President of Intel talks about Siliconomy and the Brazilian potential for the semiconductor market

In an exclusive interview with showmetech, Claudia Muchaluat, president of Intel Brazil, spoke about the concept of Siliconomy and the importance of Latin America in diversifying the company's production chain. The chat took place during a visit to the company's factories and distribution center. Intel na Costa Rica, in which we were able to learn more about how the processors that are present in our daily lives are manufactured.

What is Siliconomy?

Cited by Intel for the first time in 2023, the concept of Siliconomy (also called the Silicon Economy), can be explained as a “growing economy made possible by the magic of silicon and software”. At the time of its announcement, the silicon, a fundamental material in the production of semiconductors, fueled a US$574 billion industry that, in turn, boosted a global technological economy valued at almost US$8 trillion.

It's an interesting expression, coined by our CEO, Pat Gelsinger. Of value to the economy, it brings more than almost 600 billion dollars. This fuels a $8 trillion global digital economy, which represents 15% of Global GDP. Over the last decade, this part of the digital economy has grown two and a half times faster than the traditional economy. And the interesting thing is that, of this 15% of global GDP, 1/3 was influenced by Artificial Intelligence.

Claudia Muchaluat, president of Intel Brazil

The company has invested heavily in these technologies and recently launched processors intel core ultra e 5th generation Intel Xeon, respectively, for personal computers and servers.

The new generation of the line Xeon promises high computational power to run artificial intelligence tasks on robust servers, while saving on energy consumption. And the intel core ultra is a processor for notebooks and desktops, with a neural processing unit (NPU ou neural processing unit, in English) specialized to run AI on the machine, even without a web connection. The company's expectation is that AI PCs should represent 80% of notebook sales by 2028.

Democratization of generative AI

A Generative AI It has been present in our lives for longer than we realize, but it has gained special relevance in the last 16 months. Claudia mentions that, at the moment, everything is more democratized and this is due to the launch of several artificial intelligences at the same time. O ChatGPT is the main example since it was made available free of charge to everyone.

Artificial intelligence has been around for a long time. We have films from 10, 15 years ago that predicted what is happening today. I think that on the issue of Generative AI, it really democratized, because it broke that barrier of having to know how to interact with artificial intelligence. When we can speak with your natural language, as if you were talking to an assistant, that is, in fact, anyone can have access. That's why the adoption curve has increased a lot. Of the generative AIs, it gave an exponential with Google's Gemini and also ChatGPT.

Claudia Muchaluat, president of Intel Brazil

The democratization of AI has brought as a side effect a certain widespread fear about the power of these tools to replace the work of human beings. And you don't have to go far to understand: when tools like ChatGPT e GIVE HER were launched, many people thought that jobs for journalists and designers would be stolen by robots. But, in fact, these and other AIs just arrived to make our daily lives easier.

I think breaking the barrier as a society and having minimal AI literacy is the same case as us speaking English for years. I believe that, in a few years, anyone who does not have a minimum knowledge of artificial intelligence will not be able to keep up with advances. This is still an unknown technology, in terms of opportunities. But there is a lot to learn in the coming years. It's something different from quantum computing, which is a reality, but we still don't have quantum computers with democratized access, something that already happens with AI tools.

Claudia Muchaluat, president of Intel Brazil

Chip demand growth due to AI

According to report data from the OpenAI released in May 2023, Brazil is the fifth country that most uses the ChatGPT worldwide, representing 4,3% of total traffic. The executive comments that demands will grow globally and that the chip industry will grow in the same way.

When we talk about AI, we have a whole concept of technology behind it. Nowadays, everything that needs technology needs a chip and, with the growth of this use, we will also have a greater demand for chips. Intel is a company that never looks at hardware in isolation from software. We have more than 20 thousand software engineers around the world and everything we do is to optimize software over hardware. And not all companies have this more holistic view.

Claudia Muchaluat, president of Intel Brazil

The work for a country to be chosen to receive more investments involves many steps and this is not the work of just one leader or one company, but of the entire community.

Brazil still needs to organize itself better to be an option in the semiconductor production investment market. As the leader of a technology company in the country, I know this is my duty and we will work hard to make it happen. Within Intel's field of responsibility, we are working on developing software to generate artificial intelligence assets.

Claudia Muchaluat, president of Intel Brazil

Partnership with Brazilian Government and universities

A Intel is one of the companies that invests the most in the development of new technologies and, for this to also happen in Brazil, the company entered into a partnership with the Brazilian Government so that everything works in an integrated manner.

When we look at the Brazilian community of open source developers, we are the fourth largest in the world. We have advanced research centers in which Intel participates, together with the Government and the private sector. The first is aimed at creating smart city technologies and the second is aimed at industry 4.0. The idea is that we generate AI assets and solutions in Brazil to foster the ecosystem and increase maturity. The idea is that this can be scaled to other countries. When we talk about industry 4.0, we have high demand, but we can dream of solutions created here also being sent to other countries.

Claudia Muchaluat, president of Intel Brazil

The company also held a workshop with the Itamaraty and leaders of technology companies (including companies in the automotive sector) in Brasília in the second half of 2023. Experts were invited to talk about innovations and how this can be used to make Brazilian lands a highlight in the semiconductor market.

Renu Navale, vice president and general manager for cities and critical infrastructure, comments that Intel, for more than 3 decades, has been studying how to optimize life in cities. The company is committed to using its technologies and products to enable up to 70% of the world's population to live in smart cities by 2050.  

Incentive laws (Chip Acts)

Claudia also commented on encouraging the development of the semiconductor industry around the world. In the USA, companies that build local factories will be able to receive tax discounts of up to 39 billion dollars.

This entire semiconductor discussion/agenda has a very strong geopolitical bias. We see great powers having this issue as a priority in their strategies and that is why so many benefits are being offered by the USA and the European Union. In Brazil, we are bringing associations to the center of these discussions to continue encouraging them to reach a high point at some point.

Claudia Muchaluat, president of Intel Brazil

The executive also believes that we need to work on solutions that attract the attention of large nations so that our country is remembered and receives investment from technology giants. And this is work done in partnership with the Brazilian Government and private companies.

We need to work with universities and technology companies based on real problems identified. For example, in the case of smart cities, improving traffic, security and learning how to have a better distribution between people living in the countryside and in cities. The concept of smart cities, but using IoT, artificial intelligence resources and all emerging technologies to seek solutions based on Intel technology. And when I talk about 'Intel technology', I'm not just talking about the hardware, but also development platforms, acceleration kits and more.

Claudia Muchaluat, president of Intel Brazil

The Intel factory in Costa Rica

With 4.800 own and outsourced employees, the site has already received investments of 1,25 billion dollars since the construction of the industrial plants. The space has 26 thousand square meters of industrial area and 17 thousand square meters of laboratories, housing the Intel Design Center, Intel's main research and development center in the world.

Max Ramírez — director of Intel's Assembly and Test factory in Costa Rica — comments that, since 2020, more than 35 million units of Intel Xeon microprocessors for servers have been produced there, representing more than 50% of Intel's total production of this type of CPU. Currently, manufacturing processes Intel 3, Intel 7 eo novo Intel 18A are carried out in the industrial installation.

Formerly known for its coffee and banana production, Costa Rica is one of the main countries for technology companies. The interest of these companies caused the trade deficit of 497 million dollars in 1997 to become a surplus of 632 million dollars in 1999 — the largest surplus in 50 years.

Tax incentives also attracted the attention of other companies and companies, such as Acer, Microsoft, Motorola, DSC, EMC Technology and Photocircuits they also have factories in Costa Rica. The country is considered essential for the electronics market.

In addition to Costa Rica, Intel also has factories in: Oregon (USA), Arizona (USA), New Mexico (USA), Ohio (USA), Costa Rica, Ireland, Germany, Poland, Israel, Chengdu, Vietnam and Malaysia.

Brazil almost had an Intel factory

Costa Rica had not initially been considered for building an Intel factory, and countries like Argentina, Brazil, Chile, Mexico, China, India, Indonesia, Korea, Mexico, Puerto Rico, Singapore, Taiwan and Thailand were being quoted. However, upon learning of the company's possibility of expansion, the Costa Rican development agency — Costa Rican Coalition of Development Initiatives (Cinde) — sent representatives to Intel's headquarters in California and put the country on the list.

After a first review, considering stable political and economic conditions, sufficient human resources, reasonable structural costs (salaries, taxes, export tariffs and facilities for profit remittances) and a good environment for foreign investments, the initial list of 14 countries was reduced to 7. Intel decided that the factory would be built in a Latin American country, so the remaining countries were:  Brazil, Mexico, Chile and Costa Rica.

First, you need to understand geopolitically which locations make the most sense and the local government, in matters of taxes, has great influence. Intel's factories have a huge volume, so you depend a lot on money, in the billions of dollars. It takes a considerable amount of time for the factory to reach full capacity and begin generating revenue. This is not an effort you make now and reap the profits tomorrow; It is a process that needs planning.

Claudia Muchaluat, president of Intel Brazil

The year 1996 was decisive, as executives from the processor company began making visits to the finalist countries. In addition to federal and state authorities, there were interviews with lawyers, consulting companies and executives from branches of American companies. Brazil received a visit from Chuck Pawlak, vice president of International Site Selection at Intel, in June of that year.

Market experts say that Brazil lost the dispute due to “pure negligence”. The Minister of Science and Technology of the FHC government, Israel Vargas, said that the Intel he had a lot to gain if he chose to build his factory in Brazil, but he didn't put in much effort to make it work and even said that “we don't have to make any effort to bargain”. Pedro Malan, who at the time held the position of Minister of Finance, did not make an effort to welcome Intel executives when they were in Brazil.

The initial idea was for the Intel factory to be built in the state of São Paulo, but it can be said that the Intel was also snubbed by the São Paulo government. Mario Covas, governor of São Paulo in 1996, did not offer tax incentives for the company and did not even consider a meeting with the executives. At the time, São Paulo was receiving a lot of foreign investment.

The treatment in Costa Rica was very different: the President of the Republic, José Maria Figueres, and Minister of Foreign Trade, José Rossi, received the delegation from Intel. After talking for about two and a half hours, the president committed to creating a plan to train everyone to work at the factory and made himself available to “resolve all problems”. After that, Intel executives began visiting Costa Rica weekly. In July, Chile and Brazil were disregarded.

Only Mexico and Costa Rica were left in the dispute. Despite being a smaller country, Costa Rican leaders were more willing for Intel to choose the location to build its new factory. The size of the country, which appeared to be a problem, was actually seen as a positive point, as the resolution would be easier.

Mexico also proved to be strong, but its situation in 1995 raised doubts, as it was experiencing the effects of the Mexican currency crisis and the country's union culture was also strange for Intel. Furthermore, President Ernesto Zedillo even offered an “exception to labor law” agreement to the company, but it was seen strangely.

The president of Costa Rica, José Figueres Ferrer, was at the disposal of the Intel and, in addition to taking the company's executives for a quick trip in the presidential helicopter to the land where the factory would be built, he also offered an incentive package for the 190 foreign companies, which was also valid for Intel. This included:

• 100% exemption from import and export taxes;
• 100% exemption from municipal taxes;
• 100% tax exemption on profits for eight years;
• Fast customs processing at the factory;
• Elimination of restrictions on capital remittances.

To get Intel's attention once and for all, it also offered to grant licenses for international flights and created special electronics training programs at the Costa Rica Institute of Technology, in partnership with Intel.

In exchange for these benefits, the company paid for the construction of two energy substations for the factories. Market experts say that Costa Rica did not sell out to the company, but rather “there were adjustments to accommodate Intel's needs, but they extended the measures to other investors, benefiting the entire economy.”

Biggest investment in the Americas

With 80% of processors manufactured in Asia, Intel wants to balance production between industrial plants so that demand in the Americas is met only by local factories. This work requires a great deal of analysis to be successful, says the executive.

The company is investing in a market called Foundry (Foundry) and allows the design and manufacturing of processors to be offered as a service to the market. Muchluat mentions that the Intel is the only one in the world that manufactures and develops chip design.

Within this search for balance in the global supply chain, we have 80% of components coming from Asia and a further 20% coming from the Americas and Europe. The idea is to balance the supply chain by 50% and 50% so that Brazil is a region that is also essential for chip production.

Claudia Muchaluat, president of Intel Brazil

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