Broadcom's CEO says he's too busy riding the AI wave to consider a takeover of rival Intel.
In an interview with the Financial Times, Hock Tan said he had no interest in "hostile takeovers."
Broadcom has soared to a $1 trillion market capitalization for the first time thanks to the AI boom.
The chief executive of $1 trillion AI chip giant Broadcom has dismissed the prospect of a takeover bid for struggling rival Intel.
In an interview with the Financial Times, Hock Tan said that he has his "hands very full" from riding the AI boom, responding to rumors that his company could make a move for its Silicon Valley rival.
"That is driving a lot of my resources, a lot of my focus," Tan said, adding that he has "not been asked" to bid on Intel.
The Broadcom boss is also adopting a "no hostile takeovers" policy after Donald Trump blocked his company's offer for Qualcomm in 2018 on national security grounds. Broadcom was incorporated in Singapore at the time.
"I can only make a deal if it's actionable," Tan told the FT. "Actionability means someone comes and asks me. Ever since Qualcomm, I learned one thing: no hostile offers."
Broadcom and Intel have experienced diverging fortunes since the start of the generative AI boom. Broadcom has more than doubled in value since the start of the year to hit a $1 trillion market capitalization for the first time, while Intel has collapsed by more than half to $82 billion.
Broadcom, which designs custom AI chips and components for data centers, hit a record milestone last week after reporting its fourth-quarter earnings. Revenues from its AI business jumped 220% year over year.
Intel, meanwhile, has had a much rougher year. Its CEO Pat Gelsinger — who first joined Intel when he was 18 and was brought back in 2021 after a stint at VMWare — announced his shock retirement earlier this month after struggling to keep pace with rivals like Nvidia in the AI boom.
Gelsinger, who returned to revitalize Intel's manufacturing and design operations, faced several struggles, leading him to announce a head count reduction of roughly 15,000 in August and a suspension of Intel's dividend.
Its challenges have led to several rumors of being bought by a rival, a move that would mark a stunning end to the decades-old chip firm. Buyer interest remains uncertain, however. Bloomberg reported in November that Qualcomm's interest in an Intel takeover has cooled.
Broadcom did not immediately respond to BI's request for comment outside regular working hours.
Intel's Core Ultra 200S desktop processors—the company's biggest overhaul of its desktop platform since 2021—consume less power and run a lot cooler than the company's 13th- and 14th-generation Core CPUs. However, early reviewers found that the processors sometimes struggled to match, let alone beat, those older desktop CPUs in some tasks. This was particularly true for games, and people who build their own gaming PCs are a key constituency for these kinds of brand-new high-end chips.
Intel quickly blamed optimization issues for some of the problems, promising performance fixes sometime later in November or December, and the company has outlined the first batch of fixes in a lengthy support document. Of the five identified problems, Intel says it has fixed four; users can get those updates by installing Windows 11 24H2 build 26100.2161 or higher, updating their motherboard's BIOS to the latest version. Non-performance-related blue screens related to Epic's Easy Anti-Cheat software have also been resolved, and users should update to the latest version if they're still having issues.
The performance problems resolved via the Windows update are both related to a missing power plan specific to the Core Ultra processors—Intel didn't have those power plans ready for reviewers, who did all their testing using the generic power profiles provided with Windows. Intel said that this by itself could reduce performance by between 6 and 30 percent, depending on the software.
Intel's co-CEOs discussed splitting the firm's manufacturing and products businesses Thursday.
A separation could address Intel's poor financial performance. It also has political implications.
Intel Foundry is forming a separate operational board in the meantime, executives said.
Intel's new co-CEOs said the company is creating more separation between its manufacturing and products businesses and the possibility of a formal split is still in play.
When asked if separating the two units was a possibility and if the success of the company's crucial, new "18A" process could influence the decision, CFO David Zinsner and CEO of Intel Products Michelle Johnston Holthaus, now interim co-CEOs, said preliminary moves are in progress.
"We really do already run the businesses fairly independently," Holthaus said at a Barclays tech conference Thursday. She added that severing the connection entirely does not make sense in her view, "but, you know, someone will decide that," she said.
"As far as does it ever fully separate? I think that's an open question for another day," Zinsner said.
Already in motion
Though the co-CEOs made it clear a final decision on a potential break-up has not been made, Zinsner outlined a series of moves already in progress that could make a split easier.
"We already run the businesses separately, but we are going down the path of creating a subsidiary for Intel Foundry as part of the overall Intel company," Zinsner said.
In addition, the company is forming a separate operational board for Intel Foundry and separating the operations and inventory management software for the two sides of the business.
Until a permanent CEO is appointed by the board, the co-CEOs will manage most areas of the company together, but Zinsner alone will manage the Foundry business.The foundry aims to build a contract manufacturing business for other chip designers. Due to the sensitive, competitive intellectual property coming from clients into that business, separation is key.
"Obviously, they want firewalls. They want to protect their IPs, their product road maps, and so forth. So I will deal with that part of the foundry to separate that from the Intel Products business." Zinsner said.
Have a tip or an insight to share? Contact Emma at [email protected] or use the secure messaging app Signal: 443-333-9088.
Intel doesn't have a ton to show for its dedicated GPU efforts yet.
After much anticipation, many delays, and an anticipatory apology tour for its software quality, Intel launched its first Arc GPUs at the end of 2022. There were things to like about the A770 and A750, but buggy drivers, poor performance in older games, and relatively high power use made them difficult to recommend. They were more notable as curiosities than as consumer graphics cards.
The result, after more than two years on the market, is that Arc GPUs remain a statistical nonentity in the GPU market, according to analysts and the Steam Hardware Survey. But it was always going to take time—and probably a couple of hardware generations—for Intel to make meaningful headway against entrenched competitors.
Bank of America downgraded AMD on Monday, citing higher competitive risk in the AI market.
AWS customers' low demand for AMD AI chips and Nvidia dominance impact AMD's growth potential.
AMD could still succeed due to Nvidia supply issues and its server chip market position.
Bank of America downgraded AMD after a Business Insider report raised concerns about demand for the tech company's AI chips.
Analysts at BofA cut AMD shares to a "neutral," citing "higher competitive risk" in the AI market, according to an analyst note published on Monday.
BofA analysts also lowered their AMD GPU sales forecast for next year to $8 billion, from $8.9 billion, implying a roughly 4% market share.
AMD's stock dropped roughly 5.6% on Monday, after falling about 2% on Friday. Its shares are down about 5% so far this year.
The declines follow BI's report on Friday that said Amazon Web Services was "not yet" seeing strong enough customer demand to deploy AMD's AI chips through its cloud platform.
Bank of America cited this AWS customer-demand issue, alongside Nvidia's dominance and the growing preference for custom chips from Marvell and Broadcom, as factors limiting AMD's growth potential.
"Recently largest cloud customer Amazon strongly indicated its preference for alternative custom (Trainium/ MRVL) and NVDA products, but a lack of strong demand for AMD," the Bank of America note said, referring to AWS's in-house AI chip Trainium and its close partnerships with Marvell and Nvidia.
AWS's spokesperson said in an email to BI, "AWS and AMD work together closely, as we continue to make AWS the best place to run AMD silicon. Based on the success of AMD CPUs on AWS, we are actively looking at offering AMD's AI chips."
An AMD spokesperson didn't respond to a request for comment on Monday.
AMD recently increased its GPU sales forecast, just a year after launching its line of AI chips. But its GPU market share is still far behind Nvidia's.
Bank of America said AMD could still succeed in the AI chip market, in part due to Nvidia's supply constraints and premium pricing, making it a strong alternative, especially for internal cloud workloads. It also said AMD is well positioned in the server chip market, as rival Intel continues to struggle.
Do you work at Amazon? Got a tip?
Contact the reporter, Eugene Kim, via the encrypted-messaging apps Signal or Telegram (+1-650-942-3061) or email ([email protected]). Reach out using a nonwork device. Check out Business Insider's source guide for other tips on sharing information securely.
The Biden administration's efforts to boost US semiconductor manufacturing and employment could bear fruit during the Trump administration.
During his term, Biden secured commitments from five of the world's leading chip manufacturers —TSMC, Intel, Samsung, Micron, and SK Hynix — to build factories in the US as part of an effort to shore up production of the critical technology.Semiconductor chips power a wide variety of products, including iPhones, pickup trucks, washing machines, and military equipment.
However, many of these factories are still in various stages of construction, and for some, it will be years before they're producing chips. Much of the hiring for manufacturing roles could come under president-elect Donald Trump or a future administration, experts told Business Insider.
Jeff Koch, an analyst at the semiconductor research and consulting firm SemiAnalysis, told Business Insider that the current building of US chip factories has already created construction jobs. However, Koch said that the anticipated boost in semiconductor manufacturing employment hasn't materialized yet.
Koch and Stephen Ezell, the vice president for global innovation policy at the Information Technology and Innovation Foundation, said manufacturing jobs would likely be realized during the Trump administration.
"The longer it takes to get the funds disbursed and the projects fully underway, then the longer it takes to get to full hiring for construction of the facilities and the operational staffing of them once they're complete," said Ezell, referring to CHIPS Act funding that the five leading chipmakers — in addition to other semiconductor companies — have been allocated from the Biden administration.
The chipmakersare expected to receive some of the $39 billion in manufacturing incentives tied to the CHIPS Act, which President Joe Biden signed into law in 2022. The Biden administration is trying to finalize funding agreements before Trump — who has criticized the CHIPS Act — takes office in January.
The US could see about 42,000 direct jobs at the companies building these factories and 101,500 indirect jobsat chipmakers' suppliers, per a report published in 2021 by the Semiconductor Industry Association — a trade association and lobbying group — thatsaid a $50 billion investment would help create an estimated 10 additional chip factories in the US.
To be sure, it's not uncommon for the benefits of a president's policy initiative to see gainsafter the leader leaves office. This is a reality Biden understands.
"Much of the work we've done is already being felt by the American people, but the vast majority will not be felt, will be felt over the next 10 years," Biden said in November about his administration's policies.
Additionally, the construction of chip factories is particularly complicated, and it often takes years for these projects to be completed.
"This is the world's most complex technology," Jimmy Goodrich, senior advisor for technology analysis to the RAND Corporation, said of semiconductors. "You're talking about producing transistors — billions on a single chip — each of them is 20 to 30,000 times smaller than the human hair."
Business Insider reached out to TSMC, Intel, Samsung, Micron, and SK Hynix to confirm the latest status of their US-based chip factories under construction. The table below shows where the chipmakers have committed to building factories in the US. Intel declined to provide estimated completion dates for its four factories.
When reached for comment, the Trump-Vance transition team didn't respond to a question about Trump's plans to boost US semiconductor manufacturing employment.
Building chip factories takes time
Koch said Taiwan-based TSMC began hiring over two years ago. The company is expected to begin full production levels — BI previously reported it already startedmaking chips for Apple — at its first Phoenix factory early next year after facing some delays.
TSMC is projecting that its second and third chip Phoenix-based factories will begin production in 2028 and by the end of the decade, respectively. The second factory was initially slated for a 2026 opening.
Micron, which is based in Boise, Idaho, has five factories in the works — four in Clay, New York, and one in Boise. The Boise factory is expected to begin production in 2026, the company told BI, but Micron's Clay factories have faced some delays.
SK Hynix, which is based in South Korea, expects to begin mass chip production at its West Lafayette, Indiana factory in the second half of 2028. Samsung is projecting that it will begin chip production at its chip factory in Taylor, Texas in 2026. In October, Reuters reported that Samsung has postponed taking deliveries of chipmaking equipment because it has yet to land any major customers for the project.
The Commerce Department said that TSMC, Intel, Micron, Samsung, SK Hynix, and TSMC are "five of the world's leading and most advanced leading-edge logic and leading-edge memory chip manufacturers." The Commerce Department added that building chip factories is a very intensive and complex construction project — and that it often takes three to five years before factories are fully constructed and operational.
While creating US semiconductor manufacturing jobs would be good news for the people who eventually land these roles, Chris Miller, a nonresident senior fellow at the American Enterprise Institute who focuses on semiconductors, told BI that he thinks the Biden administration's main goal was to boost US chip manufacturing. Doing so could help secure US supply chains and make the country less reliant on advanced chips made in Taiwan.
"The point is to have more chip manufacturing, which will mostly come over the next few years," he said.
Do you work in the US semiconductor industry? Reach out to this reporter at [email protected].
"We are very driven toward 'no wafer left behind,'" Naga Chandrasekaran, the chief global operations officer, said at the UBS Global Technology and AI Conference on Wednesday.
But Intel needs a "no capital left behind" mindset, he added.
Chandrasekaran, who joined Intel this year after two decades at Micron, said that Intel's strategy of producing excess wafers in the hope that there will be demand may have worked when it was closer to a monopoly.
Intel was Silicon Valley's dominant chipmaker in the 2000s. But it has lost ground to AI king Nvidia, Samsung, and several Taiwanese and American players over the years, missing out on skyrocketing artificial intelligence demand. Companies like Microsoft and Google have been designing their own chips, further limiting Intel's market.
Intel's share price has dropped almost 50% this year as it has faced multiple challenges, including billions in losses, sweeping layoffs, and buyouts.
Chandrasekaran and Intel's interim co-CEO David Zinsner, who also participated in Wednesday's fireside talk, said that the company needs to be more mindful of capital spending and operating expenses.
"We're going line by line through this stuff and he's challenging everything and we're picking off things," Zinsner said of Chandrasekaran's strategy. "You've got to absolutely think about every dollar going to capital and scrutinizing it for sure."
The company said in its most recent annual report that it expects continued high capital expenditures "for the next several years" amid an expansion. Intel spent $25.8 billion on capital expenditures last year, up from $18.7 billion two years ago.
On Wednesday, the execs also said that Intel would stick to its current financial forecast and that they were not worried about the impact of the incoming Trump administration.
The company is set to get a $7.9 billion CHIPS Act grant, which is mostly awarded in tax credits, as part of a government program to boost the American semiconductor industry. The Commerce Department told The New York Times that Intel was receiving less than the $8.5 billion originally promised because it also received a separate grant of $3 billion to produce chips for the military.
Trump's tariff threats are not publicly ruffling the Intel executives.
"We have good geographic dispersion of our factories. We can move things around based on what we need," Zinsner said.
Bloomberg and Reuters reported Wednesday that the chipmaker is considering at least two people to replace Gelsinger, who abruptly retired on Sunday after clashing with Intel's board over turnaround plans. Candidates include Lip-Bu Tan, a former Intel board member, and Matt Murphy, the CEO of Marvell Technology.
Intel is considering two people for the position of its new CEO, Bloomberg and Reuters reported.
Justin Sullivan/Getty Images
Intel is reportedly considering Lip-Bu Tan and Matt Murphy for CEO after Pat Gelsinger's exit.
Gelsinger's departure follows Intel's struggles in the global chip market and stock decline.
Murphy leads Marvell, while Tan is a former Intel board member.
The contest to become Intel's new CEO is on— and two possible candidates' names have already leaked.
The American chipmaker is considering at least two people from outside the company to replace former CEO Pat Gelsinger, who abruptly retired on Sunday. Candidates include former board member Lip-Bu Tan and Marvell Technology CEO Matt Murphy, Bloomberg and Reuters reported Wednesday, citing people familiar with the matter.
After a clash over Gelsinger's plan to gain ground against rival chipmaker Nvidia, Intel's board gave the CEO the option to retire or step down, Bloomberg reported. Gelsinger, who joined the role three years back, has been temporarily replaced by co-CEOs: David Zinsner, who has been Intel's chief financial officer for nearly three years, and Michelle Johnston Holthaus, the new CEO of product.
His departure follows Intel's yearlong struggle to keep up with the global chip race. Intel has seen its share price drop almost 50% this year as it has faced multiple challenges, including billions in losses, sweeping layoffs, and buyouts.
Gelsinger's plans to revitalize the company included ambitions to build more factories in the US and Europe to scale its production capacity. He also wanted the company to designits own line of AI chips, named Gaudi, to take on Nvidia.
However, these efforts have proven expensive and have produced poor results. Last month, Gelsinger said the company was set to miss its target of $500 million in 2024 sales for Gaudi 3 due to software-related issues.
Cadence Design CEO Lip-Bu Tan is reportedly one of the people being considered to become Intel's CEO.
Dibyanshu Sarkar for AFP via Getty Images
One board member and one outsider
The two CEO contenders reported so far have strong chipmaking backgrounds.
Semiconductor veteran Tan served on Intel's board between 2022 and this year, where he was on the mergers and acquisitions committee. He left the board in August, citing "demands on his time."
Tan is currently the chairman of Walden International, a venture capital firm. His prior board seats include SoftBank Group and Hewlett Packard Enterprise.
Murphy, meanwhile, does not have a public prior connection to Intel. He is the CEO of Marvell, an American semiconductor manufacturer that produces chips for data centers and service providers. He worked in sales and marketing for circuits producer Analog Devices for over two decades before joining Marvell and has served on the boards of eBay and the Global Semiconductor Alliance.
Marvell gained over 10% in after-hours trading on Tuesday after forecasting fourth-quarter revenue above estimates as it benefits from strong artificial intelligence chip demand. Its stock is up 59% this year.
"As the chairman and CEO of this company, I'm 100% focused on Marvell," Murphy, who has been in the position for eight years, said on Tuesday in an earnings call, when asked about being offered other opportunities.
Marvell has an $83 billion market capitalization and about 6,500 employees, as of 2024. Intel has a $97 billion market cap and about 131,000 employees, according to its website.
Representatives of Intel, Murphy, and Tan did not respond to requests sent outside business hours.
Former Intel CEO Pat Gelsinger holding up a chip at a US Senate hearing.
Getty
Intel's CEO departure reignited debate on splitting its factories from the company.
Intel's fabs are costly, but they're also considered vital for US national security.
CHIPS Act funding requires Intel to maintain majority control of its foundry.
One central question has been hanging over Intel for months: Should the 56-year-old Silicon Valley legend separate its chip factories, or fabs, from the rest of the company?
Intel's departing CEO, Pat Gelsinger, has opposed that strategy. As a longtime champion of the company's chip manufacturing efforts, he was reluctant to split it.
The company has taken some steps to look into this strategy. Bloomberg reported in August that Intel had hired bankers to help consider several options, including splitting off the fabs from the rest of Intel. The company also announced in September that it would establish its Foundry business as a separate subsidiary within the company.
Gelsinger's departure from the company, announced Monday, has reopened the question, although the calculus is more complicated than simple dollars and cents.
Splitting the fabs from the rest of its business could help Intel improve its balance sheet. It likely won't be easy since Intel was awarded $7.9 billion in CHIPS and Science Act funding, and it's required to maintain majority control of its foundries.
Intel declined to comment for this story.
A breakup could make Intel more competitive
Politically, fabs are important to Intel's place in the American economy and allow the US to reduce dependence on foreign manufacturers. At the same time, they drag down the company's balance sheet. Intel's foundry, the line of business that manufactures chips, has posted losses for years.
Fabs are immensely hard work. They're expensive to build and operate, and they require a level of precision beyond most other types of manufacturing.
Intel could benefit from a split, and the company maintains meaningful market share in its computing and traditional (not AI) data center businesses. Amid the broader CEO search, Intel also elevated executive Michelle Johnston Holthaus to CEO of Intel Products and the company's co-CEO. Analysts said this could better set up a split.
Regardless, analysts said finding new leadership for the fabs will be challenging.
"The choice for any new CEO would seem to center on what to do with the fabs," Bernstein analysts wrote in a note to investors after the announcement of Gelsinger's departure.
On one hand, the fabs are "deadweight" for Intel, the Bernstein analysts wrote. On the other hand, "scrapping them would also be fraught with difficulties around the product road map, outsourcing strategy, CHIPS Act and political navigation, etc. There don't seem to be any easy answers here, so whoever winds up filling the slot looks in for a tough ride," the analysts continued.
Intel's competitors and contemporaries are avoiding the hassle of owning and operating a fab. The world's leading chip design firm, Nvidia, outsources all its manufacturing. Its runner-up, AMD, experienced similar woes when it owned fabs, eventually spinning them out in 2009.
Intel has also outsourced some chip manufacturing to rival TSMC in recent years — which sends a negative signal to the market about its own fabs.
Intel is getting CHIPS Act funding
Ownership of the fabs and CHIPS Act funding are highly intertwined. Intel must retain majority control of the foundry to continue receiving CHIPS Act funding and benefits, a November regulatory filing said.
Intel could separate its foundry business while maintaining majority control, said Dan Newman, CEO of The Futurum Group. Still, the CHIPS Act remains key to Intel's future.
"If you add it all up, it equates to roughly $40 billion in loans, tax exemptions, and grants — so quite significant," said Logan Purk, a senior research analyst at Edward Jones.
"Only a small slice of the commitment has come, though," he continued.
Intel's fabs need more customers
Intel is attempting to move beyond manufacturing its own chips to becoming a contract manufacturer. Amazon has already signed on as a customer. Though bringing in more manufacturing customers could mean more revenue, it first requires more investment.
There's a more ephemeral reason Intel might want separation between its Foundry and its chip design businesses, too. Foundries regularly deal with many competing clients.
"One of the big concerns for the fabless designers is any sort of information leakage," Newman said.
"The products department competes with many potential clients of the foundry. You want separation," he added.
It was once rumored that a third party might buy Intel. Analysts have balked at the prospect for political and financial reasons, particularly since running the fabs is a major challenge.
Turnover at the top of the company isn't stopping Intel from launching new products: Today the company is announcing the first of its next-generation B-series Intel Arc GPUs, the Arc B580 and Arc B570.
Both are decidedly midrange graphics cards that will compete with the likes of Nvidia's GeForce RTX 4060 and AMD's RX 7600 series, but Intel is pricing them competitively: $249 for a B580 with 12GB of RAM and $219 for a B570 with 10GB of RAM. The B580 launches on December 13, while the B570 won't be available until January 16.
The two cards are Intel's first dedicated GPUs based on its next-generation "Battlemage" architecture, a successor to the "Alchemist" architecture used in the A-series cards. Intel's Core Ultra 200 laptop processors were its first products to ship with Battlemage, though they used an integrated version with fewer of Intel's Xe cores and no dedicated memory. Both B-series GPUs use silicon manufactured on a 5 nm TSMC process, an upgrade from the 6 nm process used for the A-series; as of this writing, no integrated or dedicated Arc GPUs have been manufactured by one of Intel's factories.
Pat Gelsinger is leaving Intel at a moment when its problems have mounted.
I-HWA CHENG/ Getty Images
Pat Gelsinger's successor has big problems to pick up.
The departing Intel CEO has struggled with a turnaround and left the company behind on AI.
Intel also faces an uphill battle in its bid to outdo its industry rival TSMC.
Intel's announcement that Pat Gelsinger is retiring has thrown the storied chip firm's future into deep uncertainty. Its interim leaders and its next CEO must pick up the pieces of a turnaround plan designed to fix a business in turmoil, play catch-up in a lucrative AI race, and navigate Donald Trump's second term.
The mission assigned to Gelsinger when he took over as CEO in 2021 was to restore the then-52-year-old company to relevancy. Its business of designing and manufacturing chips — once industry-leading — was struggling. It had to contend with Big Tech customers pushing forward with their own designs, and with production setbacks from manufacturing woes.
Now the challenges are even greater. It has failed to capitalize on the generative-AI boom that has enriched rivals like Nvidia and TSMC. It is also struggling to make the case that it's a national champion of US industry as chipmaking becomes increasingly critical to the nation's future prosperity.
In October, Intel announced a net loss of $16.6 billion in its third quarter, adding to a loss in its second quarter. The company announced it would suspend its dividend and reduce its head count by 15%. The market has not reacted kindly. The chip giant has lost half its value since the start of the year, sinking to a market capitalization of about $103 billion.
After Gelsinger's exit, which Bloomberg reported followed a clash with the board, it's on Intel's interim co-CEOs — David Zinsner and Michelle Johnston Holthaus — and its future leader to overcome these problems.
Closing the AI gap
In 2006, Intel's CEO at the time, Paul Otellini, famously turned down an offer from Steve Jobs to make chips for the iPhone. Intel's move to shun the smartphone market has been replayed in the AI boom.
"It hung on to PCs for too long and ignored what Nvidia was doing," said Peter Cohan, an associate professor of management practice at Babson College. "By the time Intel began to work on AI chips, it was too late, and the company had basically no market share."
Though Intel has tried to play catch-up, it has struggled to deliver. Analysts and researchers pointed to a few reasons.
Hamish Low, a research analyst at Enders Analysis, said Intel had issues during Gelsinger's tenure getting operations ready for the AI boom while dealing with the internal challenges of separating its foundry division from its design business.
"This long, drawn-out corporate process of trying to get your own house in order, when that's your focus, clearly generative AI just skipped right by," Low told Business Insider.
He added that Intel was long known as "the x86 CPU company," referring to its architecture for more general computer chips. The AI world runs on chips known as GPUs loaded into servers, so trying to shift focus while restructuring the business proved tough.
"When it suddenly is GPUs and accelerated computers, it was always going to be a tough challenge to pivot into doing those kinds of server GPU chips," he said.
Intel's AI chips have struggled to make ground on Nvidia, the market leader.
Justin Sullivan/Getty Images
Intel has felt the pains of this pivot. Its line of AI chips, known as Gaudi, has paled in comparison with offerings from competitors like Nvidia. In an October earnings call, Gelsinger said the company would "not achieve our target of $500 million in revenue for Gaudi in 2024."
"They're in this awkward position where their server-side chips are just too subscale to ever really gain meaningful market share," Low said. "It's hard to see who the real customers for those would be."
Daniel Newman, the CEO of the research firm The Futurum Group, argued that Intel struggled because it didn't "count on the democratization of silicon." Companies like Microsoft and Google have been designing their own chips, further limiting Intel's market.
"They all went down the path of making their own investments and bets on silicon, so what was left was this second-tier enterprise market," Newman told BI. "If you look at the enterprise market, they're not buying a lot of AI silicon yet."
Making the case as a national champion
The other big challenge facing Intel's next leaders is proving that the company can be a national champion of US chipmaking. That won't be straightforward.
Doing so would require strengthening its fab-manufacturing business. "Standing up a successful fab is not an overnight thing," Newman said. "This is a multiyear process."
A lot of the challenge, he said, is that success would require "quite a bit of customer acquisition" from those who have seemed reluctant to shift high-volume production to Intel. As it stands, Intel is its own biggest customer for chip manufacturing.
That's because everyone else largely turns to the Taiwanese giant TSMC, which has grown by more than 83% this year, hitting a market capitalization of $1 trillion. Newman acknowledged that it's unclear whether this is because TSMC is technologically superior. He sees a new Intel process called 18A as being competitive, following news in September that Amazon Web Services was adopting it for a particular chip.
What's more likely, he said, is that TSMC's customers think, "TSMC's not broken, why fix it?" If Intel wants to get serious about building a leading manufacturing business, it'll need to find a way to take on TSMC.
Donald Trump has said tariffs could motivate chipmakers to invest in the US.
The president-elect has emphasized a protectionist policy. Given the importance of chipmaking to US industry and national security, he could look to throw weight behind Intel.
How that might happen is unclear. Trump has criticized the CHIPS Act, which is set to give Intel $7.9 billion in grants to boost its domestic manufacturing capabilities. Trump has said he'd prefer tariffs as a tool to incentivize chip manufacturing on US soil.
In September, Intel announced plans to spin off its manufacturing unit into its own subsidiary. But not everyone is convinced these moves will be enough.
Cohan told BI he thinks "it is highly unlikely that Intel can be more successful than TSMC in making chips" without significant support from the US government.
"That company lacks the capital to do that on its own, and its knowledge of how to make Nvidia chips is way behind TSMC's," he said. "Why would Nvidia even choose to give up its relationship with TSMC for a less successful rival?"
Intel’s newly departed CEO Pat Gelsinger could be walking away with more than $10 million in severance pay. As per a filing with the Securities and Exchange Commission (SEC) today, Intel and Gelsinger entered into a “retirement and separation agreement” which will entitle the former CEO to a payment equal to 18 months of his […]
Intel CEO Pat Gelsinger delivers a speech at Taipei Nangang Exhibition Center during Computex 2024, in Taipei on June 4, 2024.
I-Hwa CHENG / AFP
Intel CEO Pat Gelsinger is out of the top spot after a challenging 4-year tenure.
The company's interim co-CEOs addressed the workforce Monday morning in an all-hands meeting.
One Intel employee described the responses to questions as "vague" and the tone of the meeting as "damage control".
On Monday morning, Intel employees joined an all-hands meeting after receiving an email invite at 5 a.m. PT.
Accompanying the invite was the news that the company's CEO Pat Gelsinger had stepped down as of Sunday, and would be temporarily replaced by co-CEOs David Zinsner, Intel's chief financial officer for nearly three years, and Michelle Johnston Holthaus, the new CEO of product.
Gelsinger's move came without warning. He isn't staying on to transition out slowly or help with the search for his replacement. Come 9 a.m. the pair of fresh co-CEOs were bombarded with questions.
Why did Gelsinger leave so suddenly? What kind of CEO is Intel trying to get now? How can employees trust leadership after repeated missteps?, employees asked.
The man at the center of the conversation was not there. Being CEO of Intel was Pat Gelsinger's dream since he joined the company as a teenager in 1979. He achieved it improbably after being ousted once already.
"He was the prodigal son returning," described Alvin Nguyen, senior analyst at Forrester. Gelsinger returned a savior, but now he's retiring at 63 and Intel is far from saved. Multiple outlets reported Monday that Gelsinger's departure is the result of board rancor, with Bloomberg reporting that the CEO was given the choice to retire or be removed from the job.
Gelsinger's departure was a "personal decision", executives repeated in the all-hands, according to a current employee in attendance.
Intel's interim leadership brings deep knowledge of the company's finances, products, and customers.
Zisner has overseen the recent cost-cutting effort, and Holthaus has been steeped in Intel for nearly 20 years. But no one at the top has the technical expertise of Gelsinger, which Intel employees pointed out in their questions. Yet despite his technical prowess as Intel's first chief technology officer, Intel remains in critical condition.
The leaders emphasized that the company goals would not change: employees would improve efficiency and, reduce costs, and the company would need to execute better with products and with the crucial 18A process.
Holthaus told employees on the call that her leadership style is direct and transparent, according to the employee in attendance. She reminded them that she has worked at Intel for many years.
Intel declined to comment, but a spokesperson pointed to Gelsinger's departure press release.
Contending with Intel's many misses
Intel has more than 65% of the market for traditional PCs and 85% of the server market, according to Edward Jones. Yet critical missteps plague the company. Zisner and Holthaus likely can't wait for an executive search to conclude to address them.
Supporting the passage of the CHIPS Act and obtaining its promised funding has been a major focus of Gelsinger's nearly 4-year term as CEO. However, the funding is contingent upon hitting execution benchmarks, with which the company has struggled.
Last week, the Department of Commerce finalized its direct funding for Intel under the CHIPS Act, totaling $7.865 billion. Said funding fell short of the original amount of $8.5 billion announced.
"While we have made significant progress in regaining manufacturing competitiveness and building the capabilities to be a world-class foundry, we know that we have much more work to do at the company and are committed to restoring investor confidence," said Frank Yeary, now Intel's interim board executive chair, said in a statement.
Intel's overall fall from grace is most apparent in the context of the rise in the importance of accelerated computing and AI.
In 2021, when Gelsinger took over as CEO, shares of Nvidia were trading below $30. The GPU designer's recent rise to one of the most valuable companies in the world has put a spotlight on Intel's relative absence from the accelerated computing race that Nvidia has come to dominate. Median pay at Intel has remained stagnant the last five years compared to other competitors as employee cuts continue.
Gelsinger said last month that the company would miss its target of $500 million in sales this year of its AI chip, Gaudi 3. But analysts told Business Insider that 18A, the company's most advanced manufacturing node, is actually more important to Intel's resurgence than making a splash in AI.
"Intel has ostensibly 'bet' the company on 18A for salvation," Bernstein analysts wrote.
The costs of bringing this node online are likely to increase further, and it "still to get any external validation from large fabless customers," according to Bank of America analyst Vivek Arya. But this expensive work is essential to bring Intel back to the cutting edge and make it an attractive partner for bleeding-edge chip designers like Nvidia.
"The importance of bringing manufacturing back in-house can't be overstated," Futurum Group CEO Daniel Newman told BI. The fate of the company, and the legacy of Gelsinger rides on it.
"The cornerstone of Pat's tenure as CEO was built upon Intel achieving process leadership or at least parity and if they cannot execute with 18A, then it was all for naught," Logan Purk, senior research analyst at Edward Jones, told BI. Given slow-moving technological progress and cost-cutting, and fast-moving competitors, Intel's next CEO may be inheriting a harder job than Gelsinger did.
"It was a tough situation when Pat showed up, and things look much worse now," Bernstein analysts wrote in a note to investors.
No one has been a closer witness to this roller coaster than Intel employees, who have seen multiple waves of layoffs and buyouts.
Monday's meeting had the distinct flavor of "damage control", according to the employee.
Intel shares were down 60% Monday, compared to the day Gelsinger took the CEO job. However, shares jumped slightly upon Monday's announcement of Gelsinger's retirement.
Got a tip? Contact this reporter at [email protected] or use the secure messaging app Signal with the username hliwrites.99.
Have a tip or an insight to share? Contact Emma at [email protected] or use the secure messaging app Signal: 443-333-9088
In a surprise move, Intel CEO Pat Gelsinger has stepped down as head of the company after less than four years, as reported by Reuters and other outlets. The change caps a chaotic year for Intel, which is poised to report its first annual financial loss since 1986 and announced layoffs of at least 15,000 employees this year as it attempted to cut costs.
Intel CFO David Zinsner and Client Computing Group head Michelle Johnston Holthaus will be sharing the title of interim CEO while the company's board of directors searches for a new CEO. Gelsinger has also stepped down from his seat on the board.
