After a series of setbacks, the company has ousted CEO Bob Swan.
With Intel losing its title as the most valuable semiconductor company to Nvidia and also losing one of its beloved customers, Apple, it is only a matter of time before people question whether Intel can recover from the death of Moore’s Law.
The company has now begun its transition to embracing its engineering roots by ousting CEO Bob Swan. VMware Inc. Chief Pat Gelsinger will be stepping into the leadership role effective February 15.
At age 18, Gelsinger joined Intel and soon got his master’s degree in electrical engineering from Stanford University with the mega-corporation’s help. In turn, he led the company to wide-ranging successes, becoming the lead architect of the widely used 80486 microprocessor, managing the development of 14 chip projects, and becoming Intel’s first chief technology officer. In 2012, Gelsinger left the company to become VMware’s CEO, where he almost doubled the company’s sales and partnered with Amazon and others in cloud computing. Soon, he will be named Intel’s eighth chief executive.
Swan joined Intel back in 2016 as chief financial officer and was given the title of CEO two years later. During those two years, Intel saw a decline in shares by 17 percent, while rival Nvidia’s capitalization soared to about $100 billion higher than Intel’s.
There’s no doubt that Nvidia’s stock has benefited during the pandemic as the leading graphic cards manufacturer in gaming. While many are locked away indoors, they are turning to video games to distract themselves from all the chaos happening outside. Not only that, but many employees have found themselves working away from the office and in dire need of graphics processing units (GPUs), which are used in data centers for cloud storage and cloud computing.
Meanwhile, Intel has been lacking in terms of its engineering innovation since Senior Vice President Jim Keller, who successfully led the product development process and provided strategic platforms for future products, left the company. Intel suffered from product delays and lost market share to the midsize company Advanced Micro Devices (AMD).
Apple also dropped Intel as it started to create its own computer processor, the M1 chip. The tech giant transitioned to using its own processors in Macs after 15 years of sourcing them from Intel, so its workstations run cooler and quieter than before.
Companies like Apple and Google are putting traditional chip producers out of work as they begin to work on more optimized designs with their engineering teams.
“Whereas Intel in the 1990s was an order of magnitude larger than all their customers, now the customer has superior scale over the supplier,” said New York money-manager ARK Investment Management Analyst James Wang in the Wall Street Journal. “As a result, they have more capital and more expertise to take components in-house.”
Intel is also behind some of its rivals, specifically Taiwan Semiconductor Manufacturing Company and South Korea’s Samsung Electronics, in creating the next generation of chips. And in yet another issue, Nvidia has agreed to buy Arm, a growing chip manufacturer that powers most smartphones, in what would be the industry’s biggest acquisition. Apple and Amazon use that technology to design their chips rather than using Intel’s.
Activist hedge fund Third Point, which recently acquired a stake in Intel, has been urging for big changes. Daniel Leob, CEO of Third Point, wrote a letter addressed to Intel Chairman Omar Ishrak, which said that his company should sell off its acquisitions or split its design and manufacturing operations. According to Intel, it did not make the leadership change due to Leob’s comments.
After Intel’s ousting Bob Swan, one of the company’s shortest-tenured CEOs, Gelsinger will have to make tough decisions while competing with Apple, AMD, Nvidia and many others in the chip industry. Intel states that it has made progress in developing its next generation of chips and has delayed the transition to 7 nm chips until at least 2022. Gelsinger will soon need to decide whether the company will outsource chip production for a more flexible design.
As for VMware, its Finance Chief Zane Rowe will step in as interim CEO until the company finds a more permanent replacement.
