Intel has announced the resignation of Chief Executive Pat Gelsinger, who stepped down after a board meeting revealed dissatisfaction with the lack of progress on his ambitious turnaround plans. Gelsinger resigned on December 1, less than four years into his tenure, after the board felt that his strategies to restore Intel’s competitive edge in chip manufacturing were not yielding the desired results. The company, once a leading force in Silicon Valley, has significantly fallen behind rivals like Taiwan Semiconductor Manufacturing Co. (TSMC) and Nvidia, the latter of which leads in artificial intelligence chips.
Under Gelsinger's leadership, Intel's market value has diminished drastically, now over 30 times smaller than Nvidia. Despite Gelsinger's assurances to investors and U.S. officials regarding the continuation of his manufacturing initiatives, tangible results from his plans are not expected until next year. Following his departure, shares of Intel rose by 4.1%, although the stock has also lost more than half its value this year and was recently replaced by Nvidia on the Dow Jones Industrial Average.
The board has appointed David Zinsner, the Chief Financial Officer, and Michelle Johnston Holthaus as interim co-CEOs while searching for a new CEO. Frank Yeary, the independent chair of the board, acknowledged the ongoing challenges but expressed commitment to restoring investor confidence. Additionally, Intel’s communications chief, Karen Kahn, is also reportedly planning to leave the company.
Gelsinger's turnaround strategy, announced in July 2021, involved a substantial investment in new factories, including a $20 billion project in Ohio, and aimed to expand Intel's workforce significantly. However, this ambitious spending coincided with a decline in the laptop and PC markets post-pandemic, leading to low gross margins and straining Intel's financial performance. This prompted discussions around layoffs and potential asset sales to mitigate financial issues.
Market analyst Ryan Detrick noted that Gelsinger's tenure was marked by a substantial stock decline of over 60%, suggesting that a change in leadership had become necessary. Critics highlighted Gelsinger's inability to develop a competitive AI chip to rival Nvidia's advancements, which are integral to services like ChatGPT. Gelsinger’s vision for Intel to pivot towards contract manufacturing, termed as becoming a "foundry," has also faced scrutiny, particularly as initial contracts with major clients like Microsoft and Amazon do not cover the volume needed for profitability.
The boardroom tensions escalated, resulting in the exit of Lip-Bu Tan, a board member, due to disagreements over Gelsinger's strategies. Analysts argued that without innovative products and effective execution, Intel would struggle to reclaim its previous stature in the semiconductor industry. The uncertainty surrounding Intel's future and leadership has opened discussions about re-evaluating the direction set under Gelsinger’s administration.
