The recently appointed CEO of Intel, Lip-Bu Tan, wants to make significant changes at the firm, particularly its chip manufacturing methods and AI strategies.
Reuters cited two people familiar with Tan’s plans, who indicated that the incoming CEO is considering these changes ahead of his return to the firm on Tuesday in an effort to revive the ailing company and enhance its manufacturing efficiency.
Tan’s plans for Intel include streamlining middle management
Upon his return as CEO this week, Tan is expected to examine the company’s workforce, which was cut by approximately 15,000 to almost 109,000 at the end of last year. This comes as part of his plans, which include restructuring Intel’s AI approach and implementing job cuts to address what Tan views as a slow-moving and bloated middle management layer.
Another core priority for the new CEO is the manufacturing division. The manufacturing operations used to produce chips for internal use only but were repurposed to make semiconductors for external clients like Nvidia.
Tan told staff at a town hall meeting after his appointment last week where he indicated that some tough decisions would be made, according to two people briefed on the meeting.
Former CEO Pat Gelsinger, who left Intel in December last year, was “too nice,” according to Dylan Patel, a semiconductor industry expert, which was a big problem for the company.
“He did not want to fire a bunch of middle management in the way they needed to.”
– Patel.
However, the incoming 65-year-old, former CEO of design software company Cadence, is expected to rebuild the company and consolidate its position in the market. Both Intel and investors are also confident about Intel’s new boss.
Tan, who was also a member of Intel’s board before his resignation in August last year returns after a decade of bad decisions by three other CEOs, according to Reuters.
During this period, Intel failed to build chips for smartphones and missed the opportunity to tap into the ballooning demand for AI processors, allowing competitors like Nvidia and Arm Holdings to dominate the market.
Tan wants to improve Intel Foundry
The business suffered a loss of $19 billion in 2024, its first since 1986. Now, tasked with turning around the company’s fortunes, Tan wants to improve the performance of Intel Foundry. The division makes chips for other design companies like Microsoft and Amazon.
The new Intel boss is also looking at aggressively attracting new customers and restarting plans to make chips that power AI servers. The company will look beyond servers in several areas, such as software, robotics and AI foundation models.
“Lip-Bu will be spending a lot of time listening to customers, partners and employees as he comes on board and works closely with our leadership team to position the business for future success.”
– Intel spokesperson.
According to Reuters, Tan’s strategy seem to be a refinement of former CEO Gelsinger’s, which was also centered on transforming the company into a contract chip maker that would compete with TSMC, which supplies Apple, Nvidia, and Qualcomm.
Under Gelsinger, the company committed billions of dollars towards developing factories in the US and Europe to manufacture chips for itself and its external customers, although he had to scale back. For most of its time, the company made chips mainly for one customer, that is itself, and Gelsinger wanted to expand their customer base to include external clients.
As for Tan, he was a vocal critic of the execution of these plans, according to two people familiar with the matter cited by Reuters.
According to Reuters, Tan’s views were shaped by months of reviewing the company’s manufacturing process after he was appointed to a special role to oversee it, as per a regulatory filing.
Sources who spoke to Reuters revealed that Tan expressed frustrations with Intel’s culture, saying it had lost the “only the paranoid survive” ethos enshrined by former CEO Andy Grove. Additionally, according to an earlier Reuters report, he believed that decision-making processes were grossly slowed because of a bloated workforce.
His return brings a glimmer of hope for the company and investors.
“Tan is a longtime technology investor and widely respected executive with more than 20 years of semiconductor and software experiences as well as deep relationships across Intel’s ecosystem,” the company said in a statement.
An analyst with Stifel, Ruben Roy, said that while Intel’s total transformation was likely to take time, Tan’s appointment alone is a long-term positive for the firm.
“We believe that Mr. Tan is uniquely qualified to attempt a reboot of Intel,” he said.
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