missing the ai opportunity caused intel to "fall into the abyss"
2024-09-23
한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina
reference news reported on september 23 according to a report on the wall street journal website on september 21, three years ago, intel's market value was more than twice what it is now, and its ceo pat gelsinger was looking for acquisition opportunities at the time.
now intel itself has become a takeover target, a sign of how strategic missteps and a boom in artificial intelligence (ai) have combined to reshape the fortunes of america’s most storied semiconductor company.
qualcomm inc.’s latest acquisition reflects a fragility with few precedents in intel’s 56-year history. the problems began with manufacturing setbacks before gelzinger took the helm. they have intensified as the ceo pursued a costly turnaround strategy and failed to foresee that the explosion in artificial intelligence would fundamentally shift demand toward the types of chips made by rival nvidia corp.
“the shift to ai over the last two or three years has really been a death blow for intel,” said angelo zino, a senior industry analyst at the center for financial research and analysis.
even if intel were willing to go along, a deal with qualcomm is far from done for regulatory and other reasons. but not long ago, the idea of the smartphone chip giant buying intel was almost unthinkable.
for decades, intel has been the world's most valuable semiconductor company, with its chips ubiquitous in personal computers and servers. in an industry where specialization is increasingly the norm, intel is a rare company that both designs and manufactures its own chips, and is a world leader in both.
when gelsinger took over as ceo in early 2021, intel had lost some of its magic. prior to this, gelsinger had worked at intel for decades and was intel's first chief technology officer. his plan was to restore intel to the glory days of its leaders such as andy grove and paul otellini.
to do that, it will have to catch up with asian rivals tsmc and samsung electronics. he also plans to invest heavily in building intel's manufacturing business to enter the so-called "chip foundry business" dominated by tsmc and samsung.
it’s an expensive, ambitious bet, but it appears to have the ingredients for success: a strong core business making chips for personal computers and servers, and a host of side businesses that could help fund intel’s next phase of growth. but intel’s foundry business has been slow to get off to a good start, and gelsinger’s goal is to become the world’s second-largest chipmaker by 2030.
as intel's costs increased, generative ai took off. the craze shifted demand from intel's central processing units to nvidia's graphics processors, whose different designs are better suited for creating and deploying the most complex ai systems. as tech companies scrambled to buy scarce nvidia ai chips, many of intel's processors were left sitting on the shelf.
gelsinger has had to cut costs to maintain his turnaround efforts. intel has laid off thousands of employees starting in 2022 and cut its dividend last year. but it's not enough. last month, gelsinger said intel will lay off 15,000 employees, cut costs by $10 billion, and cancel its dividend next year.
“the wave of artificial intelligence is much stronger than i expected,” gelsinger said at the time.
intel announced new measures last week, including tighter spending controls and a further separation of design and manufacturing, although gelsinger stopped short of selling or spinning off the manufacturing business as some investors have urged.
analysts say the prospect of a positive turnaround in intel’s fortunes is increasingly dim but still possible. while the stock price drop makes intel more vulnerable to takeover bids and investor activism, cost cutting could help it weather the storm.
stacey rasgen, an analyst at bernstein research, said intel's future depends on the success or failure of a new generation of chip manufacturing technology. it is expected to go into production next year, and intel hopes to surpass its competitors at least in technology. restoring technological leadership will help improve profit margins and boost customer confidence.
still, intel faces a fundamental problem: its core chip business isn’t expected to recover quickly even as spending on artificial intelligence chips remains strong.
"we can discuss whether this strategy is right or wrong, but the problem is that the core business does not support this path," rasgen said. however, he said that at this point, "it may be too late for intel's top management to stop." (compiled by liu baiyun)
on august 2, people took a group photo in front of intel's headquarters building in california, the united states. (photo by li jianguo)
