4 key challenges facing Gelsinger as Intel's new CEO

Marian McHugh
clock • 6 min read

The VMware boss is joining the chipmaker as it finds itself adrift and losing market share to rivals. CRN considers why he might be the best person to steer the company through its troubled waters

Intel took many in the industry by surprise yesterday with the news that prodigal son Pat Gelsinger was returning to take the mantle of CEO from current incumbent Bob Swan.

On paper, the appointment makes sense; Gelsinger began his career at the chipmaker and spent three decades there, working his way up to become its first CTO, beforemoving to become COO at EMC and later chief exec at VVMware. He has frontline and boardroom experience of working at a large tech multinational.

His nearly decade-long career at VMware has seen the virtualisation vendor hit record revenues and became the very public face of the company. His interim successor has been named as current CFO Zane Rowe as VMware hunts for Gelsinger's long-term replacement.

But by joining Intel, Gelsinger is boarding a ship that has long been in troubled waters. It has had issues with chip shortages, which have been exacerbated by the ongoing pandemic and COVID-19 restrictions, rivals AMD and NVIDIA are taking bigger bites out of its market share and long-term ally Apply ditched it in favour of making its own chips for its Mac devices.

What does this move mean for Intel and what can partners expect under its new captain?

Fighting off AMD and NVIDIA

Gelsinger is likely very aware of the pressing challenges facing the chipmaker. It has faced manufacturing issues as global lockdowns impact its ability to manufacture and transport products.

"Intel has made a number of missteps over the past couple of years," noted Alan Priestley, VP analyst at Gartner, who covers the semiconductor market.

"First off, work has to be done to correct that position and to clearly communicate to the industry how Intel is going to recover its competitiveness and continue to deliver bleeding-edge products going forward."

Gelsinger also has to contend with rivals AMD and NVIDIA closing in on Intel's dominant market presence. AMD has become an assertive competitor in their core markets, while NVIDIA is targeting AI-based products, boosted by its $40bn acquisition of ARM last year.

"NVIDIA is limiting the amount of money that's available to spend on Intel products because people are spending on NVIDIA products," stated Priestley.

"Intel's core processor design x86 was the main game in town for many years, but we're now seeing growth and interest in the use of non-x86-based devices in the datacentre."

The loss of Apple as a partner might also be a painful flow for Intel as other hyperscalers invest in producing their own processing units for their products, he added.

All of these challenges sum up to Intel's main issues: expanding in a market that is changing and growing at an accelerated rate.

"The longer-term challenge is how Intel grows and expands its business in the face of increasing competition and how it diversifies to give itself a broader base," the analyst said.

"Swan had set a target to go after a $300bn total addressable market (TAM) which was covering a much broader spectrum of the market than Intel's original core business. How do you continue to grow and gain share within that broader market, beyond just the PC and the datacentre?"

Bringing tech innovation to Intel

Swan has helmed the good ship Intel since 2019.  His appointment came after a seven-month stint as interim chief exec. Swan stepped in after his predecessor stepped down once a relationship with an Intel employee was exposed.

Priestley said the CEO shake-up had taken him by surprise but that choice of Gelsinger was a "logical" one. He noted that Gelsinger's appointment is in stark contrast to his two predecessors.

"It's interesting that the last two times when Intel was seeking a CEO they spent many months evaluating candidates," he explained.

"Even when Swan got it, they had been looking for new candidates to take over but were unable to find anybody. This time, out of the blue, Pat gets it."

Swan is a numbers man, previously holding the role of CFO at Intel and eBay before that, while Pat worked his way up from the tech floor. This appointment could indicate a more innovative future for the chipmaker. If nothing else it is a strong message to the industry that Intel has a plan.

Knowing its a job few can do

Intel is in Gelsinger's blood. He knows the floor, he knows the boardroom and he knows the technology.

He is the right man for the job, according to Priestley, because of this experience and Intel's tendency to hire internally.

"This is where they faced problems in the past in finding an external CEO, it's to find someone who truly understands the nature of the business because Intel is a highly complex manufacturing entity," he elaborated.

"Manufacturing chips is a long-term process, massively expensive and it's the bleeding edge of technology development. You want to have a CEO that understands that, but that's why it's really difficult to identify an external CEO that would come in and truly be able to add value to the corporation.

"There are very few people that could do that unless you're already a CEO in one of those companies and they're unlikely to move around - you're not going to see Lisa Su suddenly move from AMD or Jensen Huang from Nvidia!"

Gelsinger's time at Intel will stand to him, despite being away from the company - and the semiconductor market - for over a decade. He still understands Intel's core mission and offering and he has proven himself at VMware to be an enthusiastic leader who can deliver the goods.

Charting a course to $100bn revenues

Many will watch with bated breath to see if Gelsinger can steer Intel out of the choppy waters it currently finds itself in.

He is a charismatic figure and that is what will be needed to bring the Intel team along with him on the next stage of its journey, Priestley said.

"He has to instil confidence back in Intel as a leading technology company," he stated.

"Intel has got to get its messaging out there, it's got to come out and really articulate to its customer base where it's going and give the industry confidence that it's going to address the problems it has on the technology front."

Its smaller rivals have taken advantage of Intel's troubles in recent years and this has seen them make significant revenue gains, though Priestly added that it is much easier to see massive growth as a $10bn business than as a $70bn one.

"Intel needs to look to how it grows its business; there are certain areas where big investments are being made that are giving other companies advantages over Intel and it doesn't appear, at the moment, to be really committed to some of the segments - Gelsinger has to define the strategy and make the investments in these growth areas," explained.

"How does Intel get from $70-plus billion to $80, to $90, to $100bn? It's not going to do that doing what it's doing at the moment, it has to look and grow other areas and identify the growth segments that will allow it to take these next steps forward to become a $100bn company."

The outgoing CEO will sing his Swan song on 15 February when Gelsinger is set to take the wheel of Intel. He is certainly taking over at a bumpy time but he could prove to be right captain to steer the ship out of troubled waters.

You may also like
'The channel are realising VMware doesn't work for their needs anymore' - Climb Channel Solutions partners with VMware alternative Scale Computing

Distributor

The duo are offering a way out for European VMware partners and customers

clock 20 March 2024 • 2 min read
Broadcom's VMware license cancellations should face scrutiny, urges cloud trade body

Vendor

CISPE demands a pause on contract terminations and calls Broadcom’s actions unwarranted and threatening to EU firms

clock 20 March 2024 • 4 min read
'GenAI adoption and returns to slow down': Nine predictions from the Gartner Data & Analytics Summit

Research

Gartner analysts predict genAI to significantly impact data, analytics governance and consumption by 2027

clock 14 March 2024 • 5 min read

Sign up to our newsletter

The best news, stories, features and photos from the day in one perfectly formed email.

More on Vendor

Christanto Suryadarma, Zebra Technologies

Christanto Suryadarma, Zebra Technologies

CRN
clock 22 March 2024 • 4 min read
AI innovation is fuelling growth amongst Microsoft partners, report finds

AI innovation is fuelling growth amongst Microsoft partners, report finds

Microsoft partners are seizing "generational" AI opportunities, fuelling ecosystem growth

Andrea Gaini
clock 22 March 2024 • 2 min read
OVHcloud aiming to increase microservices partner base

OVHcloud aiming to increase microservices partner base

European cloud giant is specifically looking to partner with organisations offering value-added services

Andrea Gaini
clock 21 March 2024 • 2 min read

Highlights

Staff & Salaries 2022

Staff & Salaries 2022

A snapshot of pay and headcount trends in the UK channel

Doug Woodburn
clock 09 March 2022 • 1 min read
Midwich CEO on Nimans acquisition, 2021 results and return to pre-pandemic levels

Midwich CEO on Nimans acquisition, 2021 results and return to pre-pandemic levels

Stephen Fenby talks to CRN after Midwich’s 2021 results in which profitability exceeded pre-pandemic levels

Josh Budd
clock 08 March 2022 • 3 min read
4 more vendors suspend sales in Russia following Ukraine invasion

4 more vendors suspend sales in Russia following Ukraine invasion

IBM and Microsoft are among a number of vendors which have also announced that they will halt sales in Russia following the invasion of Ukraine.

clock 08 March 2022 • 3 min read