Categories: Techno

Intel Crisis: 6 Reasons CEO Pat Gelsinger Is Leaving

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© Walden Kirsch/Intel Corporation

It’s a small earthquake in the world of chips. On December 2, CEO Pat Gelsinger suddenly announced his departure from Intel, which he has led since 2021. A decision that follows particularly eventful months for the fallen semiconductor leader, reflecting the alarming situation in which it finds itself.

Because this initiative is not insignificant. Pat Gelsinger’s adventure at Intel began more than four decades ago, when he became an engineer in its ranks. He then rose through the ranks, then accepted the position of CEO at VMWare, which he brilliantly held from 2012 to 2021. With this experience, Gelsinger succeeded Bob Swan in February 2021 to revive Intel, already in difficulty. But nothing went as planned.

Historic losses

Under Pat Gelsinger, Intel's revenue fell 33% to $54 billion in 2023. Its financial results for the third quarter of 2024, from June to September, were simply the worst in the company's history, with an operating loss of $16.6 billion.

Catastrophic performance that is also seen on the stock market. Intel's share price has plummeted by more than 50% since the beginning of the year. The situation is such that the company, which nevertheless dominated the electronic chip sector at the end of the 90s, has lost its place in the Dow Jones Industrial Average. This stock market index, the oldest in the world, tracks the performance of thirty large companies listed on the stock exchange in the United States. It serves as a barometer to assess the general health of the country's economy.

The PC market in free fall

These colossal losses are the result of multiple factors. Among them, the poor health of the PC market, Intel's preferred sector. The company’s chips power about 75% of the world’s laptops.

In 2020 and 2021, the laptop market experienced unprecedented growth as businesses and consumers quickly embraced remote work during the pandemic. Companies stocked up on devices to support their workforces, leading to record sales.

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After this boom, a sharp contraction occurred. In the third quarter of 2023, global notebook shipments declined by 9% year-on-year, continuing a downward trend that saw a drop of nearly 25% since the third quarter of 2021.

This decline was exacerbated by economic uncertainty, which led organizations and consumers to cut back on spending. This dynamic had a strong impact on Intel.

The lag in artificial intelligence

The technology industry has been shaken up by the rise of generative artificial intelligence (AI), popularized by the launch of ChatGPT two years ago. It has completely disrupted demand in the chip market in favor of graphics processing units (GPUs) manufactured by NVIDIA.

They are, in fact, better suited to training AI models and massive calculations, while Intel has historically focused on central processing units (CPUs). Despite significant investments in AI, the manufacturer is lagging behind its rivals. Because its historical competitors like AMD have sensed the vein, multiplying initiatives to meet the needs of businesses.

” The push for AI has been much stronger than I had anticipated “, Pat Gelsinger acknowledged a few months ago, when Intel carried out a major wave of layoffs.

A restructuring plan too slow and too costly

Upon returning to Intel in early 2021, the CEO set out to revitalize the company. His vision included a massive $20 billion investment in new manufacturing facilities, including in Arizona, and a commitment to cutting-edge manufacturing processes. The goal: to restore Intel to its leadership position in the semiconductor industry.

The reality of the company’s performance has been in stark contrast to Pat Gelsinger’s lofty ambitions. Analysts say he has overly optimistic public forecasts that don’t reflect Intel’s true state.

In the red, the CEO announced a new plan in September to cut the company’s expenses. It included staff reductions, the separation of its design and foundry operations, and the suspension of some plans to set up factories abroad. The project was ultimately deemed too slow and costly by the manufacturer's board of directors.

Strained Relations with TSMC

One of Gelsinger's most notable missteps was straining Intel's critical relationship with TSMC, the world's leading foundry maker. He made controversial remarks that questioned Taiwan's geopolitical stability. TSMC responded by removing discounts it had been giving Intel. This miscalculation increased its production costs, thereby harming its competitiveness.

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Teilor Stone

Teilor Stone has been a reporter on the news desk since 2013. Before that she wrote about young adolescence and family dynamics for Styles and was the legal affairs correspondent for the Metro desk. Before joining Thesaxon , Teilor Stone worked as a staff writer at the Village Voice and a freelancer for Newsday, The Wall Street Journal, GQ and Mirabella. To get in touch, contact me through my teilor@nizhtimes.com 1-800-268-7116

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