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As a devout Christian prone to tweeting Bible verses, Pat Gelsinger is surely familiar with the Book of Exodus. On Monday, Intel announced that Gelsinger would be departing as chief executive of the besieged semiconductor company immediately. The abrupt move was described as a “retirement” for the 61-year-old who was brought in to lead a turnaround of the troubled company. In fact, Gelsinger’s tenure lasted less than four years.
With its focus on PCs and datacentres, Intel had missed out on the smartphone and is, at best, tardy on AI. Intel revenue in 2019 was $72bn. This year it is forecast to be just $52bn. Gelsinger’s big bet was to improve Intel’s technical process and manufacturing abilities to become a so-called foundry — a manufacturer for third-party chip designers. That bet was risky and expensive: Intel expected to need some $100bn of cumulative capital expenditures to achieve its goal. At the same time, there has been approaching $20bn in impairment charges and tens of thousands in redundancies.
Most interesting is how Intel’s stakeholders have changed since 2021. Brookfield and Apollo have led multibillion-dollar investments into manufacturing joint ventures. At the same time, Intel has received more than $10bn from the US government as the nation belatedly decided that semiconductor supremacy was a matter of national security.
Those infusions have proved essential. Intel remains for now rated as an investment-grade company. But those parties could also complicate what Intel and its board want to do next. Some have called for Intel to separate its manufacturing and design segments, given their differing investment needs and execution risk. After all, Wall Street tends to favour simplicity.
Intel’s market cap today is just $100bn. Its shares are down more than 50 per cent since the day Gelsinger joined from VMware on a lucrative contract in January 2021. In the meantime, Nvidia’s equity value has soared to $3.4tn and AMD, a contemporary of Intel, even has a market value of $225bn.
Chipmaker Qualcomm has already expressed an interest in all or part of Intel and others may now follow in the current management vacuum. A break-up — once unimaginable for a sector champion — looks at least conceivable with perhaps some parts of Intel ending up in the hands of private equity. It would require a serious leap of faith for a new Intel boss to imagine that they can cleanly or quickly disentangle a mess that has been many years in the making.
sujeet.indap@ft.com
