[News] The Semiconductor Giant Falling from Grace: Intel and the CEOs Who Changed Its Destiny

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After the disappointing financial performance in Q2, Intel has been plagued by a series of challenges. Its shares plunged, falling to the lowest point in over a decade, coupling with the suspension of dividend payouts, layoffs, and product failures. The company may be facing its worst moment in 50 years, and now, the market seems to lose patience with the once-dominant semiconductor giant.

Even Pat Gelsinger, who took over as CEO in 2021 with his technical expertise, has yet been able to rescue this struggling mammoth. On December 2, Intel announced the retirement of Pat Gelsinger from the company, sending shockwaves through the semiconductor industry.

After his leave, the struggling giant is reportedly prioritizing external candidates in its search for a new CEO. The potential contenders, to name a few, are rumored to include Marvell CEO Matt Murphy and Lip-Bu Tan, former CEO of Cadence as well as a former member of Intel’s board. Even TSMC’s former Chairman, Mark Liu, is rumored to be a candidate.

Over the past 50 years, Intel has witnessed eight CEOs, as each of them has left indelible marks in history. Some of their decisions have made Intel so sluggish that it is difficult to turn around.

The latest report by Technews looks back at Intel’s past and summarizes its former CEOs’ impact, examining how the tech giant’s development trajectory is closely intertwined with that of semiconductors.

What happened before Intel’s Foundation?

Let’s go back to 1956, when William Shockley, known as the ‘Father of the Transistor,’ left Bell Labs to establish the Shockley Semiconductor Laboratory.

However, Shockley’s authoritarian management style, as well as his erratic behavior, led to the dissatisfaction of employees. Eight employees, called by Shockley as the “Traitorous Eight,” resigned in 1957 to found Fairchild Semiconductor.

Fairchild, though developed rapidly, faced organizational management issues as well. In July 1968, two of its founders, Robert Noyce and Gordon Moore, resigned to found Integrated Electronics, later known as Intel, on July 18th of the same year. Andy Grove joined as the third employee afterwards.

They are regarded as Intel’s founders who formed a management triad. Noyce was in charge of research and development. Moore, on the other hand, was in charge of business execution, while Grove responsible for commercialization and management. The Big Three had led Intel through its first 30 years, establishing the glorious era from 1968 to 1998.

(Left to right:  Gordon Moore, Robert Noyce and Andy Grove)

First CEO: Robert Noyce (1968–1975)

During Noyce’s reign, Intel introduced the first microprocessor in 1971, which marked the beginning of the personal computer (PC) era and the start of Silicon Valley’s golden age. The breakthrough has earned Noyce the nickname of “Mayor of Silicon Valley” or “Father of Silicon Valley.”

It’s worth noting that Noyce and Texas Instruments engineer Jack Kilby were both pioneers of the integrated circuit (IC). Kilby developed the world’s first integrated circuit at Texas Instruments in 1958, earning him the title of “Father of the IC.” The following year, Noyce conceived the concept of the first planar IC with a metal interconnection method in his notebook, laying the foundation for all modern IC technologies.

 

Second CEO: Gordon Moore (1975–1987)

The famous “Moore’s Law” was proposed by Moore in 1965. However, the concept was somewhat speculative, as the development of integrated circuit was still in its early stages.

Moore’s prediction was aimed to convey the idea that electronic products would become increasingly affordable, and surprisingly, it came true. Considering the exponential growth in IC complexity, Moore revised his forecast in 1975, stating that the number of transistors on an IC would double approximately every two years. The law has established the foundation for the semiconductor industry. Even how, it is still a hot topic today among semiconductor giants such as TSMC, Intel and NVIDIA.

 

Third CEO: Andrew Grove (1987–1998)

To follow his superior Moore, Grove left Fairchild to become Intel’s third employee, and took up the management duties after Noyce and Moore.

In the 1970s, Intel’s main products were DRAM and SRAM. As Japanese companies began to flood the global market with DRAM, the profit of the product line quickly declined. Therefore, Grove decided to discontinue DRAM-related products and focus on integrated circuit applications instead.

The decision helped Intel to seize the vast opportunities of the PC era.

Additionally, one of the critical decisions during his tenure was to manufacture its 386 processor independently, which successfully showcased Intel’s capability to manufacture its own processors, establishing its undisputed leading position in the early 1990s.

When Intel was founded, its annual revenue was only USD 2,672. By 1997, thirty years later, its annual revenue had grown to USD 20.8 billion. Grove played a crucial role in the success and was named by Time magazine as Person of the Year in 1997. He also documented his management philosophy in his book, with the famously saying, “Only the Paranoid Survive.”

Fourth CEO: Craig Barrett (1998–2005)

Craig Barrett was an associate professor of Materials Science and Engineering at Stanford University before joining Intel. Upon taking office, his primary challenge was determining whether Intel could become a company that could handle “low margins.”

At that time, the market believed the high-profit era of the semiconductor industry was over, and that the future of PCs would be dominated by low-cost models. Therefore, he led Intel through two major transformations.

The first transformation was the segmentation of Intel’s processor products. Due to the company’s rapid transformation, the competitors are difficult to follow, making them unable to disrupt Intel’s position in the low-cost market. The second, on the other hand, was the expansion from computer/ computing into network servers.

Barrett also believed that Intel’s competitiveness lied in manufacturing and R&D, so he invested USD 28 billion in building advanced facilities and developing new technologies, which secured Intel’s leadership in manufacturing technology.

 

Fifth CEO: Paul Otellini (2005–2013)

Under Otellini’s leadership, Intel underwent another significant shift. As the first CEO in Intel’s history without an engineering background, Otellini only held an MBA degree.

During his tenure, Intel’s financial performance was excellent, but the company’s focus had been moved from technology to performance-oriented, which prioritized sales and marketing over technological advancements. This shift set the tone for Intel’s later decline.

In 2005, Intel secured an order from Apple, which would adopt Intel’s chips in Macs. However, when Apple inquired if Intel would supply processors for iPhones, Otellini declined the request as he believed the deal was not cost-effective. This decision caused Intel to miss out on the booming mobile device market following iPhone’s 2007 launch.

Rather than focusing selling chips individually, Otellini believed Intel’s platform had greater value, which helped Intel secure its share in the x86 market. However, the company’s technological advantage began to wane. Moreover, due to the global economic downturn, Intel closed five factories, including its last plant in Silicon Valley.

Sixth CEO: Brian Krzanich (2013–2018)

With the decline in the PC market, the new CEO Brian Krzanich, responsible for technology and administration, faced the critical task of transformation once again. In his tenure, Intel shifted its focus towards the Internet of Things (IoT) and cloud computing.

However, as Krzanich did not believe in the economic scalability of EUV, he opted to forgo ASML’s first-generation EUV equipment. As a result, Intel’s 10nm progress faced multiple delays, causing it to fall behind competitors like TSMC and Samsung in advanced nodes, and even led to a loss of market share to rival AMD.

Seventh CEO: Robert (Bob) Swan (2019–2021)

Intel was plagued with many issues, such as the problems with the 10nm process, which were difficult to overcome. During Swan’s tenure, Intel’s dominance in the market has gradually declined. In some sectors, AMD even caught up and overtook Intel’s throne.

At the same time, instead of using Intel’s chips, Apple introduced its self-designed M1 processors, which might become the final straw to Intel’s dominance.

Additionally, Intel had discussions with OpenAI about investment opportunities in 2017–2018, but Bob Swan believed that generative AI models would be challenging to commercialize in the short term and considered the deal to be unprofitable, thus giving up the opportunity to participate in the AI boom.

Eighth CEO: Pat Gelsinger (2021–2024)

As the three former CEOs all came from operations or finance backgrounds, Pat Gelsinger, with his technical background, was expected to bring a fresh outlook to Intel.

Given the challenge ahead, he planned to significantly expand Intel’s factories and announced the “Four Nodes in Five Years” plan, aiming to advance five nodes within four years, betting Intel’s future on the 18A process.

However, before the 18A technology was introduced, Intel has already been plagued by layoffs, suspension of dividends, and a stock price nearing tangible book value. In September, Intel announced that the company plans to transform its foundry business into a wholly-owned subsidiary with its own board of directors, following the cancellation of using its own 20A process with the Arrow Lake processors.

Before Gelsinger ended his tenure, Intel has finally secured the USD 7.86 billion in direct funding under the U.S. CHIPS Act. However, there is a premise: the company would not be allowed to sell its stake in the chipmaking unit at will.

Read more

• [News] Intel Reportedly Eyes External Candidates for CEO, Including Marvell’s Chief and ex-Cadence CEO
• [News] Intel Delays Innovation 2024 Event amid Financial Challenges, Arousing Public’s Curiosity on 18A

(Photo credit: Intel)