Author: Zhou Yuan/Wall Street News

Three months after news of the divestiture of the IF (Intel Foundry) business came out, on December 2, after the US stock market, Intel issued a notice announcing the retirement of CEO Pat Gelsinger (Pat Gelsinger) and his resignation from the board of directors at the same time.

The notice came into effect on December 1. This incident shocked the American tech community. According to the news, Intel's stock price first rose (nearly 6%) and then fell (-0.5%).

On August 30, Wall Street News confirmed the news that Intel will divest the IF business from the supply chain; on September 1, while communicating with the industry about the influence that the divestiture of the IF business had on Kissinger and Intel, Wall Street News wrote, “This overshadowed Kissinger's prospects for reviving Intel... If it does land, then it will be unknown whether Kissinger will stay with Intel.”

I didn't expect the words to come true. Today, three months later, Kissinger was actually “resigned.”

Just after Intel's announcement, news broke in the media that Pat Kissinger's retirement was not entirely voluntary, but was “ousted” by the board of directors.

Kissinger hasn't been in charge of Intel for very long. It starts in February 2021 and ends in early December 2024. During this period, Intel's stock price fell from $52 to around $24, a drop of 54%, and the market value evaporated from $120 billion+ to $103.21 billion.

In line with Intel's tradition of choosing a CEO to understand technology, Kissinger was regarded as a “savior” when he took charge of Intel in February 2021. However, during his tenure, Kissinger, a technical proponent promoted the IDM 2.0 strategy. Since Kissinger underestimated the difficulty of the OEM business, this strategy was very expensive (requiring an investment of 100 billion dollars), but had little effect.

The cost of Kissinger's mistake in judging the difficulty of the foundry business was that Intel paid about 17.5 billion dollars in real money. One month after becoming Intel CEO in February 2021, Kissinger proposed the IDM 2.0 strategy.

This strategy completely overhauls the original IDM strategy and mainly includes key topics such as Intel's optimization of internal factory networks, expansion of third-party foundry production capacity, and construction of Intel Foundry Services (IFS).

On August 29, Kissinger said at the Deutsche Bank conference, “Entering contract manufacturing (that is, OEM) is more challenging than expected. I'm underestimating the heavy workload beyond producing premium (silicon) wafers; other chip companies seem willing to continue working with Asian manufacturers rather than sending their products to our US factory. This is both surprising and disappointing.”

Intel's hopes of leading Intel out of the quagmire through a technical expert CEO seem to have been dashed, and Intel's next CEO seems difficult to generate from within.

Because David Zinsner and Michelle Johnston Holthaus, who served as interim co-CEOs while Intel's board of directors was looking for a new CEO, Holthaus was the CEO of the newly established Intel Product Division: this division integrates the company's Customer Computing Division (CCG), Data Center and Artificial Intelligence Division (DCAI), and Network and Edge Computing (NEX).

Kissinger's most important “legacy” — Intel's Foundry Services division, which will maintain its leadership structure until a new CEO is found.

Why is it so hard to create a new CEO from within?

Because in line with the tradition that CEOs must be technical experts, neither Zinsner, Frank Yeary, the current independent chairman of the board of directors who is the interim executive chairman, or Holthaus, understand technology.

But today is different from the past. Even Kissinger, who knows technology, hasn't caught up with AI giant Nvidia (Nvidia surpassed Intel in 2023)? However, while the interim leadership is currently in effect, Kissinger's original goals, it seems, will be maintained, at least verbally.

IDM 2.0 is Kissinger's most important “governing” legacy. Among them, the advanced process roadmap involved in the IF business has been unanimously approved by Intel's senior management.

Although it is unknown whether the IF business will continue to be an independent division of Intel or will be spun off into an independent company — Intel previously announced the spin-off of its wafer foundry business responsible for chip production and the establishment of an independent division, Intel Foundry, but the 18A process involved in IF was mentioned by Wall Street analysts as a key move to revive Intel.

Logan Purk, senior research analyst at Edward Jones, said, “Kissinger's core strategy during his time as CEO was to ensure that Intel is leading the way in manufacturing processes, or at least on par with competitors. If they don't succeed in 18A, then all previous efforts will be in vain.”

Although analysts believe that Intel's future lies in the success of the 18A process, Intel's interim leadership team did not see it that way.

In the announcement, Intel emphasized Kissinger's contribution to reviving Intel's foundry business, but also emphasized that Intel's top priority right now is to “place the product division at the core of all work.”

This shows that Intel has downgraded the importance of the IDM 2.0 strategy promoted by Kissinger. In the future, Intel's focus will be on improving product competitiveness.

The announcement also clarifies Intel's current tasks — Intel will continue to act urgently to meet priorities: streamlining and strengthening the product portfolio, improving manufacturing and foundry capabilities, and optimizing operating expenses and costs. Strive to build a leaner, simpler, and more agile Intel.

This shows that Intel is aware of management issues such as inefficient internal mechanisms and bloated departments. Earlier, a technology manager at Intel told Wall Street that “the Intel department is bloated and slow to respond to market changes.” This is a major management issue.

However, Intel is not for nothing. At least Intel still ranks first in the PC chip market and maintains a leading position in the x86 (the most mainstream chip design architecture) data center chip market.

According to Mercury Research's November 2024 data, in the third quarter of 2024, Intel's x86 server chip market share was about 75%.