Intel CEO resigns before completing struggling chipmaker’s turnaround plan
Pat Gelsinger, Israel supporter and head of one of the largest employers in the country, leaves as it rushes to catch up with rivals, despite layoffs and asset sales
Intel Corporation’s Pat Gelsinger has stepped down as CEO less than four years after taking the helm of the company, handing control to two lieutenants, as the faltering US chipmaking icon searches for a permanent replacement.
Gelsinger, who resigned on December 1, left the company before the completion of an ambitious and costly four-year plan to restore the company’s lead in making the fastest and smallest computer chips, a crown it lost to Taiwan Semiconductor Manufacturing, which makes chips for Intel rivals such as Nvidia.
Under Gelsinger’s watch, Intel, which was founded in 1968 and for decades formed the bedrock of Silicon Valley’s global dominance in chips, has withered, giving Nvidia, the leader in artificial intelligence chips, a market value more than 30 times that of Intel. Back in 2017, Intel bought Israel’s Mobileye for over $15 billion, a transaction that remains the largest exit for an Israeli tech company to date.
In recent weeks, as part of global streamlining measures, Intel, one of the largest employers and exporters in Israel, has been laying off a few hundred employees from its development centers in Haifa, Petah Tikva, and Jerusalem. In June, the US chipmaker halted the expansion of a major factory project in Israel, which was planned to pour an extra $15 billion toward the expansion of its chip manufacturing plant in Kiryat Gat, in the south of the country.
During the ongoing war with the Hamas terror group, which erupted after the October 7, 2023, onslaught, Gelsinger commended the fortitude of Israelis whom he called the “most resilient people on earth,” noting that, despite the fighting, the US semiconductor giant had managed to fulfill all of its commitments to supply chips and develop products coming out of the country.
While Gelsinger has assured both investors and US officials, who are subsidizing Intel’s turnaround, that his manufacturing plans remain on track, the full results will not be known until next year, when the company aims to bring a flagship laptop chip back into its own factories.
“While we have made significant progress in regaining manufacturing competitiveness and building the capabilities to be a world-class foundry, we know that we have much more work to do at the company and are committed to restoring investor confidence,” Frank Yeary, independent chair of the board, said in a statement.
Intel stock has lost more than half of its value this year, and was replaced last month by Nvidia on the blue-chip Dow Jones Industrial Average index.
The chip giant named Chief Financial Officer David Zinsner and senior executive Michelle Johnston Holthaus as interim co-chief executive officers, while its board conducted a search for a new CEO. The moves came less than a week after US officials gave $7.86 billion in subsidies to Intel.
Gelsinger announced his turnaround plan in July 2021 and then embarked on a spending spree, starting construction on a $20 billion suite of new factories in Ohio and hiring a larger workforce — at 132,000 — than Intel had ever maintained even during its days as the biggest player in the chip business.
But the spending coincided with a post-pandemic collapse in the market for laptops and PCs, which in turn sank Intel’s gross margins well below historical norms and depressed its stock price, sparking takeover interest in the company.
The spending eventually forced Gelsinger to come up with a menu of layoffs and potential sales and spinouts of assets.
“The stock lost more than 60% under his tenure, so this shouldn’t have come as a very big surprise,” said 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.”
As part of streamlining measures, Intel said in recent weeks that it is shutting down the operations of Israeli cloud computing tech startup Granulate, which it bought back in 2022 for $650 million.
Gelsinger also failed to field an effective AI chip challenger to Nvidia, which began its march toward becoming a $3 trillion company by powering services such as ChatGPT.
“At the end of the day, you need leading-edge products, innovation, and execution, none of which we saw during Pat Gelsinger’s reign,” said Hans Mosesmann, an analyst at Rosenblatt Securities.
Gelsinger’s turnaround plan centered on Intel becoming a major player in contract manufacturing for others, a business model called a “foundry” in the chip industry. Intel has announced a handful of foundry customers, such as Microsoft and Amazon.com, but neither would bring the huge volume of chips to Intel’s factories that would be needed to ensure the factories’ profitability.
The spending spree, coupled with the lack of tangible progress in the company’s foundry, created tension among the board of directors, causing Lip-Bu Tan, a board member, who himself had turned around a faltering firm in the chip industry, to leave over disagreements with Gelsinger’s strategy.
