On 18 March, Intel’s new CEO, Lip-Bu Tan, took over from Pat Gelsinger. Mr Tan previously held the role of CEO at Cadence Design Systems from 2009 to 2021, where he reinvented the company and drove significant shareholder value. Crucially, he also served as a member of Intel’s board from September 2022 to August 2024.
The news has been warmly received on the basis that he’s a relative outsider. Intel has taken an alternative path to its usual policy of recruiting from its internal executive ranks. This is positive, although the same was said of Mr Gelsinger, who had significant experience beyond Intel at VMware before returning to the US chip giant. In reality, Mr Tan’s role on the board means that both individuals stepped into the CEO role with first-hand experience of Intel’s unique culture, balanced with the breadth of experience from external roles.
The scope of the challenge facing Mr Tan is substantial. Intel’s challenges are well known – the need to invest to ensure a return to competitiveness in leading-edge semiconductor manufacturing — a hugely capital-intensive exercise — at the same time as its key product areas suffer from strengthening competition, sales declines (particularly in PC and data centre silicon) and little progress in addressing Nvidia’s AI dominance. Fixing this isn’t straightforward.
Added to this is the challenge of expectation. The positive reception to Mr Tan suggests optimism about the steps that will be taken to ensure immediate impact. In reality, the strategy is unlikely to change much from Mr Gelsinger’s approach, at least in the near term. It may just be the degree of commitment that changes, which itself could be a problem — as I’ll discuss shortly.
Intel has stated that the strategic priority of “reestablishing Intel as a world-class products company and establishing Intel Foundry as a world-class foundry” remains central. This was the strategy under Mr Gelsinger and involved a necessarily bold bet on manufacturing and foundry investment to return Intel to process and manufacturing leadership. This demanded huge capital investment, which Intel committed to. However, it also contended with sales declines for its core product lines.
Mr Tan inherits that same — and now arguably bigger — challenge. This is an acutely difficult task because foundry success requires best-in-class design, leading-edge process technology and manufacturing capacity to compete with the likes of TSMC. This needs vast investment. This must be underpinned by confidence that Intel’s products and foundry customers will ensure fabs are run at capacity. Added to this is a new US administration, which has thrown the Creating Helpful Incentives to Produce Semiconductors and Science Act, or CHIPS Act, and its $50 billion investment into US chip manufacturing into significant doubt. Worse still, it has openly courted alternative approaches to reinvigorate US semiconductor leadership involving Intel’s biggest competitors.
Mr Tan’s resignation from the board and Mr Gelsinger’s subsequent departure suggest the board of directors decided that the direction — and more specifically, the investment level — wasn’t right. However, if manufacturing and foundry are still central under the new leadership, how will the strategy be executed without the level of investment Intel previously committed to? Is it possible to deliver at a lower investment level? Will it take longer or is Intel ultimately targeting different customer requirements?
Mr Gelsinger’s strategy was bold because it had to be. The risk now is that Intel embarks on the same headline strategy with a fraction of the conviction and investment, which leaves it in no man’s land. Intel was explicit under Mr Gelsinger about what was needed to get the manufacturing and foundry business back on track. Intel will have to be just as detailed on what’s changing, what success means and what it’ll take to get there.
CCS Insight will be attending Intel Vision from 31 March, where these questions will be in sharp focus.
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