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Tencent Technology News, August 3, according to foreign media reports, for Pat Gelsinger, running Intel was his dream job. However, in his more than three years as CEO, the prospect of leading the company out of its predicament has become increasingly bleak.

Intel shares suffered their biggest drop in 50 years on Friday, falling to their lowest level since 2013 after the chipmaker reported a sharp decline in earnings and its third-quarter revenue and profit forecasts fell short of analysts' expectations.

At the close of Friday, Intel's stock price plummeted 26%, eventually settling at $21.48 per share. This was the second worst day in Intel's stock price history, second only to July 1974, three years after Intel went public, when its stock price plummeted 31%. This plunge directly caused Intel's market value to evaporate by more than $30 billion, and its current market value is less than $100 billion.

Many investors and analysts have questioned whether the costly restructuring plan that Gelsinger launched when he took over Intel in early 2021, promising to restore the troubled technology giant, is still possible.

Ivana Delevska, chief investment officer of asset management giant Spear, which holds chip stocks and has evaluated Intel, said bluntly: "The road to recovery in the technology industry is full of thorns. It requires the perfect fit of many conditions, especially technological breakthroughs. And the impact of leadership changes is ultimately limited." Spear holds chip stocks and has evaluated Intel.

Faced with the grim situation, Intel announced a massive restructuring plan. As a key part of its $10 billion cost-cutting strategy, the company announced a 15% layoff, which will affect 15,000 employees. The layoffs are expected to be mainly implemented this year, and the scale is unprecedented. Even more striking is that Intel has made an unprecedented decision in its 30-year history - suspending the fourth quarter dividend.

Gelsinger said: "We are experiencing the most significant transformation period since Intel's transformation to memory microprocessors 40 years ago. We have drawn up a grand blueprint for the revival of the company and are determined to carry out this bold journey to the end."

In a call with analysts, Gelsinger acknowledged that the strategy of accelerating the production of Core Ultra PC chips optimized for artificial intelligence workloads was a key factor in the recent losses. The company pointed out that the second quarter pricing strategy was more aggressive than originally planned in response to the continued intensification of market share competition among competitors such as AMD and Qualcomm. In this battle in the field of artificial intelligence, Intel is clearly lagging behind its main competitors.

In a letter to all employees, Gelsinger called the decision to cut spending the hardest thing he had ever done in his career, but in a subsequent interview, he remained committed to his resolve. He said: "It is true that we still have many challenges to overcome, but the plan to reshape Intel will be ambitious. Today, we are entering a new phase and integrating the transformation into a sustainable economic model."

For Gelsinger, reviving Intel is not only a continuation of his personal mission, but also a case study in profound business transformation. His career has been closely tied to Intel's growth trajectory since he joined the company as a teenager after graduating from a vocational school in Allentown, Pennsylvania.

In the 1980s and 1990s, Gelsinger participated in the development of many iconic personal computer chips of Intel as a core member and became a disciple of legendary CEO Andy Grove. After entering the 21st century, Gelsinger was promoted to Intel's first chief technology officer. But in 2009, due to the failure of the graphics chip project he was responsible for, Gelsinger was forced to resign.

Intel enjoyed a few years of success, but about a decade ago it began to falter in the race to produce ultra-small, ultra-fast transistor chips, a technology race that was eventually won by Taiwan Semiconductor Manufacturing Co. and South Korea's Samsung Electronics Co.

In 2021, Gelsinger returned to Intel to take charge, which he regarded as "the pinnacle of his career," and immediately announced an ambitious blueprint for comprehensive transformation. He vowed that Intel would achieve five major leaps in chip manufacturing technology within four years in order to regain its leading position in the industry.

To achieve this goal, Intel is accelerating the expansion of its manufacturing footprint, spending tens of billions of dollars to build new factories in Arizona, Oregon, Ohio and even Europe. At the same time, Intel has also restarted and strengthened its foundry business, signing contracts with external circuit designers to manufacture chips, even though this field was once Intel's failure.

Initially, Gelsinger’s strategy benefited from a global chip shortage and a surge in demand for personal computers during the pandemic. In his first quarter as CEO, Intel reported revenue of about $19.7 billion, about $7 billion more than in the most recent quarter.

However, the good times did not last long. As the work mode gradually resumed in the post-epidemic era, sales of personal computers and data center chips (another major business pillar of Intel) suffered a Waterloo. By mid-2022, facing the severe situation of "a sharp slowdown in economic activity", Gelsinger promised investors: "We must and will do better."

at the same time,Generative AIThe wave of surging has further exacerbated Intel’s predicament.OpenAILaunched in late 2022ChatGPTSince the 2016 financial crisis, investment in AI computing infrastructure has been pouring into its main competitor Nvidia, which has benefited greatly from its long-term dominance in chip supply in the field of AI training. This trend has directly weakened customers' purchasing budgets for Intel chips. Nvidia's valuation once soared to a high of more than $3 trillion. In contrast, Intel's stock price has continued to be under pressure. Even before Friday's plunge, it had fallen by more than 42% this year.

Faced with challenges, Gelsinger continues to invest resources and strives to achieve significant improvements in financial efficiency through reforms. In order to balance the factory expansion expenditures that may exceed $100 billion in the next few years, he sought cooperation with investment companies and used the Chip Act enacted in 2022 to obtain $8.5 billion in government funding support.

In addition, Gelsinger has adopted a more cautious expansion strategy to strictly control costs. He delayed the initial construction schedule of a factory in Ohio and implemented the first round of cost-cutting plans in February last year, including a sharp dividend cut (a drop of 66%) and layoffs.

The day after the financial report was released on Thursday, Gelsinger sent an email to all employees, saying that although further cost cuts and launching a new round of large-scale layoffs are difficult moves, they are the only way to lead the company out of its predicament and achieve correction.

He emphasized in the email: "We must strengthen our execution capabilities, quickly adapt to the new normal of the market, and transform into a more agile and flexible enterprise. Although the series of measures currently taken are challenging, they are aimed at building our stronger customer service capabilities and laying a solid foundation for business growth in the next few years."

This series of measures and the sharp fluctuations in Intel's stock price are testing the patience of investors who firmly believe that Gelsinger can lead the company to turn things around. Ariel Investments, headquartered in New York and with assets of approximately $14 billion, established a position in Intel shares at the end of last year based on its confidence that Gelsinger can lead Intel to revive its glory and return to the pinnacle of chip manufacturing technology.

Micky Jagirdar, portfolio manager at Ariel Investments, said that from a strategic perspective, Gelsinger's technology blueprint remains sound, and the company's successful passage of the Chip Act with strong support from the U.S. government has added a guardrail to its future development. However, he also admitted that after Friday's sharp drop in stock prices, Ariel Investments will carefully reassess Intel's prospects before deciding whether to increase its stake. (Compiled by Jinlu)