It's silly to post a headline of a large operating loss when the unit was literally partitioned off a few months ago. Building fabs is expensive... literally the most cost intensive manufacturing enterprise in the world. Making those investments is the only way to stay competitive, and I'm sure we don't want to live in a world where there's a TSMC monopoly on the high end, and Chinese state run semiconductor fabs on the low end.
Yup. This is more of a signal on 1) experience with new EUV processes and 2) cost of labor. That's not taking into account the expensive EUV amortization.
A hard truth I've heard in CEO circles is that western middle classes are falling down in terms of purchasing-power; And they will continue to do so until they join Chinese middle classes levels of revenue.
Which country's business leadership did you hear that from?
I'd be fairly surprised that American disposable purchasing power would fall to around $3-4k USD a year, unless by "middle class" your peers meant the professional class in China (the kind that can afford to splurge on a new iPhone every year, buy a Xiaomi SU7, and send their kids to do a bachelors degree at UCB, UCLA, or UIUC), in which case I wouldn't be too surprised simply because of how much growth was captured by that subset, and salaries for that subset are at France/Germany levels, but those countries also severely underpay professionals tbh.
Even professional salaries at employers like Google India or Gojek Engineering in Bangalore, Jakarta, etc can pay German or French level dev salaries, let alone the subset of similar companies in China that can afford to pay around $20-100k USD salaries (depends on the city)
> signal on 1) experience with new EUV processes and 2) cost of labor. That's not taking into account the expensive EUV amortization
Yep. There's a reason Intel and GlobalFoundaries have the last American owned Fabs - most other players left the industry in the 2010s due to the massive costs, though it's a similar story in China as well which was only solved by the "Big Fund", but a similar Cambrian die off happened in the 2017-20 period which basically only left SMIC (comparable to TSMC or Intel in the early 2010s), Hong Hua (comparable to Tower), and YMTC (comparable PSMC or SK Hynix)
> like Google India or Gojek Engineering in Bangalore, Jakarta, etc can pay German or French level dev salaries
Not even close. Indian devs at top companies earn way more then European devs at local non-top-tech companies.
>unless by "middle class" your peers meant the professional class in China (the kind that can afford to splurge on a new iPhone every year, buy a Xiaomi SU7, and send their kids to do a bachelors degree at UCB, UCLA, or UIUC)
How many Chinese families (percentual speaking) can actually afford that?
Depends on the company you are working for in India.
At a product company like Ola or a top MNC like Google you are earning way above most Europeans excluding Netherlands, Switzerland, and maybe London, but if I had to estimate, Product+MNC companies only make up like 30-40% of the ecosystem in India today.
If you're working for a mass recruiter your mid-career salary will top off around the $8-20k range, which is Eastern European level, but lower than France and Germany (where it's around the $40-60k range).
Also, there are regional variations in salaries in India as well. You're more likely to earn much higher working in an established tech or MNC hub like BLR, HYD, NCR, or PN than in Indore, Kolkata, Chennai, or Ahmedabad, where the tech scene skews towards outsourced contracting.
Government dev salaries are lowish (depending on the Ministry and whether it's central or state), but the perks are solid.
I'd probably say the split is 35-45-20 Product-WITCH-Govt.
Edit: You said "Top". Fair enough. Yea, the salaries at top employers like Google India or Flipkart are extremely competitive by European standards and are comparable to those in Mainland China, Israel, and Canada.
Are you talking about software and tech in general? Because that's several times lower than the average. In every single East European country in the EU, the average ~~monthly~~ [edit: yearly] wage (I'm talking about the whole population) is at least 18-20k and you certainly can't find any actual developers for anything even close to that.
> single East European country in the EU, the average ~~monthly~~ [edit: yearly] wage (I'm talking about the whole population) is at least 18-20k
Median disposable household income in Poland is around $600/mo [0], only $200/mo more than in China
Median monthly household income in Romania is around $545/mo [1], so disposable is probably comparable to China.
Median monthly household income in Bulgaria is around $600-700/mo [2], so disposable is probably comparable to Poland.
The only Eastern European country that broke the $1k/mo barrier was Estonia with around $1k/mo [3].
These are all government statistics from the Polish, Romanian, Bulgarian, and Estonian government.
Eastern Europe has developed significantly, but still lags behind Western Europe massively.
Based on the hiring packages we've given to developers in Warsaw, the salaries were around $30-40k, but we could have paid much less if we hired someone from EPAM.
I'm taking umbrage to the fact that OP said the "average ~~monthly~~ [edit: yearly] wage (I'm talking about the whole population) is at least 18-20k" when it is obviously bull.
I gave direct sources from the OFFICAL Stats Agencies of Poland, Romania, Bulgaria, and Estonia in 2022-2023. You just gave Wikipedia.
The numbers which are on Wikipedia are AVERAGE. I'm using MEDIAN
The fact that the AVERAGE income skews significantly higher than MEDIAN income is proof that you have a subset earning much much more than the majority.
I have to question your reading comprehension. You're talking about median DISPOSABLE INCOME per capita (so it would include, disabled, retired, unemployed, part-time etc. workers). The Wikipedia link showing the average WAGE/SALARY. These are not the same thing.
Even in Poland the median household disposable income (the metric I am using for China) comes out to around $600/mo [0] and is comparable to Thailand.
Polish boosterism is almost as annoying as Indian boosterism tbh - both seem to come from a place of insecurity and heavily play up some positives while ignoring the negatives. If you listen to Polish or Indian nationalists, you'd think Poland or India are major superpowers already and have been for decades.
Is this a side effect of PiS's hypernationalist media in the 2010s? Or is this some weird alt-right Catholic White Nationalism fetish?
> both seem to come from a place of insecurity and heavily play up some positives while ignoring the negatives
> Or is this some weird alt-right Catholic White Nationalism fetish?
I see a lot of projection going on here. No, you were not talking about average disposable income you were talking about salaries for workers in tech. This is what you wrote:
> if you're working for a mass recruiter your mid-career salary will top off around the $8-20k range, which is Eastern European level, but lower than France and Germany (where it's around the $40-60k range).
The average salary for all employes in all sector in Poland is > $24k. Are you implying that you can hire tech workers or even software engineers for considerably less than the national average? Seems highly far fetched.
Was this an unintentional mistake or are you doing it on purpose. Considering the totally uncalled for diatribe about Polish(I'm neither Polish nor have anything to do with it for that matter) nationalism unfortunately it's probably the second?
You made it about average incomes when you said your average Eastern European - not Eastern European techie - earns around $18k-20k a year when every government from Poland to Romania to Bulgaria has provided statistics proving otherwise.
No, I was talking about average salaries because we were comparing salaries.
> government from Poland to Romania to Bulgaria has provided statistics proving otherwise
Can you please stop being obtuse? That's not particularly entertaining at this point..
> earns around $18k-20k a year
The average salary in Poland AFTER TAX is around $17k, GROSS is almost $24k. I'm not sure why are you fixated about this. That average income is tangential to the whole discussion fact is you certainly can't find any software developers/etc. for $8k primarily because that's actually below any minimum wage in any EU country besides Bulgaria. You would really struggle to hire anyone even remotely decent for $20k as well.
The phrasing of 'a hard truth' makes it sound as if it is inevitable, and those in 'CEO circles' are simply bystanders to the phenomenon. Why is it that the purchasing power of CEOs has drastically increased, while the purchasing power of the middle class has decreased?
I guess it's just one of those darned hard truths.
The average CEO's insight into the wider economy is zero. When a CEO (or anyone for that matter) says "a hard truth about x" where x is some complex system like the economy, roll your eyes.
In real terms I'd expect Chinese middle class to be converging up to European standards right now. The Chinese have quite a lot of infrastructure; by the numbers [0] they're capable of sustaining a really comfortable existence. It hasn't stabilised but China isn't a byword for poverty any more.
That being said, it does seem likely that the US living standards will drop. It isn't obvious what is supposed to be driving living standards given that the US has been undermining its own energy and manufacturing sectors. Their political situation also seems to be deteriorating.
The difference is population, there are A LOT of Chinese that are in the rural areas still making very little.
European wealth is generational. Land and homes that have been in the family from infrastructure that has stood the test of time.
Chinese wealth is rather New money and it’s all paper thin based on construction that isn’t built to last. Look at Guangzhou they are already relocating their downtown. Before it was Baiyun then it became tianhe, now they’re focusing on making New Baiyun already in just 20 years.
> Chinese middle class to be converging up to European standards
Depends where in Europe and where in China.
Beijing, Shanghai, and Greater Bay Area have definitely converged with Central Europe (eg. Praha, Warsaw, Budapest, maybe even Wien)
The rest of urban China has converged with Eastern Europe (Russia, Poland, Türkiye, Serbia) and Thailand+Malaysia.
Rural and some of the poorer provinces are still stuck around India levels.
There's a reason why household incomes per capita are still around $450/mo [0] - significantly lower than Thailand [1] or Serbia [2]. Per Capita Urban Household Income is around $7k/yr but for Rural Households it is around $2.5k/yr
I know some Chinese will find this a hot take, but this urban-rural divide is very similar to Brazil and Mexico, both countries that share similar developmental indicators to China.
Warsaw as most of the eastern part Poland is still heavily influenced by the post-Soviet mentality. Warsaw is even less diverse than ~380k-headcount Lublin (also eastern part) due to Lublin's universities welcoming international students with relatively cheap living costs for years now.
I live in Poland for 40 years, I'm biased, but I'd say that if you're looking for "western" cities - it's not Warsaw but Gdańsk or Poznań. Warsaw will keep its post-soviet mentality at least until the generation remembering WW2 is alive. Of course younger people may lack exposure to it, but I'm generalising on city/region-level.
I'm just solely going by developmental metrics and median household income.
Eastern Poland might have a fairly conservative society (as is reflected by Sejm and Presidential election results), but because Warsaw is the political, financial, and social capital of Poland, social and economic infrastructure is much stronger there than in other parts of Poland - west or east.
It's the same way that Beijing is luxurious but very socially conservative compared to Shanghai.
It's usually 5 years, Intel now do over 8 years, fabs can have a useful lifetime much longer than that. However Intel historically recycled old fabs to create new ones, so in practice they don't have many old fully depreciated fabs.
My understanding is that the various pieces of a fab are depreciated over different time horizons. Some of it as short as a few years, some of it as long as 30. I'd guess it evens out around high single digits.
This doesn't account for the fact that Gelsinger kicked off IDM 2.0 in 2021 and is this far in the hole already and the investments chosen have put them further behind TSMC before they even get started.
Gelsinger is trying to do too much in too short of a timeframe creating disarray at Intel, just like he left in his wake at VMware. I'm not sure that he has the landscape vision that's required in this market. I think he's likely better cut out in a more CTO type role at Intel rather than being at the helm.
And even if Intel is on a better long term path, Gelsinger didn't see the short term hurdles as he should have. These are the American taxpayer dollars being wasted in high executive pay and corporate greed under his leadership. Gelsinger should be held better accountable if Intel is looking for more handouts [0].
This and the fact that the point is obvious that Intel is already behind schedule based on the fact there are cost overruns. Then let's ask if, because Intel is behind, are the executives still being paid as if Intel is on a positive outlook in the short term? They are. Gelsinger, for example, took no hit even though is salary was reduced. [0]
And even though there were cost cuts they're still off by $1.8B.
Also $8.5B is in direct funding and access to up to $11B in federally backed (and discounted) loans. [1]
Executive comp and performance is interesting largely because it entirely depends on the counterfactual alternative, not actual outlook. There is bulletproof measure of impact, and it is subjective in the assessment of the BOD.
A CEO that oversees a loss of $1B could be doing a great job if you think the counterfactual was a loss of $2B.
A CEO that oversees a profit of $3B could be terrible if you think the counterfactual was a profit of $4B.
For the most part it is irrelevant to 3rd parties, because CEO compensation comes out of shareholder compensation, so it is their money to spend or throw away based on their assessment.
Intel's highest year of top-line revenue and gross profit was in 2018 @ at $22B. Their lowest, comparatively, was 2022 @ $11B. Most players of their size don't have that type of volatility. Your argument doesn't make much sense with imaginary numbers.
Gelsinger destroyed VMWare's focus and market prowess. His time at Intel looks unsurprisingly very similar.
Top line revenue and gross profit aren't my opinion.
You really think the BoD cares much about anything other than their profits? The board is the last place to look for an honest opinion. They're all friendlies of Gelsinger.
The problem is making those investments only guarantees cash outflow. Not that you will remain competitive. In the case of Intel it is rather obvious they are not going to be competitive again in the next 50 years for fab tech.
