TLDR:
- Intel CEO Pat Gelsinger’s sudden departure opens possibilities for new strategic deals and restructuring
- The company’s stock lost 61% under Gelsinger’s leadership since early 2021
- Intel’s foundry business lost over $11 billion in first nine months of 2024
- The company is behind schedule on its Intel 18A chip production process
- Board considering various options including private equity deals and potential company split
Intel’s Chief Executive Officer Pat Gelsinger is stepping down from his position, opening the door to potential strategic changes at the struggling chipmaker. The departure comes as Intel faces mounting challenges in its manufacturing operations and declining market share in key segments.
The company’s board of directors announced the immediate leadership change, with current Chief Financial Officer David Zinsner and PC division head Michelle Johnston Holthaus serving as interim co-CEOs. The move follows a difficult period for Intel, during which its stock price dropped 61% since Gelsinger took the helm in early 2021.
Intel’s foundry business, which manufactures chips for other companies, has been a particular source of concern. The division lost more than $11 billion in the first nine months of 2024, nearly double the losses from the same period last year. This performance has raised questions about the viability of Intel’s strategy to compete with established foundry leader Taiwan Semiconductor Manufacturing Co.
The timing of Gelsinger’s exit has drawn attention as it comes just months before the planned launch of Intel 18A, a crucial manufacturing process that represents the final phase of the company’s ambitious technological catch-up plan. The company had previously announced that chips using this process would begin shipping in mid-2024.
During his tenure, Gelsinger had resisted calls to break up the company, instead focusing on rebuilding Intel’s technological capabilities and expanding its contract manufacturing services. However, the board has been exploring various options in recent months, including potential private equity transactions and the possibility of separating the factory operations from the chip design business.
Market analysts note that Intel’s data center revenue has fallen to half of what it generated in 2020, largely due to competition from Advanced Micro Devices in server CPU chips and NVIDIA’s dominance in AI-focused GPU chips. Intel’s own Gaudi GPU chip has underperformed, with the company acknowledging it will miss its $500 million revenue target for the year.
Financial firms Morgan Stanley and Goldman Sachs have been advising Intel on potential strategic options. Previous discussions have included interest from Qualcomm in a potential transaction, though these talks did not advance far. Broadcom had also considered pursuing an Intel deal but focused instead on integrating its VMware acquisition.
The company has already taken steps to reduce costs, including cutting approximately 15,000 jobs and suspending its long-standing dividend. Construction of new plants in Poland and Germany has been paused as part of these cost-saving measures.
Intel’s Altera unit, acquired in 2015 for $17 billion, could be a potential target for divestiture. The company has held talks about selling portions of this business to financial investors, and Lattice Semiconductor has expressed interest in acquiring the entire unit.
The company still maintains an 88% stake in Mobileye, its self-driving technology subsidiary, which could be another avenue for raising capital through a partial sale or public market offering.
However, any major strategic moves face complications. The $7.86 billion in U.S. government grants Intel is receiving through the CHIPS Act requires the company to maintain at least 50% ownership of its manufacturing facilities. Additionally, regulatory hurdles would likely challenge any large-scale merger attempts, particularly from foreign buyers.
The board has begun searching for a permanent CEO while maintaining that the company’s technological development plans remain on track.
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