Thanks for taking my question. I wanted to dig into the competitive and the financial implications of the 7-nanometer delays that Bob mentioned. So, on the competitive side, by the time you come up with 7, TSMC is planning to be on the 3-nanometer, so will still be a generation ahead. So, what’s the market share implication of that? And then, related on the financial side, what’s the CapEx and gross margin implications, and even pricing implications if you stay on 10-nanometer longer next year? And I guess, the bigger question that a lot of investors would have is, at what point should Intel just consider outsourcing a lot more to foundries, so that you can keep in line with the state-of-the-art manufacturing technologies? Bob Swan (CEO): Thank you, Vivek. Our main priority is to consistently provide leadership products on an annual basis for our customers in a predictable way. Today, we presented a robust lineup for 2020, 2021, and 2022 for both client and server segments, and we are quite confident about it. Regarding our expectations for 10-nanometer technology, we aim to achieve improved performance similar to what we accomplished with 14-nanometer technology. We believe our product roadmap through 2022 is solid. Looking ahead to the next generation of products in late 2022 and 2023 and beyond, it’s crucial that we maintain strong performance. Ideally, our focus should be on leadership products developed on our process technology, allowing us to reap the economic benefits of Integrated Device Manufacturing. However, if necessary, we will prepare contingency plans to utilize other companies' process technologies. There are various factors at play, and if we opt to partner with another foundry, we need to ensure that our average selling prices align with our costs while still delivering leadership products to maintain appealing ASPs and minimize the capital required to invest in older technology nodes. Over the past couple of years, we have concentrated on product leadership and have engaged with the ecosystem more comprehensively. We are designing our products and improving our packaging technologies to enhance our flexibility in deciding whether to utilize our own fabs or those of other companies to meet our annual cadence for leadership products. We are optimistic about the timeline through 2022 and are currently assessing our options for 2023 and beyond. George Davis (CFO): Hey, Vivek. Regarding your question about what we might see next year, I want to mention that next year will essentially still be a 10-nanometer year with some 14-nanometer products, as we discussed in May 2019. The situation is evolving as we have progressed further along the yield curve, and we've seen more demand for 10-nanometer products in 2020 than we anticipated. We won't be updating our outlook for 2021 at this moment, but our primary concern is more about the state of the global economy than our progress with 10-nanometer technology.

Thank you. null (Operator): Thank you. Our next question comes from C.J. Muse with Evercore. Your line is now open.

Yes. Good afternoon. Thank you for taking the question. I guess, a follow-up question on the 7-nanometer delay. I guess, curious, how should we think about the implications for CapEx and required capacity adds at 10-nanometer and 14-nanometer? And then, just to circle back on the comment around contingency plans after ‘22. Considering your first data center CPU will launch in the first half of ‘23, are you suggesting that that could be found out and not be built internally at Intel? Thank you. Bob Swan (CEO): In response to the first part of your question, regarding 2022, we anticipate a full range of 10-nanometer products. Our expectation is that, all else being equal, we will invest slightly more in 10-nanometer technology and less in 7-nanometer, assuming we continue to handle all of our production internally. However, if we decide to utilize third-party foundries more effectively, we would increase our investment in 10-nanometer and significantly decrease our spending on 7-nanometer. This flexibility is something we’ve integrated into our strategy as we assess the future of Moore’s law and our leadership in technology development. If it turns out that we aren't on track and a better alternative arises, we are ready to capitalize on that opportunity. null (Operator): Thank you. Our next question comes from John Pitzer with Credit Suisse. Your line is now open.

Yes. Hi, guys. Thanks for letting me ask a question. Sticking on the same topic of 7-nanometer. Bob, if you could just help me understand yields are 12 months behind where you would expect them but the product ramp is only 6. If you could square that circle that’d be helpful. But more importantly, you had multiple sort of push-outs of 10-nanometer. You’re identifying this 7-nanometer push-out today. What confidence level do you have that this is sort of a one-and-done issue and it doesn’t turn into a repeat of 10 where you kind of had multiple periods of push-outs? Bob Swan (CEO): Thanks, John. First, we are experiencing a product schedule delay of about two quarters, while the process timeline is now expected to be around four quarters. This gap is due to a few factors. Firstly, we have included a buffer in our planning between process and product to minimize customer disruption caused by process issues. Secondly, as mentioned earlier, die disaggregation and advanced packaging allow us to distribute certain tasks for a system on chip, which helps us to expedite product delivery despite the process delays. This is why we feel confident about a six-month product delay, even with the process extending by 12 months. Regarding your second question, we have been in similar situations before. One significant lesson learned from our experience with 10-nanometer technology is the need for solid contingency plans if our process technology advancements do not progress as expected. We want to ensure we can still provide leading products to our customers on an annual basis. While we anticipate some challenges, we believe we have set ourselves up well with our 7-nanometer plans. Importantly, we will be practical about our manufacturing decisions, whether to produce internally or externally, and we will maintain the flexibility to adapt our strategy depending on the circumstances. Our key takeaway from the 10-nanometer experience is to have thorough contingency plans and clear milestones, enabling us to leverage external resources if necessary to avoid further product schedule delays due to process challenges. null (Operator): Our next question comes from Ross Seymore with Deutsche Bank.

Hi, everyone. I’d like to follow up on the discussion about the 7-nanometer. Bob, it's encouraging to hear that you plan to take a more practical approach regarding internal versus external resources. However, it appears that the external option is viewed as a backup plan for three years down the line. Investors seem to be frustrated with the delays in manufacturing execution. Can you clarify if there are steps being taken to prioritize the external approach before 2023, particularly on the design side rather than the revenue aspect? Additionally, looking ahead three to five years, do you anticipate any changes to the proposed 20-80 mix of 20% external and 80% internal resources? Bob Swan (CEO): Maybe, I’ll flip those around. Over the last couple of years, we’ve been talking about, as we expand our capacity, evaluating more holistically, when do we use third-party foundries rather than do everything ourselves. And we call that engaging in the ecosystem in much more holistic ways for a variety of different reasons, so we don’t have to build everything ourselves as the capital associated with each node becomes a bit higher. So, in general, I would say for planning purposes, we’ve been engaging with the ecosystem much more. And all else equal, I would expect that roughly 28% to be a little bit higher as we focus on growing the business. Your first question in terms of planning then, we feel like we have a solid product roadmap, again for the second half of this year for ‘21 and for ‘22 and that we’ll do it on our existing 10-nanometer that’s ramping faster than we expected, it yields in line with what we expected. So, for the near term, we think we’ve got a great lineup of products and we expect to fight and protect our share, while standing the role we play in a variety of different places in the industry. But now is when we’re planning for ‘20, ‘23. And we are evaluating now in light of where we are, where we think the industry, the competition or third parties are, evaluating now what’s the best option for us to make sure that we can deliver an annual cadence of product leadership for our customers. And those decisions are not decisions that we’ll make in 2023. Those decisions, based on the information that we have along the way, will be made long before then. Whether it’s decisions that are about how much capacity we need to put in place or decisions about how do we leverage more effectively somebody else’s process capabilities and factories, so that we can get real good incremental returns on capital deployed. null (Operator): Our next question comes from Stacy Rasgon with Bernstein Research.

I want to ask about the acceleration in 10-nanometer. Is this truly due to improved yields and increased demand, or is it an effort to compensate for the delay in 7-nanometer? The impact on margins is significant, which makes it difficult for me to reconcile the idea of yields improving substantially compared to where you expected them to be in January. How should we understand the factors driving the acceleration in 10-nanometer considering the delay in 7-nanometer, especially in relation to the margin situation? George Davis (CFO): Hey Stacy, this is George. I’ll provide a general overview of the margin situation for the year. This is clearly having an impact. The acceleration is tied to the fact that we're growing faster than we expected in 2020, and part of that growth is due to a higher mix on the PC side, as well as increased demand for products on the 10-nanometer process compared to our forecasts for the year. This is why we're seeing somewhat lower revenue flow-through than anticipated. Overall, it's a positive growth story as we see customers increasingly attracted to the 10-nanometer product.

Wait a minute. If I look at your annual guidance now versus higher, but it’s actually lower in the second half versus what you had implied when you first gave the annual guidance six months ago. How does that imply that demand is higher versus where you were, given you’ve actually lowered the second half? Bob Swan (CEO): Well, I think I’ll start with our full-year demand relative to where we were at the beginning of the year is our guidance is up by $1.5 billion in revenue.

Yes. But you just… Bob Swan (CEO): Let me finish by addressing your question. Our full-year demand for the Company is increased. The yields for 10-nanometer technology are aligning with our expectations for the first half of the year, and we feel optimistic about our yield performance. Additionally, the demand for our products in the PC segment and for the 5G SoC in the communications sector has exceeded our expectations. This demand plays a significant role in the $1.5 billion increase in revenue for the year. As we accelerate the 10-nanometer production, driven by customer demand, our margins will, all else being equal, be somewhat lower. George noted that these factors are key contributors to a one-point margin decline. The ramp-up of 10-nanometer products is occurring faster, and our 5G communications business in the data center group is growing more rapidly than we had forecasted. I consider the faster ramp-up of 10-nanometer production a positive development. Although we anticipate lower margins when initiating a new process compared to the end of an old one, the current margins for 10-nanometer are lower than for 14-nanometer. We believe that ramping up 10-nanometer technology is beneficial for our customers, even though it may temporarily reduce our yields if growth outpaces our expectations. Overall, this will affect our gross margin modestly for the full year due to higher growth in a challenging market and increased demand for our 10-nanometer products. Thank you. null (Operator): Thank you. Our next question comes from Timothy Arcuri with UBS. Your line is now open.

Hi, thanks. I wanted to ask also on the same manufacturing topic. So, I think, Bob, when you were talking about Ponte Vecchio, I think you said that you’re going to package it internally, but it seemed like you were implying an external foundry contingency, even for this first GPU product. I guess, my question is, did I read that right? And also, I wanted to ask George, what the long-term implications are, if you move to somebody else’s fab? What does this do to your 57% to 63% long-term gross margin? And how does it impact free cash flow? I mean, obviously, it saves you on CapEx but can it be accretive to free cash flow? Bob Swan (CEO): Yes. The design of Ponte Vecchio originally includes an IO-based die, connectivity, a GPU, and some memory tiles all packaged together. From the start, we planned to have some of those tiles inside and some outside, utilizing packaging technology to demonstrate how we can combine different designs into a single package. This was our initial concept. As we discuss disaggregation, it allows for more flexibility and options in our designs, with some components inside and others outside. Ponte Vecchio on the data center side and Lakefield on the client side have served as our test products—one launched and the other in development. This design disaggregation provides us with significant flexibility moving forward. We can evaluate whether to introduce Ponte Vecchio with a mix of internal and external tiles. As we progress, we can consider replacing one of our tiles with a third-party foundry if needed. This flexibility is a key advantage of our new design approach, allowing us to adapt in case of any production delays by sourcing externally rather than manufacturing everything ourselves. George Davis (CFO): And with respect to the long-term outlook, first off, our long-term margin outlook is not 57%, we’ve talked about it being well above that over time. But in terms of as we dynamically move, potentially move product depending on where it is best provided, I think that certainly gives us more flexibility to optimize our capital spend, get a higher return on that capital spend. And it should be accretive to free cash flow. So, we talked a little bit about that actually back in May of ‘19 that embracing the ecosystem and balancing some of our activity externally is going to be important as we look to improving returns over time. null (Operator): Our next question comes from Weston Twigg with KeyBanc Capital Markets.

I wanted to ask about the data-centric revenue heading into Q3. The mid-single-digit decline year-over-year implies a pretty big decline from Q2. You helped a little bit on the call, but I’m wondering if you could help us better understand the reason for that big quarterly drop. And kind of as an aside, you also mentioned increased competition in DCG in the second half, and I’m just wondering what exactly you were referring to on that side? George Davis (CFO): As we examine the data-centric revenue, several factors come into play. Year-over-year, we will notice the effects of the decline in IoT and Mobileye. However, on the DCG side, we believe that we peaked in cloud revenue during the second quarter, which was a record high. We likely reached our peak in enterprise and government back in Q4 of 2019. While the first quarter was relatively strong, a downward trend is expected in the coming quarters. There may be a slight rebound in Q4, but we will have to see how that unfolds. For our communications provider segment, we anticipate that Q2 was the peak, and revenue is expected to decline from there. Overall, everything in the DCG segment is stepping down from a very strong second quarter and is likely to continue decreasing in both cloud and communications based on our current outlook. Does that clarify things?

Yes. That’s helpful. And then, the comment on increased competition in DCG in the second half? George Davis (CFO): Yes. We anticipated that rising competition would emerge in the latter half of this year due to the competitors’ product plans. However, we have been pleasantly surprised by the robust demand for our products in the first half, which is continuing into the second half. Therefore, we don’t believe the competitive impact will be as significant in the second half as we initially expected. Additionally, when it comes to PCs, we expect to gain market share. Bob Swan (CEO): When we guided back in January, in the context of our guidance, we made that statement. So, George is just reiterating that we see a more competitive world and we’ll be prepared to deal with it. And we factored that into our outlook for the second half of the year. Trey Campbell (Head of Investor Relations): Operator, I think, we have time for one more question, and then we’ll turn the call back over to Bob to wrap things up. null (Operator): Thank you. And our final question comes from Srini Pajjuri with SMBC Nikko.

Thank you, George. I have a question about your guidance for the full year. I think, it implies DCG declining again in Q4, pretty much in double-digit sequentially. So, just trying to understand, I mean is it primarily because of digestion that you talked about? And also, if you can talk about to what extent do you have visibility into Q4 or are you just taking a conservative stance because you just simply don’t have visibility into Q4? George Davis (CFO): I believe, as mentioned in response to the previous question, that we have a reasonable expectation that spending in the cloud, enterprise, and communications sectors will decrease from very high levels. We anticipate this trend will continue into Q4. Overall, looking at the full year, our performance has been stronger than expected. Given the various global factors, we are pleased to be so close to our forecast. However, we've experienced significant demand, particularly in the cloud and communications sectors during the second quarter, and now we are entering a phase of some adjustment, which is expected. Bob Swan (CEO): Yes. Let me just kind of close out and end where we began. First, over the last couple years, as you know, we’ve expanded our TAM in the quest to play a much larger role in our customers’ success by investing in key leading technologies like 5G, AI, and intelligence at the edge. And we feel pretty good about the investments that we’ve been making. And last year, we wrapped up our year best year in the Company’s history, entering 2020. Obviously, this year has been an incredibly challenging year on multiple fronts. But, at the same time, we expect ‘20 to be the best year in our Company’s history, our fifth record year in a row, delivering better results than we expected in January at a time when the market is worse than we expected. So, competitively, we feel stronger as we exit 2020. Third point I’d make is our execution is improved. Capacity and supply is in place. We’re ramping a slew of 10-nanometer products across our portfolio. We are ramping 10 faster than we had planned. And we have a strong pipeline over the next several years. And we believe we can deliver another node of performance on 10-nanometer itself. Fourth point, at the same time, our 7-nanometer products will be delayed. We pushed out the timing of the 7-nanometer node. But along the way, we have taken steps, die disaggregation, advanced packaging, deeper engagement with the ecosystem and contingency planning as a sign of strength, not as a sign of weakness that gives us much more flexibility to make the decisions where it’s the most effective way to build our products to deliver that annual cadence of leadership for our customers. And we feel pretty good about where we are, though we’re not happy. I’m not pleased with our 7-nanometer process performance. But, as we sit here today, six months through the year, our people are safe. We’re delivering for our customers. The communities we operate in are better as a result of our presence and the passion of our employees for making a difference. And next 90 days from now, we’ll talk more about our efforts to create world-changing technologies that continue to enrich the lives of every person on earth. So, thanks for joining us. And we’ll talk to you soon. Trey Campbell (Head of Investor Relations): Thanks, Bob. And thank you all for joining us today. Operator, could you please go ahead and wrap up the call? null (Operator): Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.