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.
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