Image source: Intel
There is no point in idealizing Gelsinger, because under his leadership the company made many mistakes. But he had a plan to bring it out of the crisis, he was one of the few with knowledge in the field of semiconductor production, and he wanted to do this work. Gelsinger relied on the production of semiconductors not only for Intel, but also for third-party customers. With some naivety, he intended to start producing chips on hundreds of thousands of silicon wafers, although at the initial stage tens of thousands were a significant problem. The CEO directed funds from profitable divisions to semiconductor production, which in the long term could, in his opinion, make the company a market leader. But in the short term, the implementation of his plan did not provide financial returns, the company showed significant losses, and the board of directors could not stand it.
Gelsinger’s dismissal at the last moment before the launch of production using 18A (1.8 nm) technology, according to the analyst, can be compared to stopping the last course of chemotherapy for cancer treatment. Rather than see the long and painful process through to completion, the board will likely let Intel die and the company be sold off piecemeal. This will help maximize the stock’s value in the short term, but will generally deprive the company of its long-term prospects. A predictably short-sighted move for a board of directors in which 7 out of 11 members have no technical knowledge at all. Many of them have been on the board of directors for a long time, which means they are responsible for the crisis into which Intel was led – and they remain in their posts to this day. Among them are people who hold similar positions in other companies, that is, professional members of boards of directors. And Gregory Smith, the head of the audit committee, previously served as executive vice president of Boeing, another giant experiencing the same setbacks as Intel.
The chairman of the board of directors of Intel since the beginning of 2023 is Frank Yeary – he has been on the board since 2009, and was appointed to the new position two years after Gelsinger took office. Yeary is an expert in mergers and acquisitions, and despite the fact that Intel has not officially made any fateful announcements, there have been rumors in the industry about the likely sale of all or part of Altera, as well as that Qualcomm could absorb Intel itself . However, there is a significant counterargument to the latter scenario: Intel is counting on receiving government funding under the American “Chip Law,” which provides for strict restrictions on mergers and acquisitions.
Intel is a public company, and decisions are made not only by the board of directors, but also by investors – shareholders. Most large investors vote according to the recommendations of consulting firms Glass Lewis and ISS – as a rule, their decisions coincide with the decisions of the board of directors, and even if something drastic happens, this script does not change. When investors begin to scrutinize Intel’s situation, they rightly note that it seems too complicated – they have no incentive to fix anything when they can abandon Intel securities in favor of shares of another company. As a result, both the board of directors and investors are on autopilot, which explains how unqualified people ended up on the board of directors – no one made an effort to turn off this autopilot, and the once greatest semiconductor company in the United States fell into decline.
Not surprisingly, these people fired the technically competent executive they needed to save Intel. And there were good reasons for this, since Gelsinger’s naive optimism could seem delusional. The transcript of the board meeting talks about “cost optimization,” meaning that he did not like Gelsinger’s overly optimistic plans for semiconductor production – he was directing too many resources to the unprofitable part of the business. But laymen refused to acknowledge that the manufacturing unit had a chance to make the company one of the two players in the world, along with TSMC. Abandoning this plan in favor of releasing finished products under its own brand leaves Intel in the position of one of many.
The situation cannot yet be called hopeless: on December 5, Intel announced that it had appointed two more people to the board of directors: former CEO of the Dutch ASML Eric Meurice and interim CEO of Microchip Steve Sanghi. If it’s not too late, this is a step in the right direction.