New CEO Lip-Bu Tan told employees this week that he doesn’t consider Intel among the leading chip companies, a bracing message as the chipmaker began expansive layoffs in the face of severe technical and financial challenges.
“Twenty, 30 years ago, we are really the leader,” Tan said during a conversation broadcast to Intel employees around the world. “Now I think the world has changed. We are not in the top 10 semiconductor companies.”
Customers are giving Intel failing grades, Tan said, and the company is too far behind to catch up with industry leader Nvidia in developing technology to train artificial intelligence.
Intel’s turnaround will be a “marathon,” Tan said, describing the layoffs that began this week as an effort to make Intel more like rivals Nvidia, Broadcom and AMD, which Tan considers faster and more agile.
“We have to be humble,” Tan said, exhorting staff to listen to customers and respond to their needs. The Oregonian/OregonLive reviewed a recording of his comments.
Asked about Tan’s remarks on Intel’s position in the chip industry, a spokesperson said he was referring to market value, not technological leadership. But the subject of valuation never came up in Tan’s 20-minute conversation. His “Top 10” characterization came in response to a question about Intel’s culture.
It’s true, though, that Intel’s position in the chip industry’s pecking order has slumped badly. The company’s market value is around $100 billion, about half what it was just 18 months ago. Nvidia, by contrast, briefly hit a market value of $4 trillion on Wednesday — the first company ever to breach that threshold.
This week’s question-and-answer session with Tan coincided with the start of the mass layoff of thousands of Intel employees around the world.
Intel hired Tan in March, three months after the company’s board forced out his predecessor, Pat Gelsinger. Tan has addressed employees and investors just a few times since then, and hasn’t addressed the media at all, so this week’s remarks are a rare look at his thinking on Intel’s future.
Intel set plans Monday to lay off 529 Oregon workers by the middle of July. It’s in the process of laying off several hundred others at sites in California, Arizona and Israel.
Many more workers stand to lose their jobs in coming weeks as Intel shuts down its automotive business, outsources its marketing department and cuts up to a fifth of all jobs in its manufacturing operation.
Intel is cutting jobs in most other parts of the business, too. Tan said he believes a smaller Intel will move faster.
“The whole process of that (deciding) is so slow and eventually nobody makes a decision,” said Tan, a veteran semiconductor executive and investor who previously ran Cadence Design Systems.
Intel is playing catch-up in nearly every part of its business, the result of technological setbacks that date back nearly a decade. That has left Intel at a competitive disadvantage in its core PC and data center markets.
“There’s a lot of work to do,” Tan said, noting Intel’s loss of market share in data centers. He said its PC business is “doing a bit better,” but he said Intel needs to strengthen its architecture to meet the demands of advanced computing.
The company’s plight deepened significantly with the advent of artificial intelligence, which runs on processors from Nvidia known as GPUs. Intel has no advanced GPUs of its own and has been essentially shut out of the boom in demand for chips that train AI systems.
“On training I think it is too late for us,” Tan said. He said Nvidia’s position in that market is simply “too strong.”
Instead, Tan said Intel will focus on “edge” artificial intelligence, which brings AI capabilities directly to PCs and other devices instead of operating in centralized computers. He said Intel also wants to explore agentic AI, a young field that enables artificial intelligence to operate independently without continual direction from people.
“That’s an area that I think is emerging, coming up very big and we want to make sure that we capture,” Tan said. He said three new vice presidents hired last month could help Intel make headway in the AI business.
“Stay tuned,” Tan said. “A few more people are coming on board.”
Intel is preparing to introduce a new manufacturing process, called 18A, which the company hopes will make its chips more competitive with those from industry leader Taiwan Semiconductor Manufacturing Co.
At one time, Intel hoped 18A would be so advanced that other chip designers would hire Intel to use its factories to make chips for those other companies. In recent months, though, Intel has acknowledged that it has made little headway on that front.
Reuters reported last week that Tan might stop marketing 18A as a manufacturing process for outside companies. Instead, Intel might focus on attracting clients for its next generation, 14A.
In this week’s chat, Tan didn’t speak directly to that possibility. But he said Intel needs to demonstrate first that its processors are meeting the company’s own needs.
“Our number one priority is to make sure that our 18A is robust for our internal customer,” Intel’s own processors, Tan said this week. “And then second priority is starting to look at another, 14A, and that’s the next frontier.”
-- Mike Rogoway covers Oregon technology and the state economy. Reach him at mrogoway@oregonian.com or 503-294-7699.
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