Intel CEO Pat Gelsinger has been pushed out less than four years after joining the company’s leadership, handing up responsibility to two lieutenants as the struggling American chipmaker hunts for a permanent successor.
Gelsinger resigned on December 1 following a board meeting last week in which directors believed Gelsinger’s costly and ambitious plan to turn Intel around was failing and that change was not moving quickly enough, according to a person familiar with the situation. According to the source, the board gave Gelsinger the option of retiring or being dismissed, and he opted to step down.
His departure comes long before the end of his four-year plan to reclaim the company’s position in producing the fastest and smallest computer processors, which it had lost to Taiwan Semiconductor Manufacturing Co, which manufactures chips for Intel rivals such as Nvidia.
Under Gelsinger’s leadership, Intel, which was created in 1968 and for decades served as the foundation of Silicon Valley’s global chip domination, has shrunk to a market value more than 30 times lower than Nvidia, the leader in artificial intelligence chips.
Gelsinger, 63, has convinced investors and US officials who are funding Intel’s turnaround that his production plans are still on track. However, the entire findings will not be known until next year, when the company plans to release a flagship laptop processor.
The company’s share price increased by 4.1%. The stock has lost more than half of its value this year, and Nvidia took its position on the blue-chip Dow Jones Industrial Average index last month.
While the board of directors looked for a new CEO, the company selected Chief Financial Officer David Zinsner and senior executive Michelle Johnston Holthaus as interim co-chief executives. The moves come less than a week after US regulators handed Intel $7.86 billion in subsidies.
The board has organized a search committee to find Gelsinger’s replacement.
“While we have made significant progress in regaining competitiveness in manufacturing and building the capabilities to be a world-class foundry, we know that we have much more work to do at the company and are committed to regaining investor confidence,” the board’s independent chairman, Frank Yeary, said in a news release.
Karen Kahn, Intel’s communications chief, is also preparing to depart the business, according to two people who know about the problem.
Intel Spending Spree In 2024
Gelsinger revealed his turnaround strategy in July 2021, when the company was already plagued by years of production errors, and then went on a spending spree. It began building on a $20 billion suite of new plants in Ohio and hired a workforce of 132,000, more than Intel had ever had even when it was the dominant player in the chip sector.
However, the expenditure coincided with a post-pandemic fall in the laptop and PC markets, which lowered Intel’s gross margins far below historical norms and weakened its stock price, generating acquisition interest in the company.
The spending finally pushed Gelsinger to devise a menu of layoffs, as well as potential asset sales and spinouts.
“The stock lost more than 60% during his tenure, so this shouldn’t have come as a huge surprise,” said Ryan Detrick, chief market strategist at Carson Group, an investment advising firm.
“New leadership is required to turn things around and it is safe to say that any of his major strategic decisions are on the chopping board, including the move to focus on being a contract manufacturer.”
Gelsinger’s recovery strategy focused on Intel becoming a big participant in contract manufacturing for others, a business model known as a “foundry” in the semiconductor industry. Intel has named a few foundry customers, including Microsoft and Amazon.com, but neither will provide Intel’s factories the massive volumes of chips required to secure their profitability.
The spending spree, along with the lack of concrete progress in the business’s foundry, caused tension on the board of directors, forcing Lip-Bu Tan, a board member who had previously turned around a struggling chip company, to resign over concerns with Gelsinger’s strategy.
Data from worldwide outplacement agency Challenger, Gray & Christmas shows that more over 1,800 CEOs have made their resignation public as of October. Since the company started monitoring CEO changes in 2002, that is the largest number seen this year. Compared to last year, when there were over 1,500 departures during the same period, the number of exits is up 19%.
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