Intel is going through one of the most turbulent periods in its 56-year history. The chip giant is getting the bill for years of mismanagement. How can Intel turn the tide?
These are tough times for Intel. News about the company has barely sounded positive for months. From announced layoffs, poor financial numbers, shrinking market shares to unstable chips, everything that can go wrong for Intel seems to be going wrong.
Today’s problems didn’t just happen. CEO Pat Gelsinger has been trying to steer a new course for years, but the ship is proving difficult to turn. Back in April 2023, we wrote that Intel is in the corner where the blows are falling: a year and a half later, we could have used the exact same title. An accumulation of mistakes and too long feasting on past successes has put Intel in this situation.
Sleeping giant
Intel was once the reference in the PC market: that dominance earned the company the nickname “Chipzilla. Looking at market share, Intel is and remains king: according to figures from Statista, 63 percent of all CPUs worldwide come from Intel. The breeding ground for market dominance was laid as early as 1978 with the iconic Intel 8086, the chip that introduced the x86 architecture that is still common today.
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The duel with AMD is a constant in Intel’s history. The competitor is nibbling away at the lead more and more: in 2016, Intel’s market share was still 82 percent. Intel largely has itself to thank for this. The company constantly postpones its own deadlines, as a result of which chips are often obsolete even before they are launched.
PC manufacturers cannot ignore AMD today, and the days of launching new PC models exclusively with Intel are long gone. Company executives seemed to see that back in 2021 and pushed then-CEO Bob Swan to exit. Pat Gelsinger was appointed to chart a new course, but the Intel ship proved difficult to steer.
Late to the AI party
There is another hijacker on the coast: Arm. The British company is at once a partner and a competitor. Arm managed to convince Apple to put Intel in the door and is now trying the same in Windows. For now with limited success, although the hype surrounding AI in the PC industry favors Arm.
Intel for once tried to outsmart the competition once more, launching the marketing term “AI PC” in January . Microsoft turned Intel on its heel by coming up with its own term Copilot+ and using the Qualcomm Snapdragon Elite chips, built on ARM architecture, as a signpost. The difference between an “AI PC” and a “Copilot+” PC is very flou, but Microsoft has made manufacturers beckon to ARM.
Illustrative of the recent past: instead of building a lead, Intel was just put at a disadvantage. It was the last of the major chip makers to announce its Copilot+ chip, Lunar Lake. Although Intel says it achieves the highest number of TOPS, a figure that now again does not say much about a chip’s performance, Copilot+ PCs with Qualcomm and AMD chips will be on the shelves long before the first Lunar Lake PC appears. How good the chip actually is remains to be seen.
Furthermore, Intel is trying to expand its footprint in data centers with the Gaudi 3 accelerators, among other things, but there it is bumping into the inevitable Nvidia.
Unstable processors
As if things weren’t bad enough, Intel’s processors are starting to make strange leaps. Thirteenth- and fourteenth-generation Raptor Lake desktop processors appear to be susceptible to a bug that causes permanent instability. The cause remains unclear, and developers claim that laptop chips may also be susceptible, although Intel says that is not true.
The case threatens a nasty tail for Intel. A patch and an extended warranty period do not appear to be enough to avert a lawsuit. Intel could now miss that like a toothache.
Everything on Angstrom
Intel has a trump card up its sleeve. Starting next year, the next generation Intel 18A should roll off the assembly line. A deadline that Intel absolutely must meet. Baked on a very small 1.8 nm node, the chips must above all demonstrate that Intel has not lost its touch. The fate of the company seems to depend on it.
Recently Intel announced a breakthrough, but remained scarce with details. The press release seemed more like an attempt by the PR department to bring out some more good news in turbulent times. A test from Broadcom paints a less positive picture. It may take until 2026 for Intel 18A to reach cruising speed.
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Hand on the investment knot
Intel announced major investments in recent years. These fit into Gelsinger’s plans to make Intel the giant of old again. Intel is one of the few chip companies that bakes its chips itself. In Gelsinger’s master plan, Intel will also produce chips for outside parties, as TSMC does. Such contracts could bring in billions of dollars, but there must be sufficient capacity.
In addition to expansions in its own home country, Intel would cross over into Europe and establish a plant in Germany. An investment also crucial for Europe under the Chips Act. The German plant, however, is a soap opera: due to discussions about the number of millions in subsidies and what to do with the (fertile) land on the site, the first spade stab remains to be made.
It is not even certain that the plant will ever get there in Magdeburg. Intel’s revenues have declined so much that the investment budget must be cut. The German government wants to contribute ten billion euros, but the total construction cost of the plant is estimated to be at least double that. Those many billions that Intel would invest now could only begin to pay off in a few years at the earliest. The company is in a position where it has to think about the short term first.
Uncertain times
Several uncertain weeks and months await Intel and its employees. Company executives already announced that 15,000 people will receive their golden handshakes. But much more could change. Intel is considering spinning off its factory division, according to sources. Altera, acquired as recently as 2015 for $16 billion, has also been put on display.
AMD did this to Intel in 2009 with GlobalFoundries and today has virtually no ties to the divested subsidiary. Splitting off manufacturing could give Intel more focus on chip design and development, within which it could then reestablish itself as a technology leader. More clarity on Intel’s future plans should emerge in the coming weeks.
One bright spot: investors have not yet given up on the company. Although the share price has more than halved since the beginning of 2024, it registered another 12 percent increase last month despite all the negative noises. Confidence is fragile, however, and the tide will have to turn quickly. Even Intel cannot rest on its name and reputation forever.