Despite Intel's recent troubles, I didn't expect to see CEO Pat Gelsinger join the roughly 15,000 colleagues being shown the door. Gelsinger is a storied engineer and business success who laid out a comprehensive rescue plan when he took the helm of the embattled chipmaker in 2021. It was never going to be a quick fix, given the company's long legacy of mistakes. Gelsinger may be the public face of Intel's current malaise, but the problems began long before his tenure and will likely continue.
How Intel got here
Gelsinger was tasked with addressing nearly two decades of bad decisions, all of which have festered. Intel became a giant that swallowed the industry when it was half of the wintel allianceproducing chips that went hand in hand with Microsoft Windows. The huge profits that emerged from this partnership meant that there was an institutional reluctance to look too closely at new businesses that might distract from their golden goose, which is still going strong all these years later.
In 2005, then-CEO Paul Ottellini <a target="_blank" data-i13n="cpos:3;pos:1" href="https://www.theguardian.com/technology/2013/may/20/intel-smartphone-iphone-paul-otellini” rel=”nofollow noopener” target=”_blank” data-ylk=”slk:turned down the chance;cpos:3;pos:1;elm:context_link;itc:0;sec:content-canvas” class=”link “>rejected the opportunity to create the iPhone's system-on-chip. It would have been easy for Intel since it already made XScale ARM chips for mobile devices. You could find an Intel ARM chip inside popular phones like the BlackBerry Pearl 8100 and Palm Treo 650. A year later, you'd sell XScale to Marvell, believing you could shrink its x86 chips to work in smartphones. The early Intel Atom phones showed a degree of promise, but the Snapdragons of the time, produced by considerably smaller rival Qualcomm, surpassed them quite easily.
At the same time, Intel was working on Larrabee, its own discrete GPU platform based on the x86 architecture. Despite several years of marketing bluster and suggestions that it would “kill” AMD/ATI and NVIDIA, Intel killed it in 2010 in favor of including integrated graphics in its regular processor products. The decision would hand the majority of the GPU market to NVIDIA, making it the go-to name for gaming, supercomputers, cryptocurrencies and artificial intelligence, posting quarterly revenue of $35.1 billion on November 20.
Could Intel have foreseen the meteoric rise of ai? Maybe not. But <a target="_blank" data-i13n="cpos:8;pos:1" href="https://www.reuters.com/technology/artificial-intelligence/how-chip-giant-intel-spurned-openai-fell-behind-times-2024-08-07/” rel=”nofollow noopener” target=”_blank” data-ylk=”slk:Reuters;cpos:8;pos:1;elm:context_link;itc:0;sec:content-canvas” class=”link “>Reuters reported that former Intel CEO Bob Swan turned down the opportunity to invest in OpenAI in 2017. He was looking for a hardware partner to reduce his dependence on NVIDIA, offering a generous deal in the process. Swan, however, reportedly said he couldn't see a future for generative ai, and Intel's data center unit refused to sell the hardware at a discount.
Intel's main strength was in the quality of its engineering, the strength of its product and that it always remained close to the forefront. (Parallels can be drawn between Intel and Boeing, both of which are seeing their reputation for quality erode in real time.) Unfortunately, Intel's core business collapsed after the company failed to produce 10-nanometer chips on schedule. limit scheduled for 2015. The company's famous “tick, tock” strategy of launching a new chip process one year and a refined version the next has stopped.
These problems allowed Intel's competitors to step in and get ahead, taking advantage of more modern chip architectures. AMD, which remained a little above 10 percent of the chip market For much of the 2010s, it has seen its The market share has doubled in recent years.. The biggest beneficiary, of course, was TSMC, the Taiwanese chip factory that has become the envy of the world. Even if Intel controls most of the x86 processor market, it is TSMC that makes chips for Apple, Qualcomm, NVIDIA and AMD, among others. Meanwhile, Intel was saddled with an older chip manufacturing process that it couldn't use to catch up with its rivals.
The Gelsinger Doctrine
Gelsinger was as close to an Intel “lifer” as you can imagine: He joined the company at age 18 and rose to the role of chief technology officer in 2001. In 2009, he left Intel to become chief technology officer. EMC operations and served as CEO of VMWare for nearly a decade. After taking the reins of Intel, he laid out a detailed plan to plot his glorious return.
The first step would be to separate Intel's design and manufacturing business into two distinct entities. With an eye on U.S. subsidies through the Biden administration's Science and CHIPS Act, Gelsinger pledged to build two new chip factories that would leverage the same EUV (extreme ultraviolet lithography) technology used by TSMC.
Gelsinger was also determined to restore discipline to Intel's chip business and return to the “tick-tock” structure. Unfortunately, production delays that had been building up since 2015 meant that Gelsinger's goal was simply to return to parity. Meanwhile, Intel would also get TSMC to manufacture some of its newer chips, which, while expensive, would help address any concerns that the company was falling further behind.
No one had any doubts about the magnitude of the task Gelsinger faced, but there was plenty of room for optimism. Gelsinger was humble enough to accept that Intel could not simply remain on its current course and had to accept its new status. He proposed that Intel could grin and bear the short-term pain for the company's ultimate benefit. If it could build for the future, leverage its rivals to keep it in the game, and restore faith in its processes, Intel would come out ahead. All he needed was for nothing to get worse.
things got worse
At the end of October, <a target="_blank" data-i13n="cpos:13;pos:1" href="https://www.reuters.com/technology/inside-intel-ceo-pat-gelsinger-fumbled-revival-an-american-icon-2024-10-29/” rel=”nofollow noopener” target=”_blank” data-ylk=”slk:Reuters;cpos:13;pos:1;elm:context_link;itc:0;sec:content-canvas” class=”link “>Reuters reported that Gelsinger made a colossal faux pas when talking about TSMC. The CEO was quoted as saying, “We don't want all our eggs to be in one Taiwan factory's basket” and that “Taiwan is not a stable place.” This offended TSMC to such an extent that it ended a discount that Intel had taken advantage of for years
Unfortunately, Gelsinger's desire to restore discipline to the chip division would also backfire, as the latest Core processors were blighted by voltage instability issues. Intel was forced to extend the warranties on those chips, which was an additional cost that it couldn't really afford. In August, it posted a $1.6 billion loss and pledged to cut 15,000 employees in an attempt to right the ship. But he was forced to <a target="_blank" data-i13n="cpos:17;pos:1" href="https://www.nytimes.com/2024/10/31/technology/intel-earnings-loss.html” rel=”nofollow noopener” target=”_blank” data-ylk=”slk:post the biggest quarterly loss in its history;cpos:17;pos:1;elm:context_link;itc:0;sec:content-canvas” class=”link “>records the largest quarterly loss in its history Three months later, it lost $16.6 billion, although much of that figure was related to the revaluation of the company's assets and the payment of layoffs. Worse yet, Intel's new production process, 18A, reportedly failed crucial tests before its debut in 2025.
Perhaps the lowest point of Intel's year was when its stock price fell enough to become an acquisition target. Rumors suggested that Qualcomm was potentially considering an acquisition, while others indicated that ARM had made inquiries about purchasing Intel's products unit.
Where does this leave Intel?
<a target="_blank" data-i13n="cpos:21;pos:1" href="https://www.nytimes.com/2024/12/02/technology/intel-ceo-pat-gelsinger.html” rel=”nofollow noopener” target=”_blank” data-ylk=”slk:The New York Times;cpos:21;pos:1;elm:context_link;itc:0;sec:content-canvas” class=”link “>The New York Times reports that Intel's board of directors became frustrated with Gelsinger as his rescue plan “wasn't showing results fast enough.” But Intel wasn't going to hire Gelsinger in 2021 and suddenly bounce back in 2024. Building large, complex chip factories isn't easy. Nor is getting thousands of engineers to solve difficult problems related to chip performance. And, obviously, reversing a decline that began in 2015 would never happen overnight.
Intel's board of directors is currently searching for a full-time successor to Gelsinger, but it's hard to see what anyone else would do differently. After all, the company still needs to build those factories in order to own and control its future, and it still needs to fix its processes. Unless, of course, the next CEO is going to be told to just stop the bleeding and keep taking the money. Even in its deeply wounded state after a few bad quarters, Intel is still the biggest name in the world of x86 chips and will continue to make money for years to come.
You could easily imagine Intel's board of directors sitting back, prioritizing a few years of healthy profits at the expense of the company's long-term future. It can continue to sell modified versions of its existing desktop chips, ceding technological leadership to AMD, Qualcomm and others. There are probably a decade or two of large industrial customers who would be happy to use Intel processors for their hardware as long as they continue using Windows. Perhaps that would be appropriate given how large and ossified Intel has become, admitting that it can't move fast enough to evolve.
That scenario likely won't be allowed to happen given Intel's broader role in the global tech space. Even if the incoming administration were to criticize the CHIPS Act, Intel is still ready to be its largest recipient of funding — having a domestic manufacturer of Intel's scale will be an asset that few sane governments would allow to fall. But simply changing CEOs won't suddenly solve the company's big, hard-to-solve problems. It wasn't Pat Gelsinger who screwed up Raptor Lake's power design, nor passed up the opportunity to make the iPhone's CPU all those years ago. He may own the TSMC stuff, but while a CEO sets the direction of travel, he can't micromanage every process at a company the scale of Intel. So whoever replaces him will have the same slew of issues to address, knowing that the board's patience will be even shorter this time.
