Intel CEO resigns amid internal conflict with the board: retire or be dismissed

On December 3rd, news broke that Intel CEO Pat Gelsinger was forced to resign after three years in office due to the board's loss of confidence in his plans to revitalize the chip manufacturing giant, further exacerbating the turmoil faced by Intel.

According to informed sources, Gelsinger discussed with the board last week the progress of Intel regaining market share and narrowing the gap with Nvidia, at which point tensions peaked. It is reported that Gelsinger faced the choice of retirement or dismissal, and he ultimately chose to end his career at Intel.

Intel announced in a statement that during the board's search for Gelsinger's successor, Chief Financial Officer David Zinsner and Executive Vice President Michelle Johnston Holthaus would jointly serve as interim co-CEOs. Meanwhile, Intel's independent board chairman Frank Yeary will temporarily assume the role of executive chairman.

At 63 years old, Gelsinger was once seen as the savior of the chip giant. After taking office three years ago, he publicly expressed his love for Intel and vowed to restore the company's leading position in the semiconductor industry. Gelsinger joined Intel as a teenager but left the company in 2009 to become the CEO of VMware. Upon his return in 2021, he promised to re-establish Intel's leadership in manufacturing, a position that had been taken over by competitors like TSMC.

Intel's investors are eager to see the company's transformation, so they initially welcomed the CEO's departure. On Monday, the company's stock price rose by as much as 6% in the New York market but later retreated during the session. By the close of the New York stock market, the stock fell by 0.5%, closing at $23.93 per share, with a cumulative decline of 52% year-to-date.

Gelsinger was committed to pushing Intel beyond its traditional strengths in personal computer and server processors, expanding the business to produce chips for other companies (an unprecedented attempt for Intel), and directly competing with TSMC and Samsung Electronics. As a key component of his revitalization strategy, he devised a massive plan to expand Intel's factory network, including the construction of a large integrated facility in Ohio, which also received federal funding from the CHIPS and Science Act.

Whoever succeeds Gelsinger will have to face a series of challenges that have existed since his initial appointment, including the consequences of missteps by the previous management. In the $500 billion chip industry, the position of Intel's CEO was once considered one of the most coveted jobs, but it has now become increasingly difficult. The new CEO must compete with better-resourced rivals, rapidly catch up in the field of artificial intelligence computing, and prove to the outside world that Intel can be innovative as it once was Finding the right candidate to take on this important role is no easy task. Before Gehring took over from former CEO Bob Swan, there was speculation in the industry about some well-known executives who might be candidates, including AMD CEO Lisa Su, who was recommended by Wall Street.

In addition, Intel board member and former CFO Stacy Smith was also a strong contender for the position, and he currently serves as the executive chairman of Kioxia.

Analyst Hans Mosesmann from Rosenblatt Securities pointed out in a report that there is currently no clear list of candidates within Intel. He emphasized, "In an increasingly intense innovation cycle, having a new external CEO take over Intel will be a long-term task that is quite challenging."

Although Gehring stated last month that he was "energetic and passionate" and claimed to still have the board's support and was making progress, last week's meeting revealed the severe challenges he faces—namely, a lack of products that can win over the market. The board believes that this aspect has been severely overlooked in the process of transitioning Intel to an order-based chip manufacturer. According to insiders, Gehring was asked to stay on to assist the new CEO, but he was not interested. This prompted him to make the decision to end his term over the weekend.

"My feelings today are undoubtedly complex, as this company has been a part of my entire career," Gehring lamented in a statement. "The past year has been challenging for all of us, and we have made difficult but necessary decisions to position Intel in the current market dynamics."

One of the biggest challenges Intel currently faces is the industry upheaval triggered by artificial intelligence computing. Nvidia has dominated the data center space with its graphics chips, taking away a significant market share that originally belonged to Intel. This competitor, which once struggled to survive in Intel's shadow, is now among the highest-valued publicly traded companies in the world. Meanwhile, Intel's efforts to penetrate this market with new products have yet to gain sufficient momentum.

Intel's independent board chair, Yellin, stated in a statement, "We are well aware that there is still much work to be done, and we are committed to regaining investor confidence. As a board, our primary task is to place the product team at the core of all our work. This is what our customers expect from us, and it is the service we will provide to them."

Gehring's departure may lead to a greater strategic shift for Intel. Chris Caso, an analyst at Wolfe Research, noted, "This change opens the door to implementing a new strategy, which is what we have been advocating for. Although Gehring has successfully advanced Intel's process roadmap overall, given Intel's absence in the AI field, we believe Intel does not have the scale to pursue leading manufacturing technology on its own." Intel's turmoil also reflects the setbacks faced by the Biden administration in rebuilding the domestic semiconductor industry. Gelsinger, the outgoing CEO, was a major supporter of the CHIPS Act and promised to establish large-scale new factories in the United States.

Ultimately, the Biden administration signed an agreement to provide Intel with nearly $7.9 billion in federal grants, the largest direct subsidy in the project. Although this deal is smaller than previous proposals, it means that Intel can begin to receive funding support after its projects in four states meet negotiation benchmarks.

However, this plan also faces political challenges. Incoming President Donald Trump criticized the 2022 CHIPS and Science Act, which allocates $39 billion in grants, $75 billion in loans and loan guarantees, and a 25% tax credit aimed at revitalizing the U.S. chip manufacturing industry. Trump called the plan "terrible," and his Republican colleagues threatened to amend or even repeal the act.

On August 1 of this year, Intel released a disastrous earnings report revealing unexpected losses and a bleak sales forecast, bringing its challenges back into the public spotlight. At the same time, Intel announced it would suspend dividends that had been paid continuously since 1992. To effectively control costs, Intel stated it would lay off more than 15% of its workforce, which currently totals about 110,000 employees.

At this juncture, interim co-CEO Holsinger will also take on the new role of CEO of the company's Product Group, fully responsible for core businesses such as client computing, data centers, artificial intelligence, and network operations. Holsinger has nearly 30 years of experience at Intel and previously served as the general manager of client computing (covering personal computers).

Meanwhile, another interim co-CEO, Zinsner, joined Intel in 2022 after leaving Micron Technology, the largest memory chip manufacturer in the U.S. He has accumulated extensive leadership experience in the financial sector. His experience in the challenging memory market is considered a plus for leading Intel through one of its most difficult periods in history.

Looking back over the past 30 years, Intel has consistently outperformed competitors in new technologies and products, thanks to ample cash flow, which has been the cornerstone of its success. However, Intel now carries over $50 billion in debt and must rely on external investment to realize its future development plans.

Author of this article: Jin Lu, Source: Tencent Technology, Original Title: "The Inside Story of Intel's CEO Resignation: Conflict with the Board, Either Retire or Be Dismissed"

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