Pat Gelsinger: Yes. Thanks, Joe. And I do think there’s a lot of interest in that. On the export controls, as you look at them and read them, they’re very much aimed at the high-end training and these accelerator, the high-end accelerators on where they are aimed. Now obviously, some of that was for us as well in China. But we also, as I said, in the first part of your question, we saw a worldwide demand for our activities there. And overall, we’re now supply constrained on Gaudi and racing to catch up to that supply worldwide. Of course, we’re studying those — the new BIS released rules carefully. We’re working with BIS. We’re in the 60-day comment period with BIS so we’re actively working with them. We do believe that we’ll have plenty of opportunity in China continuing to deploy our products there broadly even as we comply and work with BIS specifically around the regulations that they’re putting in place, particularly around high-end accelerators and AI training.
So overall, we feel and have included that as part of our overall guidance for the fourth quarter. We feel good about the momentum that we have for AI everywhere, and we’ll, of course, be engaging with our customers, the governments and as we build out our road map taking all of that into consideration.
John Pitzer: Thank you, Joe. Jonathan, can we have the next question, please?
Operator: Certainly. One moment for our next question. And our next question comes from the line of Ben Reitzes from Melius Research. Your question, please.
Ben Reitzes: Hey, thanks a lot, guys. Congrats on the quarter. Pat, I was wondering if you could unpack your foundry comments. You have the customer that we’ve known about, where there’s prepays. I think you mentioned there’s two more customers that you’re signing up and another by year-end, and then there’s an event in the first quarter. I just wanted to see if you could give us a little more detail and talk about how that’s going to flow through and the materiality into the coming years as well.
Pat Gelsinger: Yes. Thanks, Ben. Happy to unpack that a little bit more. So we announced back at the Deutsche Bank conference that we had our first major prepay customer for that. That effort has continued to go very well since that point in time, and the relationship is expanding with that customer. But we also added two more customers this quarter as well, so now we have 3 committed external customers on Intel 18A. At the beginning of the year, I promised you one. Here we are in the third quarter, we have three, and I hope to finish at least the fourth before the end of the year. Also with 18A, this PDK milestone, and if you’re inside of the industry, hitting PDK 0.9 is a really critical milestone. As I said in my formal comments, this is when the invention phase is done.
And now we’re into the productization phase, ramping yields, refining performance and getting the process capabilities ready for manufacturing. So a critical milestone which we also say now as we release that to external customers, now a lot of them can start looking at 18A, and we start fanning out the engagements that we have in the industry. So a critical milestone on 18A. But the other thing that we saw this quarter, which was a little bit unexpected was this huge surge in interest for AI customers and Intel’s advanced packaging technology. And this is the 1 that probably we didn’t even quite realize. We always knew that Intel’s packaging technology was the best in the industry, but the amount of interest that we’ve seen. So we completed two additional customers, so three 18A wafer customers, two additional packaging customers, and we have a pipeline that we’re in active negotiations with six additional packaging customers as well.
And I think about this as the fast on-ramp to the Intel Foundry Services. And a wafer customer’s multiple billion dollar customer. A packaging customer is hundreds of millions of dollars. And that billions of dollars takes two to three years to materialize. The wafer customers takes two to three quarters to materialize, right, in the packaging. So this is a much faster way for us to build out that business. And we’re going to start to see those packaging customers start to materialize for us in revenue next year. And you add to that the Synopsys partnership, the ARM momentum, the Tower agreement, this was really the flywheel of momentum has now begun for the Intel Foundry Services business. It really is putting points up across the board for that business, and super happy with the amount of energy that we’re now seeing across the industry for the foundry business.
This was a great quarter for foundry at Intel.
John Pitzer: Ben, do you have a follow-up?
Ben Reitzes: Yes. Going to switch gears to PCs, your comments there. You’ve talked about inventories normalizing. I just wanted to hear a little bit more detail on your confidence in that. Are you — do you have confidence that the inventory builds are matching demand? And how do you see that playing out next year? It sounds like you think the TAM will grow back to 300 million, so just wanted some comments on that.
Pat Gelsinger: Yes. Three quarters in a row, we’ve seen the client business being very healthy now for us. Our customers’ inventory levels are very healthy in that regard. So we see our sell-in being matched by a sellout for those customers. As we said, the 270 million consumption TAM is something we indicated earlier in the year, and now we’re seeing that play out exactly. And here we are three weeks into the quarter and I’d say it’s looking really good. So our views and forecasts of our client business is very healthy for the fourth quarter. And we do think this idea of ushering in the AIPC generation will be a multiyear cycle. So we do think this will bring excitement into the category even starting with the Meteor Lake or the Core Ultra launch in Q4.
We also have some other incremental tailwinds with Copilot launch from Microsoft coming up this quarter. We also have the Win 10 end-of-service support coming up. Those are just incremental tailwinds that just build us more confidence in it. And finally, our road map is great. And Meteor Lake looking good, rapidly ramping what we have coming with Arrow Lake and Lunar Lake and then Panther Lake in the future. So every aspect of this business is demonstrating health, maturity, momentum and great opportunity for tomorrow.
David Zinsner: I’d just add one other thing. When we track the linearity of shipments, linearity was really, really good in the third quarter, and it’s off to a really good start for the fourth quarter. And generally, when you see really steady shipment across the entire quarter, that’s a good sign that you kind of balanced out the inventory and you’re really just kind of shipping in what’s shipping out.
