Intel boss in surprise exit as turnaround strategy fails to deliver

Intel’s chief executive has abruptly retired from the American chipmaker as it struggles to implement a turnaround plan and compete with rivals including Nvidia.
Pat Gelsinger, 63, announced his departure on Monday, halfway through an ambitious four-year plan to restore the company’s lead in the semiconductor industry. His surprise exit followed tension with board members over the company’s progress.
Intel, founded in 1968 and known for making chips for PCs and server processors, was the leading chipmaker in America for decades but has fallen behind rivals including Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC) in the race to make the chips which power generative artificial intelligence.
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Gelsinger, who started his career at Intel in 1979 as a quality control technician, had promised to reassert its lead when he returned to run the company in 2021 after nearly a decade at VMware, a cloud computing company.
Under his leadership Intel embarked on the costly construction of new factories in Ohio with the support of US government subsidies to reduce America’s reliance on Asian semiconductor manufacturing hubs. In August Gelsinger announced about 17,500 job cuts, or 15 per cent of the workforce, as part of a $10 billion cost saving plan. The company has started to make chips for other companies for the first time, and announced a multibillion-dollar deal with Amazon in September.
Gelsinger said last month that he had the support of the board and a “lot of energy and passion” to complete his turnaround strategy following reports of takeover interest in the company.
As recently as 2020, Intel was the world’s largest semiconductor company, with $77.9 billion in annual revenue, compared with the chip designer Nvidia’s $16.7 billion and the chipmaker TSMC’s $45.5 billion.
However, Intel was subsequently overtaken by competitors as it focused on chip technology known as central processing units — CPUs — and missed out on the rise of graphics processing units — GPUs — for artificial intelligence.
Intel has also failed to gain market dominance for chip manufacturing with its foundry business, launched in 2010. Instead, TSMC and Samsung Electronics Co have taken large shares of the market. Last year, amid the AI boom, Intel reported annual revenue of $54.2 billion, behind Nvidia’s $60.9 billion and TSMC’s $69.3 billion.
Intel’s shares have fallen almost 50 per cent since the start of the year, compared with Nvidia’s 188 per cent rise and a gain of 90 per cent at TSMC. Intel’s market value is more than 30 times smaller than Nvidia’s. Last month Intel was replaced by Nvidia on the blue-chip Dow Jones industrial average index.
In a statement released on Monday, Frank Yeary, independent chairman of Intel, said: “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.”
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Gelsinger has been replaced on an interim basis by David Zinsner, Intel’s chief financial officer, and Michelle Johnston Holthaus, a senior executive, while the board launches a search for a permanent new chief executive.
Gelsinger said that leading Intel “has been the honour of my lifetime”.
He added: “Today is, of course, bittersweet as this company has been my life for the bulk of my working career. I can look back with pride at all that we have accomplished together. It has been a challenging year for all of us as we have made tough but necessary decisions to position Intel for the current market dynamics.”
Hans Mosesmann, an analyst at Rosenblatt Securities, said: “At the end of the day, you need leading-edge products, innovation and execution, none of which we saw during Pat Gelsinger’s reign.”
Intel’s shares advanced $0.18, or 0.7 per cent, to $24.22 in afternoon trading in New York on Monday.