Intel’s incoming CEO, Lip-Bu Tan, is preparing sweeping changes to the company’s chip manufacturing operations and artificial intelligence strategies as he formally resumes leadership on Tuesday.
According to Reuters, two people familiar with his plans stated that Tan’s agenda includes a revamp of Intel’s AI approach and workforce reductions aimed at streamlining a management layer he reportedly views as sluggish and bloated.
A key focus will also be restructuring Intel’s manufacturing arm, which has shifted in recent years from producing chips solely for Intel to also serving external clients like Nvidia.
While the proposals are still under development and may yet be adjusted, the reported moves according to Reuters reflect an ambitious push to reinvigorate the struggling tech giant. Intel shares rose more than 8% in mid-day trading on Nasdaq following news of the expected changes.
At a town hall meeting after his appointment last week, Tan reportedly told employees that the company will need to make “tough decisions,” according to two individuals briefed on the meeting.
Semiconductor industry analyst Dylan Patel criticised former CEO Pat Gelsinger’s leadership, saying a core issue was that he was “too nice.” “He did not want to fire a bunch of middle management in the way they needed to,” Patel added.
Tan, 65, previously led chip design software company Cadence and served as an Intel board member before stepping down last August. His return comes after what industry observers describe as a decade of missteps by past leadership, including missing opportunities in smartphone chips and the AI processor market, gaps that have allowed rivals like Arm Holdings and Nvidia to surge ahead.
In 2024, Intel posted a $19 billion annual loss, its first since 1986.
In the immediate term, Tan is expected to prioritise performance improvements at Intel Foundry, which manufactures chips for companies including Microsoft and Amazon. He also plans to reintroduce chip production for AI servers while expanding into software, robotics and foundational AI models.
“Lip-Bu will be spending a lot of time listening to customers, partners and employees as he comes on board and works closely with our leadership team to position the business for future success,” an Intel spokesman said in a prepared statement.
Intel declined further comment and did not make Tan available for interview. His venture capital firm, Walden Catalyst, also did not respond to requests for comment.
Tan’s direction appears to echo elements of his predecessor’s strategy. Gelsinger had aimed to transform Intel into a major contract chip manufacturer to rival Taiwan Semiconductor Manufacturing Co. (TSMC), investing billions in new plants across the U.S. and Europe. But those ambitions were scaled back amid weak demand for Intel’s core products.
According to sources, Tan had been critical of Gelsinger’s execution. Intel’s shift to external chip manufacturing under Gelsinger reportedly failed to match the service and reliability standards set by TSMC, resulting in delays and testing issues.
Tan’s perspective reportedly stems from months of reviewing Intel’s manufacturing systems, following his 2023 board appointment to a special oversight role. Sources say he became frustrated with a culture he believes has lost the “only the paranoid survive” spirit championed by former CEO Andy Grove. He also concluded that excessive staffing was hampering decision-making.
Tan had previously presented his ideas to Intel’s board, but they were not adopted. He resigned in August over those differences, sources said. Now, returning as CEO, he is expected to reassess the workforce, which stood at about 109,000 at the end of 2024 after roughly 15,000 job cuts.
Despite planned restructuring, Tan is under pressure to make Intel’s current manufacturing processes work. The upcoming Panther Lake chip, equipped with advanced AI capabilities and produced using Intel’s new “18A” techniques, are seen as critical to the company’s financial recovery this year.
In a company memo published Wednesday, Tan signalled he iDDntends to retain control of the factories and restore Intel’s standing as a “world-class foundry.”
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Industry insiders say the success of Intel’s contract chip manufacturing depends on securing at least two major customers to commit to high-volume production. Tan is expected to drive improvements in Intel’s processes to attract companies like Nvidia and Google.
Intel has recently made strides in its chip manufacturing and has already begun test runs with Nvidia and Broadcom, Reuters reported. Advanced Micro Devices is also evaluating the updated process.
Tan is expected to focus on improving chip yield, the number of functional chips produced per silicon wafer, as Intel scales up its first in-house chip under the 18A process.
The long-term goal is to shift toward annual AI chip releases, akin to Nvidia’s model. However, sources say it will likely take until at least 2027 for Intel to deliver a compelling new architecture for a first AI chip.
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