sales from US chipmakers were about $208 billion (roughly Rs. 15,20 lakh crores), or about 47 percent of the total.

Chip sales into the United States were $94.15 billion (roughly Rs. 6,87 thousand crores), up 19.8 percent from the previous year.

Falan Yinug, SIA’s director of industry statistics and economic policy, said much of the rise in US purchasing was driven by high-end memory chips used in applications such as data centers.

American tech companies such as, Microsoft and Alphabet’s Google all saw dramatic rises in the use of cloud computing over the course of 2020 as businesses adapted to working from home.

While US-based companies represented nearly half of semiconductor sales, they represented only about 12 percent of chip manufacturing capacity in 2020. That is down from 37 percent in 1990, as most US companies now source their chips from factories in Asia.

John Neuffer, president and chief executive of the industry group, said legislation passed last year to provide incentives to chip factories in the United States could help change that figure this year. The law could provide funding to US companies such as Intel or GlobalFoundries, as well as foreign firms such as Samsung Electronics or Taiwan Semiconductor Manufacturing Company.

“Over the next 10 years, semiconductor manufacturing is going to grow 56 percent,” Neuffer said. “We want to make sure we’re getting a bigger piece of the manufacturing pie.”

© Thomson Reuters 2021

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Samsung Electronics Rides Pandemic-Driven Chip Demand to Report Quarterly Profit Spikes




By Agence France-Presse | Updated: 28 January 2021

Samsung Electronics, the world’s biggest smartphone and memory chip maker reported fourth-quarter net profits up by more than a quarter year-on-year Thursday, with coronavirus-driven working from home boosting demand for devices powered by its chips.

But the figures were below market expectations according to Bloomberg News, and the company warned of persisting uncertainties over the pandemic, and lower profits in Q1 2021 due to falling prices.

Samsung Electronics is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled empires known as chaebols that dominate business in South Korea, the world’s 12th-largest economy.

The conglomerate is crucial to the South’s economic health — its overall turnover is equivalent to a fifth of the national gross domestic product.

Samsung Electronics said profits rose 26.4 percent in October to December on a year earlier to KRW 6.61 trillion (roughly Rs. 43,300 crores), led by display and memory chip businesses.

“Although challenges from the COVID-19 pandemic continue, company-wide efforts to ensure a stable supply of products and services globally helped Samsung’s fourth-quarter results,” the firm said in an earnings report.

The coronavirus has wreaked havoc with the world economy, with lockdowns and travel bans imposed around the globe for many months.

But the pandemic – which has killed more than two million people worldwide – has also seen many tech companies boom, including Samsung.

“It’s true that Samsung’s sales increased year-on-year due to the spread of the so-called ‘new normal’, which led to a surge in demand for electronics,” said Jene Park, an analyst at market observer Counterpoint Research.

Operating profit rose 26.4 percent to KRW 9.05 trillion (roughly Rs. 59,300 crores), while sales were also up 2.8 percent at KRW 61.55 trillion (roughly Rs. 4,03,170 crores).

Even so, Samsung noted that profits fell from the previous quarter due to weaker memory prices and sluggish consumer product sales, as well as higher marketing costs and appreciation by the Korean won.

The trend was likely to continue, it said, with profitability in the memory business affected by won strength “and costs associated with new production lines, despite solid demand from mobile products and data centres”.

It expected a recovery in overall global demand in 2021, but warned that “uncertainties persist over the possibility of recurring COVID-19 waves”.

For the full year, net profit jumped 21.5 percent to KRW 26.41 trillion (roughly Rs. 1,73,000 crores), on sales of KRW 236.81 trillion (roughly Rs. 15,51,630 crores), up 2.8 percent.

Samsung Electronics shares were down 1.64 percent in early trade Thursday.

Jailed boss

The global chip-manufacturing industry is expected to see record revenue this year, with the stay-at-home economy persisting because of the pandemic, according to Taipei-based market tracker TrendForce.

Samsung has aggressively stepped up its investments in semiconductors in recent years.

As its latest investment, the tech giant is considering spending as much as $17 billion (roughly Rs. 1,24,260 crores) to build a chip plant in Arizona, Texas or New York, the Wall Street Journal reported last week.

If confirmed, it would be the biggest investment by Samsung in the absence of its de facto leader Lee Jae-yong.

Lee was sentenced last week to two and a half years in jail in a retrial over a sprawling corruption scandal that brought down former president Park Geun-hye.

That ruling cast further uncertainty over Samsung after the burial of late chairman Lee Kun-hee, who turned Samsung Electronics into a global powerhouse, in October.

Experts say a leadership vacuum could hamper the firm’s decision-making on future large-scale investments, which have been key to its rise.

Kim Dae-jong, a business professor at Sejong University, said: “Samsung is a very important company for South Korea and the imprisonment of its leader is disadvantageous.”

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IBM Hit by Rare Sales Decline in Software Units, Posts Disappointing Quarterly Revenue




By Reuters | Updated: 23 January 2021

IBM missed Wall Street estimates for quarterly revenue on Thursday, hurt by a rare sales decline in its software unit as clients shied away from longer-term deals due to pandemic-induced economic uncertainty.

The 109-year-old firm is preparing to split itself into two public companies and the namesake firm will focus on the so-called hybrid cloud, where companies use a combination of their own datacenters and leased resources to manage and process data.

Revenue from its cloud-computing business rose 10 percent to a record $7.5 billion (roughly Rs. 54,750 crores) in the fourth quarter, with IBM saying it is confident of returning to sales growth in 2021 and expected revenue to grow in mid-single digits after the separation.

That was not enough to convince investors, however, as the company’s shares dropped 6.7 percent to $122.98 (roughly Rs. 9,000) in extended trading after IBM’s fourth consecutive quarter of sales decline.

“Our performance reflects the fact that our clients continue to deal with the effects of the pandemic and broader uncertainty of the macro environment,” said Chief Executive Officer Arvind Krishna, who took helm last April.

“This puts additional pressure on larger software transactions this quarter and project delays in some services engagements.”

Sales from cloud and cognitive, which houses IBM’s software offerings and its biggest unit, declined 4.5 percent to $6.8 billion (roughly Rs. 49,640 crores) after two years of growth.

Still, Chief Financial Officer James Kavanaugh told Reuters an accelerated move to cloud by businesses, a sales rebound in the global business services unit and a weaker dollar make the company confident of returning to revenue growth this year.

Total revenue fell 6.5 percent to $20.37 billion (roughly Rs. 1,48,700 crores), missing analysts’ average estimate of $20.67 billion (roughly Rs. 1,50,800 crores), according to IBES data from Refinitiv.

Excluding items, IBM earned $2.07 (roughly Rs. 150) per share, above estimates of $1.79 (roughly Rs. 130).

© Thomson Reuters 2021

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