Stiff competition, strategic missteps, and industry shifts: Pat Gelsinger's exit from Intel

On Monday, Chipmaker Intel announced that its chief executive officer (CEO), Pat Gelsinger, will be retiring from the role. Gelsinger steps down from the role after less than four years of tenure at one of the world’s most prominent technology companies. His departure comes when the chipmaker faces massive challenges to defend its position amid stiff competition from companies like NVIDIA and TSMC; a Bloomberg report said that Gelsinger was forced to step down after the Board lost faith in his company revival plans.

In the interim, Intel has appointed  David Zinsner and Michelle Johnston Holthaus as co-CEOs while it looks for a new replacement. Zinsner is executive vice president and chief financial officer, and Holthaus has been appointed to the newly created position of CEO of Intel Products, a group that encompasses the company’s Client Computing Group (CCG), Data Center and AI Group (DCAI) and Network and Edge Group (NEX).

“Pat spent his formative years at Intel, then returned at a critical time for the company in 2021. As a leader, Pat helped launch and revitalize process manufacturing by investing in state-of-the-art semiconductor manufacturing, while working tirelessly to drive innovation throughout the company,” Frank Yeary, independent chair of the board of Intel said in a statement. 

As per the Bloomberg report quoted above, Gelsinger outlined Intel’s plans to regain market share in a tense board meeting last week. It was at this meeting that he was given two choices — to announce retirement or risk removal. Gelsinger opted for the former.

Calling his departure from Intel ‘bittersweet’, Gelsinger said that leading Intel has been a lifetime honour. “It has been a challenging year for all of us as we have made tough but necessary decisions to position Intel for the current market dynamics,” he added.

Tough time for Intel

Gelsinger joined the 56-year-old company in 2021 when it already struggling to keep up its market position. At the time, Gelsinger pledged to return Intel to top position in four years' time. He also laid out a plan to produce a new central processing unit every year between 2021 and 2025. He also committed more than $100 billion in chip-plant investment in the US and abroad. 

Under this framework, Intel’s Ohio plant received funding through the US Chips and Science Act. However, this wasn’t much respite to company’s overall performance as it continued to face challenges due to fast industry shifts, rising costs, and competition.

Currently, Intel’s market capitalization stands 30 times less than Nvidia and half of AMD. Last month, S&P Global announced that rival Nvidia would replace Intel in the Dow Jones Industrial Average. Intel had the lowest share price of among the 30 Dow stocks, meaning it had the least influence on the index. Intel was replaced after a 25-year run.

In the last few months, reports have shown that Intel is planning heavy cost-cutting measures. It includes letting go of 15,000 employees and plans to sell its 150-acre Folsom campus while also reviewing other property holdings. 

Additionally, as part of its long-term plan to reduce losses, the company announced in September that it spin-off Intel Foundry to make it an independent subsidiary with “clearer separation and independence”

Gelsinger’s exit is poised to see more strategic changes Intel faces a significant challenge in the growing artificial intelligence computing market, where Nvidia has emerged as the dominant force. Once seen as a niche player, Nvidia’s chips have now become indispensable for AI and data centers, cementing its position as the world's most valuable publicly traded semiconductor company.