The departure of Pat Gelsinger as Intel CEO on Dec. 1 took some people by surprise, but not everybody. Long-time Intel observer Mario Morales believes Gelsinger’s last day was baked in alongside the 15,000 layoffs announced in August and set to be finalized by Nov. 30.
“That November 30th date was when the Intel reduction in force was to be finished. In this case it’s like the captain goes down with the ship, especially given the size of the reduction, “ Morales said in an interview with Fierce Electronics on Monday. Morales is a group vice president at IDC overseeing market analysis for semiconductors, storage and related areas and has followed Intel for decades.
“Gelsinger’s departure will be challenging for the company,” he said. “He’s not an easy replacement. It will be hard to find someone to make the changes that need to be made.
“Whoever replaces Pat has to have a lot more focus and the ability to make tough decisions. Focus and execution will be key.”
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Morales said the end apparently became obvious to the Intel board in August when Gelsinger announced a four-year spending reduction of $10 billion and 15,000 layoffs with some semiconductor production timetables pushed out by months. “People were upset at the August move with timetables pushed and Pat could not overcome that,” he added.
Over his three years as Intel CEO, Gelsinger had pushed ambitious goals, including fabricating chips and pushing for five design nodes in four years. “He made very lofty goals. It was extremely hard and a tough challenge to turn such a great company around,” Morales said.
The decision to name as interim co-CEOs CFO David Zinsner and Michelle Johnston Holthaus, general manager of client computing, is a good move, as the board searches for a new CEO, likely from the outside, he added.
The board decided in April to reorganize the company into two groups for chip design and chip fabrication, which appeared to be a play for outside suitors to buy one or the other. But now that Intel has recently accepted $7.86 billion in a grant from the US CHIPS Act for four manufacturing sites in the US, it will be harder to split in two.
Intel’s continuing biggest problem is that Intel’s roadmap doesn’t align well with the markets buying its chips, Morales said. The next CEO will need to know Intel very well and maneuver it to make it unique.
Aligning with the market means, essentially, a big focus on developing an effective GPU or accelerator chip to reach the AI market that is now being dominated by Nvidia with AMD in a distant second, he said. “Intel has Gaudi 2 and 3 as a stop gap and they need something that competes head on with AMD and then Nvidia. Ultimately, today, they don’t have a GPU and that’s a wide gap. It cannot just be Xeon.”
Morales admits it could take years to develop such an accelerator beyond Gaudi. When Lisa Lu took over at AMD in 2014, it took until 2017 to release the Epyc CPU. “That’s what changed that company,” he noted.
Another way to align Intel products to market needs is to continue Intel’s strong lead in client computing silicon where Intel maintains 72% of the enterprise PC market. “Intel hasn’t ceded much to AMD in client,but needs to hit a home run with AI PCs and Intel needs to [continue] to be there and find someone who understands enterprise needs,” Morales said.
Both Lunar Lake and Arrow Lake for client machines are being fabricated at TSMC and Intel has plans to move to next-generation Panther Lake on the 18A process in the second half of 2025 on its own internal fabrication facilities. “Intel has to hit that window and be compelling enough for customers,” Morales said. “It’s hard to transition this stuff and TSMC has been so good, why move away? If you are successful, why risk moving past? That’s a decision the new leader will make.”
Given Gelsinger’s departure and the problems of the last two years, it is fair to wonder if Intel’s vaunted 56-year reputation is still intact. Is Intel still a great company given everything that’s happened?
“Intel is still a great company, I think so,” Morales said. “Intel has good people that are very good, even though there are still moats to grow in and the match of products they are serving in client computing and data center and AI. Mainly they need to get the AI product portfolio right and start taking on the competition there.”