Intel CEO Pat Gelsinger steps down just a week after the chipmaker receives $8 billion from Biden administration

Just a week after receiving an $8 billion funding boost from the Biden administration, Intel CEO Pat Gelsinger has stepped down from the helm of the struggling chipmaker. The announcement comes less than four years into his tenure, leaving the company grappling with a high-stakes turnaround plan.

Gelsinger’s resignation, which took effect December 1, puts Intel’s future in the hands of interim co-CEOs David Zinsner, the CFO, and senior executive Michelle Johnston Holthaus, as the board begins the search for a permanent replacement, Reuters reported. The decision comes during a critical period for Intel, as it works to regain its competitive edge in chip manufacturing.

Gelsinger’s exit comes before the completion of a costly four-year strategy aimed at reclaiming Intel’s leadership in producing the fastest and smallest computer chips—an edge the company lost to Taiwan Semiconductor Manufacturing Co. (TSMC), which supplies key competitors like Nvidia. While Gelsinger assured both investors and U.S. officials, who have subsidized Intel’s recovery efforts, that his manufacturing plans are still on track, the results won’t be clear until next year, when Intel aims to produce a flagship laptop chip in its own factories.

Shares of Intel rose 3.7% in early trading following the announcement, though the company’s stock has lost more than half its value this year. Intel was recently removed from the Dow Jones Industrial Average, and replaced by Nvidia, which has surged in market dominance.

Leadership in Transition

The decision to appoint Zinsner and Holthaus as interim leaders follows U.S. officials granting Intel $7.86 billion in subsidies to support its manufacturing plans. Independent board chair Frank Yeary emphasized that while the company has made strides in manufacturing competitiveness, significant work remains to regain investor confidence. “We are committed to restoring trust and building a stronger future for Intel,” Yeary said in a statement.

We covered Intel back in August, noting how the once most valuable U.S. chip company lost its way, plagued by layoffs and outpaced by competitors after a series of blunders. In April, Intel reported a staggering 133% year-over-year decline in earnings per share for the first quarter, marking the biggest quarterly loss in the company’s history. Revenue also took a significant hit, dropping nearly 36% to $11.7 billion.

The Spending Gamble

Gelsinger’s strategy, unveiled in July 2021, included a $20 billion investment in new factories in Ohio and an expanded workforce, swelling Intel’s employee count to a record 132,000. However, these moves coincided with a downturn in demand for laptops and PCs, slashing Intel’s margins and stock price. This financial strain sparked speculation about potential takeovers and forced the company to consider layoffs and asset sales.

Adding to Intel’s challenges, Gelsinger failed to deliver a competitive AI chip to rival Nvidia, whose dominance in powering tools like ChatGPT has pushed its valuation toward $3 trillion. “Leading-edge innovation and execution were absent during Gelsinger’s leadership,” said Hans Mosesmann, analyst at Rosenblatt Securities.

Foundry Aspirations Fall Short

Central to Gelsinger’s plan was positioning Intel as a key player in contract chip manufacturing, or “foundry” services. Despite securing customers like Microsoft and Amazon, these deals haven’t yet generated the high volumes needed to make Intel’s factories profitable. This lack of progress, coupled with high spending, reportedly created friction within the board. Lip-Bu Tan, a former board member with a history of turning around struggling chip firms, departed over disagreements with Gelsinger’s approach.

What’s Next for Intel?

Intel’s board now faces the dual challenge of selecting a leader capable of executing its ambitious vision while managing tensions both internally and externally. With the semiconductor industry becoming increasingly competitive, the stakes for Intel’s next chapter couldn’t be higher.