In January 2021, Intel wasn’t in a strong position. Bob Swan, who had been appointed CEO in 2019, was struggling to turn the company around. Two years later, Pat Gelsinger, a veteran of the company, took over the leadership.
Intel was facing the biggest challenge in its history. TSMC had emerged as the leader in the semiconductor industry, significantly impacting Intel’s market share. However, Gelsinger had a clear vision and implemented what the company called the “IDM 2.0” strategy.
Gelsinger’s approach appeared promising. Intel wanted to regain its status as a major player in the semiconductor field. The IDM 2.0 strategy included plans to operate as a manufacturer for both itself and external clients, which seemed like a sound decision.
Meanwhile, the U.S. and Europe started developing plans to establish new manufacturing plants, aiming to reduce dependence on Asia. Intel was a key beneficiary of the CHIPS and Science Act, which allocated $20 billion in loans and grants to assist the company in setting up chip plants in the U.S.
Missing the AI Train
Despite these efforts, Intel has struggled to keep pace with the rapid developments in artificial intelligence. The rise of ChatGPT catapulted Nvidia to become the largest semiconductor company in the world, alongside TSMC, pushing Intel to the sidelines.
The rapid ascendance of TSMC and Nvidia has dramatically altered the landscape of the semiconductor market. For over four decades, Intel was the dominant player in the PC market, but that has changed. Despite Gelsinger’s best efforts, nothing seemed to yield positive results.
Being late to the AI game has been particularly damaging for Intel. This has resulted in a significant decline in market valuation and necessitated drastic measures. These include the layoff of more than 15,000 employees in the summer and the postponement or outright cancellation of plans to build new chip plants in Europe.
Moreover, Intel’s traditional strengths have started to falter. Progress on new photolithography nodes has faced challenges, and despite generating high expectations, the company has struggled to meet them. As a result, Intel recently scrapped the development of its 20A node to focus on the 18A node. In this context, TSMC has become an increasingly uncomfortable rival.
A Change of Direction is Needed
Under Gelsinger’s leadership, Intel has released multiple generations of chips, but the advancements have been less significant than expected. Meteor Lake, which was to be Intel’s most important breakthrough in the last 40 years, hasn’t materialized as hoped.
These difficulties have also impacted Intel’s ability to secure grants from the CHIPS Act, although it remains the largest beneficiary of the funding program.
To make matters worse, recent reports indicate that Intel won’t produce the PlayStation 6 chips. Amid these tough times, rumors also suggest that Qualcomm considered acquiring Intel, although interest seems to have diminished.
Some view Gelsinger’s resignation as inevitable. In any case, it signals an acknowledgment that his strategy was ineffective. The company is now in search of his successor. In the interim, two senior executives, David Zinsner and Michelle Johnston Holthaus, will serve as co-CEOs alongside Frank Yeary, who will act as executive chairman.
Going forward, Intel faces daunting uncertainties and significant challenges. Although TSMC and Nvidia have emerged as formidable competitors, Intel still has the potential to adapt and gradually correct its course.
What decisions will Intel make concerning its IDM 2.0 and AI strategies? A shift is clearly necessary. Maintaining the previous course after Gelsinger’s resignation wouldn’t be viable. It’s now crucial to see what innovative ideas Intel develops for its future.
Some say every challenge is an opportunity. If this is indeed the biggest challenge Intel has ever faced, it may also represent its greatest opportunity for renewal. Will the company be able to rebound and return to its former glory? Only time will tell.
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