Gelsinger exit exposes how far behind Intel has fallen in AI race
The departure of Pat Gelsinger, CEO at Intel, from the company in what can only be described as “a very sudden retirement” appears to signal the end of an era.
Why it has happened at this point in time is all dependent on who or what you believe, but there’s no doubt that the former chip giant has been struggling to turn its fortunes around in recent times and has lost ground to rivals. It has failed to stem Nvidia’s rapid ascent to dominance in the AI chip space and appears to have done little to suggest it will do anything to turn that tide anytime soon.
For those of us who have been writing about the tech industry for a few years, it is hard to reconcile the Intel of today with the dominant CPU supplier of the 1990s and 2000s, built on the foundations of the 486 processor, which Gelsinger was the lead architect on.
The abruptly retired CEO had a very long history with the company, having started his working career there in 1979 and rising through the ranks to become chief technology officer in 2001. After leaving to become president of EMC in 2009 and then CEO of VMware in 2012, he was called back to Intel as CEO in February 2021.
At the time, it must have seemed like an inspired move. After all, who better to turn the company around than the man who had helped to build it up? If you were going to entrust the restoration of the company to its former glory to someone, surely the person who helped steer it to the heady heights of old would be the perfect choice.
But this is no redemption story. Here we are, just under four years later, and Gelsinger has been deposed in what appears to many on the outside, in a swift and brutal manner.
The dominant narrative for why this happened seems to be that whatever he was trying to do, it was taking too long and wasn’t delivering the anticipated results.
According to Reuters, the board lost confidence in his turnaround plan. It quoted Ryan Detrick, chief market strategist for investment advisory firm Carson Group: “New leadership is needed to turn things around and it is safe to say that any of his major strategic decisions are on the chopping board, including the move to focus on being a contract manufacturer.”
Rosenblatt Securities analyst Hans Mosesmann was even more brutal: “At the end of the day, you need leading-edge products, innovation, and execution, none of which we saw during Pat Gelsinger’s reign.”
For his part, Gelsinger described his tenure as CEO of Intel as “the honour of my lifetime” but admitted his retirement was “bittersweet as this company has been my life for the bulk of my working career”.
Here in Ireland, many people may have very similar sentiments. Intel has had a presence here for 35 years and the company has invested over $18 billion in Fab 34, its leading-edge high-volume manufacturing (HVM) facility designed for wafers using the Intel 4 and Intel 3 process technologies in Leixlip.
Gelsinger’s strategy of separating Intel into separate foundry and product businesses could come under the spotlight now and it may have consequences for its plans to build new factories in the US and Europe. Intel has already paused development of a €30 billion fab project in Magdeburg, Germany and a $4.6 billion assembly and test facility in Wroclaw, Poland.
Meanwhile, Intel received $7.86 billion in CHIPS Act subsidies from the US government only a week ago to support development of domestic fabs in Arizona, New Mexico, Ohio and Oregon, in addition to a $3 billion contract for the Secure Enclave programme, designed to expand trusted manufacturing of leading-edge semiconductors for the US government. The company has plans to invest more than $100 billion in the US.
This follows a separate grant of a $6.6 billion award to TSMC a few days earlier, which has plans to invest $65 billion to build three state-of-the-art semiconductor fabrication plants in Arizona.
While the Republican House Speaker Mike Johnson claimed the Republican party “probably will” try to repeal the Act in November and Trump described the act as “so bad” and falsely claimed “the good companies” were not building fabs in the country, it seems likely to remain relatively unscathed. The granting of subsidies appears designed to preempt any moves Trump and the Republicans might make to try and rein it in.
All of which means that, for now, the Irish operation is probably the least of Intel’s worries.
Gelsinger has been unceremoniously bundled off the stage. It remains to be seen whether whoever takes his place ends up with the lead role in a tragedy or an uplifting, feelgood, inspirational, triumphant, comeback story.
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