The Fall of a Giant: How Intel’s Complacency Led to Its Downfall
A Culture of Arrogance
Intel, once the iconic chipmaker, has seen its shares plummet 60% in 2024. The company posted its largest loss in its 56-year history in its latest quarterly earnings report, and its market cap has dropped 80% since 2000. Industry insiders and analysts point to a culture of complacency, short-term thinking, and lack of execution as the root cause of Intel’s decline.
Rivals Catch Up
While Intel was resting on its laurels, its rivals were innovating and improving. AMD, Arm, and Nvidia have all made significant gains, with their stocks rising 93%, 101%, and 173%, respectively, in 2024. Intel’s x86 architecture, once the gold standard, is losing share to Arm-based chips and AI-focused GPUs.
Failed Leadership
Former CEO Pat Gelsinger’s promise to turn things around by launching a foundry business was met with skepticism. His aggressive capital spending and hiring sprees were followed by layoffs, which depressed morale. Insiders describe Gelsinger as having a “God complex,” feeling that Intel’s competitive advantage was insurmountable.
The Rise and Fall of 18A
Intel’s last hope, the 18A advanced manufacturing process, has been called into question. Initially promised for high-volume production in 2025, the target has been pushed back, and internal testing has shown it’s not ready. Meanwhile, Intel has already purchased machinery for its successor process, 14A.
A Board in Disarray
Gelsinger’s ousting by the board has raised questions about its effectiveness. The board has been criticized as “extremely weak” and lacking “hardened semiconductor people.” Notably, the board added two leading semiconductor experts days after Gelsinger’s exit.
A Legacy of Innovation
Intel’s co-founder Bob Noyce has the greatest claim to the founding of Silicon Valley. The company invented the world’s first microprocessors and the x86 architecture. However, after the dot-com bust, Intel invested in multiple projects that never materialized or failed to reach their potential.
A National Security Risk
Chipmaking is becoming an increasingly important national security issue as US-China relations deteriorate. The US government is betting on Intel, sinking nearly $8 billion in CHIPS Act funding into the company’s existing and future foundries. But the money adds to Intel’s conundrum: Its product business would be better off outsourcing all chipmaking to TSMC, but that would leave its manufacturing division with no revenue.
A Tough Road Ahead
Intel’s revenue for the upcoming quarter is expected to fall more than 10% year over year, and earnings per share are projected to drop 77%. The company named CFO David Zinsner and former head of client computing Michelle Johnston Holthaus as interim co-CEOs. Analysts say Intel should spin off or divest its foundry business, but it has to maintain a 50.1% stake to keep its CHIPS Act funding. Whoever fills the CEO slot will have a tough ride ahead.
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