Intel CEO's sudden retirement signals a major shift in the company's strategy: the prioritization of foundry services has been halted, and products are being re-prioritized

On the evening of December 2nd, Beijing time, Intel Corporation announced the retirement of CEO Pat Gelsinger and his resignation from the board of directors, effective December 1, 2024.

Intel has appointed two senior leaders, David Zinsner and Michelle (MJ) Johnston Holthaus, as interim co-CEOs while the board searches for a new CEO.

To be frank, this is a very sudden personnel change. While there is a possibility that Pat himself proposed retirement, I personally lean towards the belief that the board is more likely the one requesting Pat to "retire."

In the past few months, despite facing significant challenges, Gelsinger was "full of energy" and intended to bring Intel back to its peak through substantial layoffs and restructuring.

As a veteran of Intel for over 40 years, Pat surely hoped to retire after achieving success. However, his sudden retirement today likely indicates that the board has begun to disagree with his strategy.

In February 2021, Intel announced the return of veteran Pat as CEO, succeeding Robert Swan, who had served for less than three years.

Initially, there were high expectations for Pat, but unfortunately, the previous CEOs of Intel left behind too many issues, making it difficult for Pat to have sufficient resources to balance Intel's product and foundry businesses.

Pat's strategic focus was clearly on process technology. This may be related to his background starting from the foundry, giving him a unique connection to chip manufacturing processes. More importantly, he believed that Intel could only regain its glory by reclaiming its process advantages.

Intel's process technology began to lag behind TSMC around 2019. One of the main reasons was the slow introduction of EUV equipment, which is essential for developing cutting-edge semiconductor chips. TSMC started using EUV in its mass production plants in 2019, while Intel only began using it in 2023.

Pat's strategy was to regain Intel's lead in chip process technology and surpass TSMC. To this end, he formulated the IDM2.0 strategy, promoting an aggressive path of "five process nodes in four years" (5N4Y), pouring hundreds of billions of dollars into the process technology field. This strategy has now reached a critical juncture, with Intel's latest semiconductor manufacturing process technology, 18A, expected to enter mass production in the second half of 2025.

In the press release regarding Pat's retirement, one notable change is that Intel has established the position of Chief Executive Officer of Intel Products. This department includes the company's Client Computing Group (CCG), Data Center and Artificial Intelligence Group (DCAI), and Network and Edge Group (NEX). These are almost all of Intel's core product departments that currently contribute to revenue.

Frank Yeary, the independent chairman of Intel's board, also stated, "As a board, we first know that we must place products at the center of all our work." I personally believe that this is the latest strategy reached by the Intel board of directors—prioritizing the enhancement of Intel's product competitiveness rather than prioritizing the competitiveness of its foundry business.

Clearly, this is a significant adjustment in the company's strategy. It also effectively negates Pat's "obsessive" approach of prioritizing process or foundry. This is why Pat is retiring.

However, Pat's retirement came so suddenly that it's unclear whether there are any other "hidden troubles" behind it that Intel has not explicitly stated. I hope there are no unexpected issues with 18A, as this is the only fruit of Intel's investment of hundreds of billions over the past three years.

For Intel, process technology is certainly important, but there is still a long way to go from leading in process technology to converting that into revenue from the foundry business. In the short term, the foundry business cannot significantly contribute to Intel's performance; to quickly deliver good results, it still depends on the existing product line.

If the existing product line cannot maintain its market competitiveness, then Intel's cash flow may face significant problems, and the foundry business may not be sustainable.

Next, Intel is likely to spin off its foundry business, seeking separate financing or pushing for an IPO, while it remains just one of the major shareholders.

If that day comes, Intel will historically become a chip design company for the first time, opening a new chapter in asset-light operations.

For the entire chip industry, this also signifies that the IDM strategy may not be as viable as specialized division of labor.

Goodbye, Pat.

Source: Intelligent Hyperparameters, Original Title: "Intel CEO's Sudden Retirement Indicates Major Changes in Company Strategy: Foundry Priority Halted, Products Reprioritized"

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