Intel CEO Pat GelsingerThe company’s ambitious three-year effort to restore the 56-year-old American chipmaker to its former glory has failed due to strategic mistakes, manufacturing setbacks and mounting financial losses, forcing the company to lay off 15,000 employees and fundamentally restructure its operations.
Under Gelsinger’s leadership, Intel’s revenue has fallen to $54 billion in 2023, nearly a third less than when he took office in 2021. The company now faces its first annual net loss since 1986, with analysts expecting a deficit of $3.68 billion this year, Reuters reported. learned. The stock has crashed 66% from its peak during Gelsinger’s first months as CEO.
“This is painful news to share,” Gelsinger wrote in a memo to employees. “Our revenues have not grown as expected and we have not yet fully benefited from powerful trends, like AI.”

TSMC partnership deteriorates, missed AI opportunity

One of Gelsinger’s first missteps came just months into his term when he publicly questioned Taiwan’s stability, thereby offending its crucial manufacturing partner, TSMC. “Taiwan is not a stable place,” he said at a technology conference in December 2021, according to sources familiar with the matter.
This diplomatic error cost Intel dearly. TSMC took a valuable 40% discount on its 3-nanometer wafers worth $23,000, significantly impacting Intel’s profit margins on chips made by the Taiwanese giant, Reuters reported .
In the booming artificial intelligence sector, Gelsinger’s optimistic public projections have clashed with internal realities. As Intel teams estimated peak sales of AI chips at $500 million, Gelsinger pushed to make public announcements of a billion-dollar sales pipeline match market expectations, officials said. sources at Reuters. The company then quietly revised its 2024 AI revenue target to $500 million.
The AI ​​miscalculation has extended to customer relationships. Sources say Gelsinger oversaw a deal to make custom chips for Alphabet’s Waymo self-driving taxis, personally discussing the deal with Alphabet’s CEO. Sundar Pichai. However, Intel later canceled the project due to deteriorating financial conditions, paying a fee to Alphabet after threatening legal action.

Manufacturing problems weigh on recovery plans

Intel’s ambitious 18A chip manufacturing process, the heart of Gelsinger’s $60 billion foundry expansion strategy, has encountered significant obstacles. Initial testing by potential customer Broadcom revealed disappointing results, with only 20% of chips passing quality tests, well below industry standards.
In response to these challenges, Intel announced a major restructuring of its foundry business as an independent subsidiary. The restructuring provides Intel Foundry with “clearer separation and independence” from the parent company, including its own operating board and separate financial reporting.
Gelsinger said the structure would allow “flexibility to evaluate independent sources of financing” for the troubled foundry company, which posted operating losses of $7 billion in 2023 and $2.8 billion additional during the last quarter.
While Intel scored a significant victory with a multi-year, multi-billion dollar deal with Amazon Web Services To produce an “artificial intelligence fabric chip” using the 18A process, other major potential customers, including Apple and Qualcomm, have declined to use the technology, sources familiar with their decisions told Reuters.
Manufacturing challenges forced Intel to suspend construction of new chip factories in Germany and Poland for about two years, citing “anticipated market demand.”
“All eyes will remain on us,” Gelsinger acknowledged, emphasizing the importance of restructuring and new partnerships in Intel’s turnaround efforts. However, a recent supplier document indicates further delays in the deployment of 18A technology, with customers having little prospect of high-volume production before 2026.

CEO Gelsinger’s ‘painful news’ for employees as chipmaker

“This is painful news for me to share,” Gelsinger wrote to employees. “We need to align our cost structure with our new operating model and fundamentally change the way we operate. We will reduce levels, eliminate overlapping areas of responsibility and stop non-essential work.”
Cost-cutting measures have extended globally, to Intel’s operations in Israel, where even basic employee benefits have been eliminated. In a telling sign of the scale of the cuts, Israeli employees recently arrived at work to find empty kitchens and a notice announcing the end of free beverage services. Vehicle benefits for senior employees have also been reduced, effectively reducing some salaries by 10%.
In a radical reversal of strategy, Intel is currently exploring the sale of a minority stake in Altera, its programmable chip subsidiary, seeking a deal that values ​​the unit at around $17 billion. This represents a significant change for Intel, which acquired Altera for $16.7 billion in 2015 and had, as recently as last month, described it as being central to the company’s future. Intel is also shutting down Granulate, a startup acquired for $650 million less than three years ago, as part of its transformation process.
The harsh reality of Intel’s situation is evident in its workforce. “Our annual revenue in 2020 was approximately $24 billion higher than last year, but our current workforce is actually 10% larger than then,” Gelsinger acknowledged in his note to staff. “There are many reasons for this, but it is not a sustainable path forward.”
The company’s restructuring efforts go beyond staff reductions. Intel announced plans to reduce its global real estate footprint by about two-thirds and suspend construction of new chip factories in Germany and Poland for about two years. However, the company will continue its U.S. manufacturing plans in Arizona, Oregon, New Mexico and Ohio, supported by $3 billion in funding from the CHIPS Act.

Intel CEO Pat Gelsinger is “confident” about the company’s “turnaround” plan.

Despite the setbacks, Gelsinger remains optimistic about Intel’s turnaround prospects. “I am confident we will achieve this,” he told Reuters in August. “In three years, yeah. This one’s coming, baby.”
However, with Intel now the worst-performing tech stock in the S&P 500 this year and facing intense competition in the AI ​​and traditional chip markets, the company’s path to recovery remains uncertain.