Track Hyper | Where will Intel go after Kissinger's retirement

Author: Zhou Yuan / Wall Street News

Three months after the news of the divestiture of the Intel Foundry (IF) business, on December 2nd after U.S. stock market hours, Intel announced in a statement that Chief Executive Officer Pat Gelsinger would retire and also resign from the board of directors.

This announcement took effect on December 1st. The news sent shockwaves through the U.S. tech industry. Following the announcement, Intel's stock price initially rose (nearly 6%) before falling (-0.5%).

On August 30th, Wall Street News confirmed from the supply chain that Intel would divest its IF business; on September 1st, while discussing the impact of the divestiture on Gelsinger and Intel with industry insiders, Wall Street News wrote, "This casts a shadow over Gelsinger's prospects of revitalizing Intel... If it indeed materializes, whether Gelsinger can continue to stay at Intel will also become uncertain."

Unexpectedly, this turned out to be prophetic, as today, three months later, Gelsinger has indeed "been dismissed."

Immediately after Intel's announcement, some media reported that Pat Gelsinger's retirement was not entirely voluntary, but rather that he was "pushed out" by the board of directors.

Gelsinger's tenure at Intel was not very long. He took over in February 2021 and was set to end in early December 2024. During this period, Intel's stock price fell from $52 to around $24, a decline of 54%, with a market value evaporating by over $120 billion to $103.21 billion.

As someone who met Intel's tradition of selecting a CEO with technical expertise, Gelsinger was seen as a "savior" when he took the helm in February 2021. However, during his tenure, Gelsinger strongly advocated for the IDM 2.0 strategy. Due to his underestimation of the challenges in the foundry business, this strategy, while requiring a massive investment of $100 billion, yielded minimal results.

The cost of Gelsinger's misjudgment regarding the difficulties of the foundry business was approximately $17.5 billion in actual cash outlay. Just one month after Gelsinger became CEO in February 2021, he proposed the IDM 2.0 strategy.

This strategy completely overhauled the original IDM strategy, primarily including Intel's optimization of its internal factory network, expansion of third-party foundry capacity, and the establishment of Intel Foundry Services (IFS) among other key themes.

On August 29th, Gelsinger stated at a Deutsche Bank conference, "Entering contract manufacturing (i.e., foundry) is more challenging than expected. I underestimated the heavy workload beyond producing high-quality (silicon) wafers; other chip companies seem willing to continue collaborating with Asian manufacturers rather than sending their products to our factories in the U.S. This is surprising and disappointing."

Intel's hope of being led out of the quagmire by a technical expert CEO seems to have been dashed, and it appears difficult for Intel's next CEO to emerge from within the company.

During the board's search for a new CEO, the interim co-CEOs David Zinsner and Michelle Johnston Holthaus—Zinsner serving as Executive Vice President and Chief Financial Officer, and Holthaus as the newly established CEO of Intel's Product Division, which integrates the company's Client Computing Group (CCG), Data Center and Artificial Intelligence Group (DCAI), and Network and Edge Computing Group (NEX) Kissinger's most important "legacy" - Intel's foundry services division, will maintain its leadership structure unchanged until a new CEO is found.

Why is it said that the new CEO is unlikely to come from within?

Because it must adhere to the tradition that the CEO should be a technical expert, and neither Zinsner, nor the current independent chairman of the board Frank Yeary, who is serving as interim executive chairman, nor Holthaus, understands technology.

However, times have changed; even the technically knowledgeable Kissinger couldn't catch up with AI giant Nvidia (Nvidia surpassed Intel in 2023), right? Nevertheless, during the current interim leadership's tenure, Kissinger's original goals seem to be maintained, at least verbally.

IDM 2.0 is Kissinger's most important "governing" legacy, and the advanced process roadmap involved in the IF business has received unanimous recognition from Intel's senior management.

It is still unclear whether the IF business will continue as an independent division of Intel or be spun off into an independent company—Intel had previously announced the spin-off of its wafer foundry business responsible for chip production to establish an independent department, Intel Foundry, but the 18A process involved in IF has been highlighted by Wall Street analysts as a key move to revive Intel.

Logan Purk, a senior research analyst at Edward Jones, stated, "The core strategy during Kissinger's tenure as CEO was to ensure that Intel achieved a leading position in process technology or at least kept pace with competitors. If they cannot succeed with 18A, then all previous efforts will be in vain."

Although analysts believe Intel's future hinges on the success of the 18A process, Intel's interim leadership does not share this view.

In the announcement, Intel emphasized Kissinger's contributions to revitalizing Intel's foundry business, but also stressed that Intel's current top priority is "to place the product division at the core of all work."

This indicates that Intel has downgraded the importance of the IDM 2.0 strategy promoted by Kissinger, and the future focus of Intel will be on enhancing product competitiveness.

The announcement also clarified Intel's current work tasks—Intel will continue to take urgent actions to complete priorities: streamline and strengthen the product portfolio, enhance manufacturing and foundry capabilities, while optimizing operating expenses and costs. The goal is to create a more streamlined, simpler, and agile Intel.

This shows that Intel has recognized management issues such as internal inefficiencies and departmental bloat. Previously, a person involved in technical management at Intel told Wall Street that "Intel's departments are bloated and slow to respond to market changes," which is a significant management issue.

However, Intel is not without merit; at least Intel still holds the top position in the PC chip market and maintains a leading position in the x86 (a mainstream chip design architecture) data center chip market.

Mercury Research data from November 2024 shows that in the third quarter of 2024, Intel's market share in the x86 server chip market was approximately 75%