Summarize this content to 2000 words in 6 paragraphs in Arabic Intel chief executive Pat Gelsinger received an unusually direct demand from the company board in the spring of last year: pay closer attention to its strategy on artificial intelligence.According to three people familiar with the directive, the board expressed concern it would miss out on a new multibillion-dollar market to create chips that power generative AI which had emerged in the months after OpenAI launched ChatGPT. Gelsinger’s response was to set up an AI Acceleration office, charged with co-ordinating its AI plans across multiple business segments. The office would be led by Srinivas Lingam, transferred to California from his post at its AI product group in India. Yet, the US chipmaker remains far behind rival Nvidia and even AMD in the global market to sell AI chips in data centres. Intel expects $500mn in sales of its latest Gaudi 3 chips this year, compared to Nvidia’s tens of billions of dollars in sales of graphics processing units.Meanwhile, the company has been rocked by the departures of key executives, thousands of lay-offs and a plunging share price. Over the past year, Nvidia has added $1.4tn to its market capitalisation, which has accelerated to $2.6tn. By contrast, Intel has shed around $70bn of value to a market capitalisation of just $83bn. These troubles come with Gelsinger, appointed chief executive in 2021, more than three years into his five-year plan to turn Intel into a chipmaking powerhouse that rivals Taiwan Semiconductor Manufacturing Company, build new factories in the US and Europe, and catch up with the most advanced manufacturing processes. He has already separated the company’s chip design business from its manufacturing arm. Instead, attention is focused on Gelsinger’s relationship with his board. In August, a key board member charged with overseeing its crucial chip manufacturing strategy resigned. While the AI Acceleration office continues its work, Lingam moved to another position at Intel earlier this year. Gelsinger acknowledged at a recent Deutsche Bank conference that the company has had “a difficult few weeks”. He is expected to present the board this month with another restructuring plan, following a $10bn cost-cutting effort unveiled in August that included 15,000 lay-offs.Recently departed staff told the Financial Times that, while they agreed with Gelsinger’s strategy, the company is fumbling its execution. They described frustration at a sprawling internal bureaucracy, with a back and forth over lay-offs sapping morale. Intel is considering yet more changes. In recent days, Bloomberg reported that the company is working with bankers to consider other options. This includes: an IPO of its specialist chipmaking unit Altera, acquired for $16.7bn in 2015; a potential sale of its foundry business that makes chips for outside customers; and scrapping some factory projects including a politically sensitive site in Germany.That Intel could contemplate some of these changes “feels like moving the deckchairs around on the Titanic”, said Stacy Rasgon, analyst at Bernstein. “If you need the cash that badly, I think that’s a bigger problem.”Among Intel’s issues is heavy spending on building new factories. Its foundry business haemorrhaged $7bn in 2023. Ambitious sales targets set out in 2022, at the height of a boom in Covid-era demand for PCs, have not been met. These were supposed to help fund the massive investment plans.“I think Gelsinger’s biggest issue right now is he is losing credibility and losing legitimacy,” said G. Dan Hutcheson at TechInsights. “He’s been seen as the saviour of Intel. With the lay-offs, if that pain had been inflicted at the beginning [of Gelsinger’s five-year plan], the shares would be going up instead.”If Intel can ride out the storm, Hutcheson said, it could reach a “very profitable state” in 2026 or 2027 if it succeeds with a new manufacturing process called 18A, designed to create the latest cutting-edge chips. “The problem is you have to wait until then.”The board has pushed for more oversight of Intel’s strategy. Last year, Lip-Bu Tan, former chief executive of chip design software company Cadence, who was appointed to the board in 2022, was given additional responsibilities to guide the company’s critical foundry business. The role came with an additional restricted stock award of around $1mn. In August, Tan departed, fuelling further anxiety about the top of the company. Tan did not respond to requests for comment. There have been other high-profile departures. Stuart Pann, a longtime Intel executive who returned to the company in 2021 after a hiatus, was appointed head of its foundry business in March 2023. He left in June to join chip start-up Groq. Another veteran Shlomit Weiss, a top design engineer, departed in April. Lisa Spelman, who headed Intel’s Xeon line of data centre chips, left to become chief executive of hardware manufacturer Cornelis Networks in August. Keyvan Esfarjani, chief global operations officer, announced his departure the same month.Experts in key areas of foundry and AI have sometimes proven difficult to hire, insiders said. Major clients for Intel’s 18A manufacturing, with the notable exception of Microsoft, have yet to be announced.On Wednesday, Reuters reported that Broadcom, a potential key manufacturing customer, had run tests on the new chip manufacturing process, which had failed. Broadcom said it valued its relationship with Intel and that “we are evaluating the product and service offerings of Intel Foundry and have not concluded that evaluation”.A potential manufacturing partnership with SoftBank, owner of Arm, fell through earlier this year. The $5.4bn deal to buy Tower Semiconductor, which would have brought client-facing foundry talent into the company, collapsed after Chinese regulators failed to approve it in August last year.One bright spot is the Chips Act, passed by the Biden administration to support the country’s chip industry. In March, the government announced that Intel had been awarded an $8.5bn grant and $11bn loan to support its plants in Arizona, Ohio, New Mexico and Oregon, but the company is yet to receive the funding.The Department of Commerce declined to comment on Intel specifically, but reiterated that all grants under the Chips Act are subject to an ongoing and comprehensive due diligence process.Intel said it had “made significant progress to rebuild Intel’s process technology engine and re-establish product leadership in key segments such as the AI PC category”.It added: “The plan we announced last month will further strengthen our market competitiveness, improve our profitability and accelerate the next phase of our transformation.”
