David Zinsner: Yes. Well, maybe step back a little bit on the 60%. I mean, it will be driven by a number of factors, one of which is just revenue. Revenue growing on a largely fixed cost business is going to help gross margins. Obviously, we have optimism around how we can drive the growth of the business. The second, as you point out, is loadings. And we are managing our capital spend and our investment with an eye on loadings to make sure that we keep those in a good place. Obviously, last year, we had some underloadings to deal with. But as we kind of break out of that and start to move into the next year, I think we’ll start to see some improvements there. Third, as we get, as Pat was talking about, to leadership in terms of nodes and products, ultimately across the entire product portfolio, that’s going to help out on margins.
It’s going to help out from a cost structure perspective, but also better performing products are just going to yield better pricing and so forth, better profitability. And then lastly, we’ve got this internal foundry model that Pat mentioned, and I mentioned in the prepared remarks that we think is going to deliver tons of savings for the company. I think every week that Pat and I spend on this. Somebody brings up another big rock that they found of savings they can identify, because they were looking at the business in an entirely different way than they’re used to looking at it. The product groups are now hyper-focused on test times and how many – and what sort of hot lots they do and how much sample activity they use. The factories now, as you point out, very, very hyper-focused on loadings and making sure they’re properly thinking about their capital investments associated with the loadings.
So, we’re way more focused in terms of steppings and so forth. So, I think we’ll get, like I said in a call a couple of quarters ago, $4 billion to $5 billion of savings from this internal foundry model ultimately. And so that’s another big step function that I think gets us to the 60% gross margin.
Pat Gelsinger: I’d also add things like we just announced with UMC, right. We’re taking older factories. And as Tim, as you might’ve heard me say in the past right, a bug in the Intel business model, right. Just when a factory got very good and depreciated, we moved to the next node. Well now, we’re starting to fill that with long-term foundry business as well. So all of these are improving the discipline of running the business as well as how we utilize our factory networks long-term. And we really do think that the 60-40 is what Dave and I are driving the business to and we’re going to get there.
John Pitzer: Thanks, Tim. Jonathan, can we have the next question, please?
Operator: Certainly. One moment for our next question. Our next question comes from the line of Joseph Moore from Morgan Stanley. Your question, please.
Joseph Moore: Great. Thank you. I wonder if you could talk about the data center decline in Q1, how much of that is a function of the weakness in FPGAs that you’ve talked to already and then just any sense of what the cloud and server environment is like in the first quarter?
Pat Gelsinger: Yes. So, overall, when you fact, obviously, we’ve spoken separately about the FPGA business. So, let’s just move that to the side. Overall, I’ll say it’s fairly seasonal quarter-to-quarter in what we expect. That said, we’re seeing strength from our server customers. For instance, more of the OEM responses are strong with regard to the momentum they’re seeing in the enterprise server business. And obviously, our product line is improving there. We do expect year-on-year growth here. We see our market share stabilizing. And obviously, as we’re ramping, Gen 4, Gen 5, Granite Rapids, Sierra Forest, the momentum is building for us overall. And as we indicated, hi, we think more of the AI surge is going to result in AI inferencing on-prem, which we’re well positioned to be a beneficiary of.
I would just cite that here we are in year 20 of the public cloud, and you have 60% plus of compute in the cloud, but 80 plus percent of data remains on-prem. Customers want to realize the value of that on-prem data with AI, and that’s an enterprise strength for Intel. So, we do see all of these trends giving us a very favorable outlook for the year. And there’s nothing surprising about the Q1 guide here. And we’re going to be very focused on beating those numbers and building on the momentum of improving our product line.
John Pitzer: Joe, do you have a follow-up question?
Joseph Moore: Yes, I do. Along the same lines, can you talk about Sierra Forest and Granite Rapids? And I guess, how do you see the long-term mix between those? What kind of appetite do you see for the Sierra Forest and higher core count designs?
Pat Gelsinger: Yes, thank you. And I would love to talk for hours about Sierra Forest and Granite Rapids. I am super excited about those products, both of them on Intel 3. And if I build on the last question from Tim about factory loadings, hi, we are driving hard to accelerate those products into the marketplace, and they’re really the drivers of Intel 3 capacity. The mix between them, obviously, this is our first, I’ll say, volume mainstream offering for a high core count. I sort of view this as the cloud guys just one VMs at scale or just one containers at scale. That’s what Sierra Forest is about, is sort of that bulk workload. And it doesn’t have some of the performance capabilities, peak capabilities, feature capabilities that Granite Rapids has.
I expect the bulk of the market to stay on Granite Rapids type products, the P-core products, certainly in ’24 and ’25. But we do see a pretty steady rise in the use of Sierra Forest. And then as we move to Clearwater Forest in ’25, a very compelling product. We do see a pretty healthy split between those for the cloud and data center customers. I think most of the enterprise customers will stay with the P-core products that they will have. And it really is Sierra Forest, Clearwater Forest, and successors being sort of that bulk mainstream cloud offering that’s very focused on TCO. So with that, we feel super good about our product portfolio, P-cores, E-cores, really allowing us to stretch the offerings to the highest performance with high core count and to the best TCO.
