I write often about Intel and in particular is spectacular rise and fall.  I have explained that Intel under the leadership of Andy Grove, recognized  the opportunity of the Personal  Computer and brilliantly exploited it.  That as act two for Intel which had originally focused on memory devices. The PC opportunity in which Intel played not initial role in its creation came along just in time to save the company for bankruptcy or a sale to the Japanese (Grove once confided in me that this was something he saw as a possibility).  But Intel missed act three, mobile computing which created the opportunity for TSMC (Taiwan Semiconductor Manufacturing) to become the leading manufacture of semiconductors and to over take Intel in terms of technology in starting in 2017 and asserting a clear leadership position by 2020.

Intel was/is a vertically integrated semiconductor company meaning that it both designs and manufacture its chips.  Companies like Apple and Nvidia (and many more), design chips but then utilize TSCM to manufacture them.  Apple made the decision to move the manufacturing of the processor for the iPhone to TSCM in 2014.  Steve Jobs, the CEO of Apple, approached Paul Otellini  the then CEO of Intel in 2005 about providing the processor for the yet to be designed iPhone.  Otellini famously turned Jobs down because he did not see the potential of the smart phone and was not interested in having a low margin business while Intel factories were operating at full capacity. Apple turned to Samsung.  The iPhone was introduced in 2007. In 2014, Apple moved to TMSC. Apple is TMSC largest customer, accounting for 20-25% of sales, followed by Nvidia and AMD.   Companies like Amazon, Google and Microsoft design their own chips and then have them made by founders like TSMC.   They probably represent about 20% of the semi conductor demand.  The equipment used by TSMC and other foundries is made by a number of companies with the leader being the Dutch company, ASML which has about 25% of the world market.

When I joined Intel in 1984, the company was vertically integrated. It developed its own manufacturing capabilities and designed it own chips.  In 2000 for instance, half of Intel’s engineers were involved in manufacturing technology. The manufacturing technology group was called TMG.  It was initially led by Craig Barrett who become Intel’s COO in 1990 and succeeding Andy Grove as CEO in 1998.  He became board chair in 2005.

It was Barretts appointment to CEO the cemented my decision to leave Intel which I did in April of 1999.  Intel was very insular during my time there (1984-1999).  Of the 33 Corp officers listed in the 1998 Annual Report, I was the last to have joined, 14 years earlier.   Andy, and I often spared about strategy.  I regretted my inability to have much impact on his thinking.  All of this is covered in my book, The Flight of a Wild Duck.  

During my last years at Intel, I often had debates with Andy about the future of the PC industry.  At that time, I was leading Intel’s efforts to create residential broadband as well leading the consumer investments of Intel Capital.  Andy, realized that Intel needed to expand the companies business into other areas because the PC but was incapable of making that happen.  He thought that Barrett would be the one to do that but alas that was not the case. I use to say that Andy wanted the same old ideas from the same old people and the Barrett wanted new ideas from the same old people.  The was very clear when he took Gerry Parker the then leader of TMG and made him head of new business development even though Gerry never ran a business in his life.  The result of billions of dollars wasted in new business development and a reduction in leadership of TMG which proved deadly.  By the way, I offer Gerry my help in his new role but he declined.

It is amazing to me that Grove who wrote a brilliant book, “Only the Paranoid Survey” in which he explained how the computer industry went from vertical integration with companies like IBM and Digital Equipment where companies had proprietary hardware and software as well as there own peripherals and service organization, to the PC world where different companies produced the hardware, peripherals, software and services.  What happened to Intel was describe  by Clayton Christensen in 1997 in his very impactful book, The Innovators Dilemma. Andy was well aware of the concept as we had Christensen teach a class to the executives and advise the company. This book explains a great deal about what happened to Intel and so many other companies.  It is hard for successful companies to reinvent themselves.  They cling to their success protecting business that generate high profits.  Talent manager seek to run the successful businesses rather than take risk to run new ventures.  And those that want the new ventures often leave to start their own successful business.  

The story of Intel would just be another example if it was not for the strategic importance of having USA domestic leader in chip development.

During my time at Intel. the PC boom drove Intel’s volume.  While the X86 architecture was not ideal, intel’s ability to push performance by outstanding semiconductor process development, allow the company to monopolize the PC industry.  

What went wrong

I blame Intel’s board, When I first joined Intel in 1984, the company had an amazing board. but it was a board that change under Grove’s chairmanship.  It became focused on governance and financial issues. Few on the board understood the semiconductor business and the importance of investing in the process technology.  After Andy’s chairmanship (1997-2005), Barrett become the chairman (2005-2009).  You would have thought he knew better but he did not actually have a good relationship with the other board members. He was succeeded by Jane Shaw (2009-2012) a health care executive, then Andy Bryant (2012-2020) the former CFO of Intel.  Bryant is in my opinion bares the most responsibly for the decline of Intel.   After Bryant (came Omar Ishrak (2020-2023) of Medtronic, another health care executive and finally Frank Yeary (2023-Present)  and investment banker.  

Stock Buybacks

One of the unforgivable acts of the board was supporting stock buybacks.  Intel used $108 billion dollars to by back its own shares as an average price of $45 dollars.   This is more than the company is currently worth.  Part of the downward  pressure on the stock results from concerns that the company does not have enough capital to pull of it strategy having a major boundary business.  

After Grove left as CEO, their was a succession of CEOs, each worse than the previous.  One of the major responsibilities if not the main responsibility of a board is to appoint the right CEO.  Intel’s board failed spectacularly in this regard.

. 1. Craig Barrett (1998–2005)

2. Paul Otellini (2005–2013)

3. Brian Krzanich (2013–2018)

4. Robert Swan (2019–2021)

Then there was Pat Gelsinger (2001-2004)

Pat first joined Intel at the age of 18 in 1979.  I meet him soon after I joined Intel in 1984.  I remember being impressed by his energy.  He became one of Grove’s “fair hair boys”.  Since I was not really that involve with the microprocessor development, I did not have much to do with Pat until Pat was appointed by Andy to lead the failed video conferencing product,  Pro Share project. It was a poorly conceived but it was one of Andy’s failed to create to create new applications for PC market. Andy tapped Pat to run that project although Pat had no qualifications.  At that time, I was driving Intel initiative to create residential broadband.  I knew a great deal about communications and new that ISDN and working with the phone companies would led to a disaster but neither Pat nor Andy would listen.  Pat left Intel in 2009 to join EMC Corp as President and COO.  I believe that Pat was push out by Otellini, the CEO.  I was no longer at Intel and have no direct knowledge other than hearsay.  

In many ways, Pat was a great choice to try to retrieve Intel.  But right away, I began having concerns.  One of Pat’s first pronouncements about his joining was to say “Intel is back.”  He kind of had a messianic tone to his speeches.  He like to liken himself and his return to Steve Jobs.  But Gelsinger was no Steve Job.

Never the less, I think he did have a strategy for the company.  Pat recognized that need for there to be a foundry based in the USA to compete with TSMC especially given the geo political issues between Taiwan and China.  But building a boundary business is very capital intensive.  Intel would have to match or exceed the abilities to TSMC.  That would take years and billions of dollars. There problem is that Intel is a public company and investor in such companies are very short term oriented. 

On Dec 2nd, Gelsinger abruptly resigned.  It is not really clear what happened.  Clearly there was a major disagreement about direction at the board meeting.  Over time, we are likely to learn more.  

What will happen now

I think there are a few scenarios.  The best would be for Intel to be taken private, perhaps by a consortium led by Michael Dell (Dell Computer) which would bring Pat back to lead this effort. 

Otherwise, I think Intel will be sliced and diced and cease to exist as an independent company.   I hope that does not happen.  The USA and the world needs a vibrant Intel.  Intel is the only USA company that can build a capability similar to TSMC.