Editorial: Intel Struggles Continue

Two years into his tenure, CEO Pat Gelsinger continues to oversee major product delays. As profits fade, he must consider axing some of the company’s emerging businesses to meet expense targets.

Linley Gwennap

When Pat Gelsinger started as Intel’s CEO, he promised to minimize schedule delays and deliver better financial results. Two years later, he’s made little progress on either front. The company’s financial problems have been widely reported: quarterly revenue has plunged 30% since Gelsinger took over, and net income (profit) has entirely disappeared. Although weakness in the PC and server markets caused much of this decline, AMD consistently outperforms Intel in the same markets, indicating significant share loss.

Customers switch to AMD because Intel products are often inferior, late to market, or both. For example, Intel’s flagship CPU cores are larger and less power efficient than AMD’s. But schedule delays exacerbate the problem, causing products to miss their market window. For example, the new Xeon processor code-named Sapphire Rapids reached production more than a year behind schedule, by which time AMD had introduced a next-generation competitor. Intel’s AI and GPU chips have also suffered major delays, although PC processors continue to roll out on schedule.

To boost profitability, Intel plans to cut annual expenses by $3 billion in 2023, representing a sizable 12% of nonmanufacturing expenses. It has already disclosed thousands of layoffs across its various business units. This approach pleases short-term investors but risks impeding ongoing projects and causing further delays. The company would be better served by shutting down at least one of its three programs that aim to build new businesses in markets where it has little share today: AI processors, GPU chips, and foundry services. To right the ship, Gelsinger must make some difficult choices.