Pat Gelsinger’s turbulent run as CEO of Intel came to end this week after the company announced that he is retiring and stepping down from the board of directors.
The insider story is that Intel’s board members lost confidence in Gelsinger’s ambitious turnaround plan and gave the 63-year old the option to retire or be removed, according to Reuters.
In August, Gelsinger announced a $10 billion cost reduction plan, which involved asset sales and 15% workforce reduction. Intel's stock price plummeted by nearly 60% since Gelsinger took over in 2021. In October, the company reported its biggest ever quarterly loss of $16.6 billion, while its market cap fell below $100 billion for the first time since 2012.
Intel will be led by two interim CEOs David Zinsner and Michelle Johnston until a permanent replacement is appointed. Zinsner is executive vice president and chief financial officer, while Holthaus was recently appointed as the CEO of Intel Products.
Gelsinger joined Intel in 1979 and was appointed as its first chief technology officer in 2000. He left the chipmaker in 2009 to join Dell EMC as COO and was appointed as CEO of VMWare in 2012, a position he held until 2021 before returning to Intel as CEO.
“Today is, of course, bittersweet as this company has been my life for the bulk of my working career. 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,” said Gelsinger in a statement.
Though Intel remains the market leader in the x86 PC chip segment with 62% share, weakened demand for PCs has also led to slump in demand for Intel chips, which are used in most laptops and desktops PCs. The decline in revenue and profitability has been exacerbated by rival AMD gaining significant market share under CEO Lisa Su.
AMD’s overall revenue during the second quarter of 2024 grew 9% to $5.8 billion while its data center business registered a record 115% growth in Q2 2024.
Intel has also struggled to keep pace with AMD and Nvidia in adapting to the shifting dynamics in favour of AI chips. In June, Nvidia surpassed Apple and Microsoft to become the world's most valuable company, worth $3.34 trillion, on the back of high demand for its Hopper H100 AI chip, which is especially designed to enable faster training of LLMs such as ChatGPT.
Intel’s reputation also took a hit this year after a bug affecting its 13th and 14th generation Raptor Lake chips caused widespread system crashes.
Last week, Intel received $7.86 billion in direct funding from the US government under the US Chips and Science Act to accelerate establishment of its chip manufacturing plants in Arizona, New Mexico, Ohio and Oregon. Intel is also setting up a chip plant in Germany as part of its expansion into the foundry business.
In 2022, Intel opened its foundry business to manufacture chips for fab-less chip companies such as Qualcomm and MediaTek. According to Counterpoint Research, the foundry business is mainly dominated by TSMC, which accounted for 64% of the market share in Q3 2024.
In August, Intel CFO David Zinsner said the decline was due to headwinds from the accelerated ramp up of AI PC products, which affected the company’s gross margin. He also attributed the slump to unused capacity of chip manufacturing facilities, resulting in huge operating losses.
Image credit: Intel