The news of Intel CEO's sudden retirement has caused quite a stir in the tech industry!
On December 2nd local time, American chip giant Intel announced that its CEO Pat Gelsinger had officially retired on December 1st and resigned from the company's board of directors. Subsequently, foreign media reported that Gelsinger's retirement was not entirely voluntary, but was "ousted" by the board of directors.
Intel is the second largest chip supplier in the world by revenue scale, and also the world's largest supplier of PC (personal computer) chips and CPU server chips. According to some media reports, during his less than four years in charge of Intel, Gersinger failed to successfully reverse the company's predicament, and Intel's market value has significantly shrunk, widening the gap with AI chip leader Nvidia.
Since the end of December last year, Intel's stock price has fallen by over 50%, and its market value has shrunk from $210 billion to $103.2 billion; And Nvidia's market value soared from $1.22 trillion to $3.395 trillion, with a stock price increase of nearly 180%.
How much impact will Gersinger's sudden resignation have on Intel, a well-established chip giant?
Intel CEO resigns suddenly
Intel announced on December 2 local time that CEO Gersinger has retired from the company after more than 40 years of outstanding career and has stepped down from his position on the board of directors effective December 1, 2024.
Intel stated that the company's board of directors is currently actively seeking and evaluating a new CEO candidate. During this period, in order to maintain the normal operation of the company and the stability of the leadership, the company has appointed Chief Financial Officer David Zinsner and Product Department Head MJ Holthaus as interim joint CEOs. Meanwhile, Frank Yeary, who has served the board for a long time, has been appointed as the interim executive chairman to lead the daily work of the board.
Gelsinger said in a press release, "Leading Intel has been the honor of my life - this group of people is one of the best and smartest in the industry, and I am honored to call everyone a colleague. Of course, today is bittersweet because this company has been a big part of my career. I can proudly look back on the achievements we have made together. For all of us, this has been a challenging year as we made difficult but necessary decisions to position Intel in the current market dynamics. I am forever grateful to the many colleagues around the world who have worked with me as part of the Intel family
Regarding Gersinger's resignation, Frank Yeary, independent chairman of Intel's board of directors, stated in a press release that although the company has made significant progress in restoring manufacturing competitiveness and building world-class foundries, there is still much work to be done. The board of directors is committed to restoring investor confidence and has established a committee to search for a successor to Gelsinger.
It is worth noting that Gelsinger's resignation has attracted widespread attention in the industry. According to foreign media, Gelsinger's retirement was not entirely voluntary, but was "ousted" by the board of directors. According to reports, Gersinger failed to successfully reverse Intel's predicament in less than four years of leading the company, and his ambitious and costly turnaround plan failed to gain the confidence of the board, ultimately leading to his resignation.
According to foreign media reports, insiders revealed that Gelsinger's resignation occurred at last week's board meeting. At the meeting, the directors expressed dissatisfaction with the progress of the changes under the leadership of Gelsinger, believing that his plan had not been effective and that the pace of change was not fast enough. The Intel board of directors has lost confidence in Gelsinger and has stated that he can choose to retire or be dismissed. Faced with pressure from the board of directors, Gelsinger chose to resign rather than retire or be dismissed. His resignation occurred before the completion of his four-year roadmap to restore Intel's leading position in computer chip manufacturing, which had been taken away by TSMC.
How big will the impact be?
Intel was once a dominant force in the chip manufacturing industry, but in recent years it has fallen behind TSMC in competition and missed out on the artificial intelligence boom caught up by Nvidia and AMD. In August of this year, Intel announced a 15% layoff and will temporarily suspend dividend payments to shareholders. This is the largest layoff in Intel's history, indicating that the chip company is committed to reducing costs and promoting operational model transformation to reverse the long-term losses in its chip manufacturing business amid declining performance. In the capital market, Intel's stock price has fallen by over 50% since the beginning of this year, with a latest market value of around $100 billion.
Gersinger joined Intel in 1979 as a quality control technician. Under the leadership of Intel's legendary CEO Andy Grove, Gelsinger participated in multiple key projects, including the design of the 80386 and 80486 processors. Due to being highly appreciated by Andy Grove, Gersinger rose through the ranks: in 1993, at the age of 32, Gersinger became the youngest Senior Vice President in Intel's history and was promoted to Chief Technology Officer (CTO) in 2001.
Halfway through, Gelsinger resigned to become the CEO of software company VMWare. In 2021, as Intel faced issues such as declining production capacity, intensified market competition, and talent loss, Gersinger returned to Intel as CEO, leading Intel's IDM 2.0 strategy. The IDM 2.0 strategy refers to Intel's plan to strengthen its chip foundry capabilities over the next 10 years and build a chip foundry manufacturing network centered around the United States. This strategy requires an investment of over 100 billion US dollars.
However, Gersinger has not reversed Intel's previous problems in the past three years, on the contrary, the crisis of this chip giant continues to intensify. In recent years, Intel has been caught off guard by the wave of artificial intelligence, and Nvidia, which was once much smaller than Intel, has relied on betting on the soaring stock price of the artificial intelligence industry. During Gersinger's tenure, chips produced by Intel were found to have process defects and the production speed did not meet expectations, causing the stock price to plummet in 2024.
Ryan Detrick, Chief Market Strategist of Carson Group, an investment consulting firm, stated that the company's stock price dropped by over 60% during Gelsinger's tenure, so his departure is not surprising. He believes that Intel needs new leadership to turn the situation around, and any major strategic decisions made by Gelsinger are at risk of being vetoed.
Rosenblatt Securities analyst Hans Mosiman also pointed out that Intel needs cutting-edge products, innovation, and execution, which were not seen during Gelsinger's tenure. He believes that Gelsinger's failure to launch an effective AI chip to challenge Nvidia was a major mistake under his leadership.
However, according to insiders, Intel's communications director Karen Kahn also plans to resign. This series of personnel changes undoubtedly adds more uncertainty to Intel's future.
Bank of America analysts say that Intel may spin off its business after Gersinger announces sudden retirement. The analyst said that Intel's internal manufacturing business and the foundry business that produces chips for other companies are now more likely to separate, as Gelsinger opposes splitting the company. This restructuring will still face many obstacles, such as the conditions attached to the nearly $8 billion federal CHIPS bill funding announced last week. Bank of America analysts said that the financing agreement stipulates that Intel needs to retain at least 35% of its OEM business shares.
This leadership change increases the possibility of asset divestment, "Kunjan Sobhani and Oscar Hernandez Tejada, analysts at Bloomberg Intelligence, said in a report on Monday." Gelsinger strongly opposes splitting the company, but the long and expensive turnover tests shareholder patience and may force Intel to reconsider
Bloomberg previously reported that Qualcomm had considered acquiring Intel, but as of last week, its interest had cooled down. Insiders at the time stated that the complexity of acquiring all of Intel's shares reduced the attractiveness of this transaction. But Qualcomm could consider acquiring some of Intel's businesses, such as its product business. Like many companies in the chip industry, Qualcomm does not produce its own semiconductors. On the contrary, it designs chips and relies on partners such as TSMC to handle production.