Intel CEO Pat Gelsinger was forced to resign after the board lost confidence in his plans to turn around the iconic chipmaker, adding to turmoil at one of the technology industry’s pioneers.
The conflict came to a head last week when Gelsinger met with the board to discuss the company’s progress in regaining market share and closing the gap with Nvidia (), according to sources familiar with the matter. He was given the option of retiring or being fired and chose to announce the end of his career at Intel, said the sources, who declined to be identified discussing a process that has not been made public.
Intel CFO David Zinsner and Michelle Johnston Holthaus are serving as interim co-CEOs while the board searches for a replacement for Gelsinger, the company said in a statement. Frank Yeary, Intel’s independent chairman, will serve as interim executive chairman.
Continues after advertising
Gelsinger, 63, was hailed as the chip giant’s savior, declaring his love for the company and his determination to restore it to its pre-eminence in the semiconductor industry it helped define. The executive started working at Intel when he was a teenager, but left in 2009 and became CEO of VMware. Upon returning to Intel in 2021, he promised to regain the manufacturer’s leadership in manufacturing — something it had lost to rivals like TSMC.
Intel shares rose more than 3% in New York this Monday (2), after the announcement. However, they are still down more than 50% this year.
Gelsinger sought to take Intel beyond its traditional strengths in processors for personal computers and servers by expanding chip production to other companies — something it had never done before, putting it in direct competition with TSMC and Samsung Electronics. As part of his turnaround strategy, Gelsinger presented an expensive plan to expand Intel’s network of factories, including building a massive new complex in Ohio, a project for which the company received federal “Chip Act” aid.
Continues after advertising
The executive said last month that he had “a lot of energy and passion”, still had the support of the board and was making progress. He expressed determination to keep the company together in the face of reports it was being targeted by takeover proposals and said it was pressing ahead with its plans. Intel’s board held a meeting last week.
“Today is, of course, a bittersweet day as this company has been my life for most of my career,” Gelsinger said in a statement. “It has been a challenging year for all of us as we have made difficult but necessary decisions to position Intel for current market dynamics.”
One of the biggest challenges Intel faced was the industry shift in the form of artificial intelligence computing. Nvidia, which has turned its graphics chips into a key component for data centers, dominates this area and has captured tens of billions of dollars that would have previously gone to Intel’s data center division. The once niche rival fighting in Intel’s shadow has become the world’s most valuable publicly traded company, and Intel’s attempts to enter that market with new products have yet to take off.
Continues after advertising
“We know we have much more work to do at the company and we are committed to restoring investor confidence,” Yeary said in the company statement. “As a board, we know we must put our product group at the center of everything we do. Our customers demand this from us, and we will deliver for them.”
Gelsinger’s departure could lead to more dramatic strategic changes.
“This move opens the door to a new strategy, which we have been championing for some time,” said Chris Caso of Wolfe Research. “While Gelsinger has been generally successful in advancing Intel’s process timeline, we do not believe Intel has the scale to pursue cutting-edge manufacturing alone, given Intel’s absence in the AI space.”
Continues after advertising
Intel’s turmoil also represents a setback for the Biden administration’s ambitions to rebuild the U.S. semiconductor industry. Intel’s outgoing CEO was the biggest supporter of the “Chip Act” and promised to build factories in the US to help support the goal of bringing manufacturing of critical components back to the country. In the end, the administration signed a final agreement to give Intel nearly $7.9 billion in federal subsidies, the largest direct subsidy in a program. The deal was smaller than a previous proposal, but allowed Intel to begin receiving funds as it reached negotiated milestones on projects in four US states.
President-elect Donald Trump criticized the 2022 “Chip Act,” which set aside $39 billion in subsidies, $75 billion in loans and loan guarantees, and 25% tax credits to revitalize American chipmaking. He called the chip program “so bad,” and fellow Republicans threatened to revise — or even repeal — the legislation.
Intel’s challenges became evident during a disastrous earnings report on Aug. 1, when the company posted a surprise loss and a grim sales forecast. Intel also suspended its dividend, which it had paid since 1992. To control costs, Intel announced that it is cutting more than 15% of its workforce, which numbered about 110,000 employees.
Holthaus, the interim co-CEO, will also take on a new role as CEO of the company’s product group, where she will oversee client computing, data center, and AI and networking operations. Holthaus began her career at Intel nearly three decades ago and previously served as executive vice president and general manager of client computing.
© 2024 Bloomberg L.P.
