Predecessor "too nice"

New boss prescribes radical overhaul for chip giant Intel!

Chip giant Intel, once the absolute top dog in the industry, has missed out on the smartphone revolution and now also the AI revolution.

(Bild: AP/Paul Sakuma)

According to insiders, the newly appointed future Intel CEO Lip-Bu Tan had already forged plans to restructure the struggling US chip manufacturer before his appointment. Several people familiar with the matter told the Reuters news agency on Monday that they envisage increased AI efforts, a reorganization of semiconductor production and redundancies. Tan wants to cut jobs, particularly in what he sees as bloated middle management.

He had already announced at an employee meeting on the occasion of his appointment last week that the US company was facing "difficult decisions". Intel did not want to comment on this topic or allow an interview with Tan. His venture capital firm Walden Catalyst was initially unavailable for comment. The plans were well received by investors. Shares in the former flagship company rose by a good one percent in pre-market trading on Wall Street, having already risen by a good 16 percent last week in response to Tan's appointment.

Dylan Patel, founder of the research firm SemiAnalysis, welcomed the possible job cuts. Intel boss Pat Gelsinger, who was fired in December, had been "too nice". "He didn't want to lay off middle management employees to the extent that would have been necessary." In response to the years-long slump at what was once the world's largest semiconductor manufacturer, Gelsinger launched a multi-billion euro restructuring package last August, as part of which around one in six jobs have been cut across the group to date. It was around this time that Tan, the former head of the software company Cadence, left Intel's Board of Directors.

Expansion of contract manufacturing - new AI chips
Another of Tan's goals is to aggressively recruit customers for Intel's contract manufacturing, the insiders added. In addition, the production of high-performance processors for artificial intelligence (AI) is to be resumed. According to experts, however, it will take at least until 2027 to develop a competitive chip. Intel merely stated that Tan would work closely with customers, employees and management to create the basis for future business success.

Intel has missed out on the AI trend and is no competition for global market leader Nvidia, especially when it comes to high-yield AI processors for servers. At the same time, the company based in Santa Clara, California, is lagging behind rival TSMC from Taiwan in terms of contract manufacturing technology. Intel's new "18A" production technology is supposed to bring a breakthrough here, but its introduction is being delayed by problems.

Few changes to the Group strategy?
At first glance, Tan's restructuring plans appear to differ only in nuances from those of Gelsinger. The latter also wanted to significantly expand contract manufacturing, but had to put some projects such as the construction of a new factory in Magdeburg on hold due to losses running into the billions. Intel is now considered a possible takeover candidate.

At the end of 2023, the Group commissioned Tan to analyze the situation of contract manufacturing, insiders said. He had then submitted reform proposals to the Board of Directors, but the Board had not implemented them. He therefore left the board last year.