In a turbulent year for the company, Intel CEO Pat Gelsinger has been forced out by the board after huge under performance over his 4 year tenure. Intel was once the main semiconductor manufacturer in the US but has since struggled to keep up with competitors like Nvidia and Advanced Micro Devices in the growing field of AI. In response, Intel has made David Zinsner and Michelle Johnston Holthaus their interim co-CEOs as they search for a more permanent successor.
When Gelsinger’s leadership began in February 2021, Intel aimed to reclaim its position at the front of semiconductor technology. Gelsinger came back to Intel after a stint as CEO of VMware, a cloud computing and virtualization technology company. When Gelsinger returned, he promised aggressive strategies to close the gap with competitors, particularly in manufacturing the smallest and fastest chips. Despite these big goals, which included becoming the world’s second-largest contract chip maker by 2030, Intel faced numerous challenges - for instance, the company’s earnings from its AI chips, fell short of expectations, with Gelsinger admitting on a recent earnings call that Intel would miss its revenue target of $500 million for the year.
The challenges at Intel are emphasized by shifts in market dynamics and internal struggles within its foundry (outsourcing of chip manufacturing) business, which has had difficulty attracting significant customers. This division’s struggles reflect broader issues within the company, which has seen its share price fall by 50% since the beginning of the year.
Intel’s plans to grow by securing substantial financial support through government grants. The Biden administration has an initiative to boost chip manufacturing in the US, due to this Intel recently received $7.87 billion to develop chip plants in four states. This funding is crucial as Intel plans to lay off about 15,000 employees and suspend dividend payments in an effort to cut costs by $10 billion next year.
The next few months will be crucial for Intel as it adjusts strategy in the highly competitive and ever-evolving semiconductor industry. Intel Corp is down 4.55% over the past 5 days and trades at 23.96 as of December 2.
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