{"id":2638,"date":"2024-08-02T21:10:25","date_gmt":"2024-08-02T21:10:25","guid":{"rendered":"http:\/\/mobiledave.me\/?p=2638"},"modified":"2024-08-07T00:21:21","modified_gmt":"2024-08-07T00:21:21","slug":"intel-was-once-a-silicon-valley-leader-how-did-it-fall-so-far","status":"publish","type":"post","link":"http:\/\/mobiledave.me\/index.php\/2024\/08\/02\/intel-was-once-a-silicon-valley-leader-how-did-it-fall-so-far\/","title":{"rendered":"Intel was once a Silicon Valley leader. How did it fall so far?"},"content":{"rendered":"
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Visitors visit the booth of Intel at the 2023 Apsara Conference in Hangzhou, East China\u2019s Zhejiang province, November 1, 2023. | CFOTO\/Future Publishing via Getty Images<br><\/figcaption><\/figure>\n

Intel stock is tumbling amid news that the company will lay off 15 percent of its staff after a steep decline in revenue and billions in losses in its chip foundry business<\/a>.\u00a0<\/p>\n

It\u2019s the largest drop for the company in half a century<\/a>; at Friday\u2019s closing bell, shares were trading at $21.48 \u2014 a price not seen since 2013.<\/p>\n

The company is scrambling to shore up reserves\u00a0by introducing layoffs and suspending stock dividends.\u00a0But even those moves may not be enough to return the veteran tech company to its once-vaunted spot as an industry leader, especially\u00a0in the face of heavy competition, particularly from rival chipmaker Nvidia<\/a>.<\/p>\n

Intel\u2019s bad week really is more of a bad quarter: It started back in April, when the company revealed during an investor presentation<\/a> that its chip manufacturing unit had, through a series of poor decisions, sustained $7 billion in losses in 2023, on top of a 31 percent decrease in revenue from 2022. Cost-cutting and other measures will save the company $10 billion in 2025, according to CEO Pat Gelsinger<\/a>.<\/p>\n

Semiconductor technology \u2014\u00a0which is crucial to everything from our phones to operating airplanes \u2014 was the foundation of Intel\u2019s business when the company started in the 1960s. (Co-founder Gordon Moore was responsible for Moore\u2019s Law, which theorized that semiconductor power would grow exponentially smaller, more powerful, and less expensive over time.) But as the company\u2019s recent announcements indicate, Intel is no longer the innovative leader it once was.\u00a0<\/p>\n

There are also concerns about the global semiconductor industry \u2014 shares of other major chip companies like Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung were down at closing on Friday, too, and industry leader Nvidia is reportedly facing an antitrust investigation by the Department of Justice<\/a>. But Intel is in a particularly difficult position.<\/p>\n

How did things get so bad for Intel?<\/strong><\/h2>\n

This is not the first time the company has had to implement cost-cutting measures \u2014 Intel did mass layoffs<\/a> back in October 2022, after a brief, Covid-powered bump in the company\u2019s fortunes.<\/p>\n

\u201cIn February \u201922, they put out revenue targets that \u2014\u00a0I mean, I use the phrase outlandish, they were ridiculously high,\u201d Stacy Rasgon<\/a>, senior analyst at Bernstein Research, told Vox. \u201cThey were sizing the company and sizing the investments to that COVID level of revenue,\u201d based on the need for technology that allowed people to work from home or for kids to attend school remotely \u2014\u00a0a business that collapsed nearly as quickly as it arose.<\/p>\n

But the current CEO, Pat Gelsinger, inherited a business that was coming off a decade of stumbles when he started in 2021. \u201cHe came into a situation that they were dire straits; they had no competitive product to really bring to market,\u201d while Jensen Huang\u2019s Nvidia dominated the curve on AI tech, Daniel Newman, CEO of the Futurum Group, told Vox.<\/p>\n

Intel\u2019s other recent big bet<\/a> has been its foundry business<\/a> \u2014\u00a0three facilities in the US and three overseas to manufacture semiconductor chips<\/a>, with other facilities in Asia and Latin America for testing and assembly. But that\u2019s gotten a bumpy start; for instance, Intel declined to invest in cost-effective extreme ultraviolet machines for its manufacturing facilities, then had to outsource 30 percent of the manufacturing to a rival company, TSMC.<\/p>\n

Intel is no longer ahead of the technological pack<\/strong><\/h2>\n

\u201cHistorically, Intel has been the company that was pushing the leading edge,\u201d Newman said. But in the lead-up to Gelsinger\u2019s tenure, the company \u201cmissed the AI transition,\u201d he said \u2014 and companies like Nvidia, AMD, and TSMC, which are manufacturing semiconductor chips that can be used to accelerate AI technology, filled the market. <\/p>\n

Nvidia, in particular, has become a dominant force. As my colleague Nicole Narea explained<\/a>, some of the technical capabilities of its earlier work in graphics cards for gaming translated well to the needs of generative AI. Starting in 2018, well before ChatGPT came on the scene, the company bet big on that possibility:<\/p>\n

\n

The company structured its research and development and mergers and acquisitions strategies to benefit from a coming AI boom.<\/p>\n

\u201cThey were playing the game when nobody else was,\u201d Newman said.<\/p>\n<\/blockquote>\n

Intel is now trying to catch up with its Gaudi technology<\/a>, but in the meantime, companies that used to use Intel products are shifting away from the company. Apple, for instance, switched from Intel processors to manufacturing their own processors in 2020 and reportedly relied on Google to build Apple Intelligence<\/a> \u2014 Intel wasn\u2019t even in the running.<\/p>\n

Intel will survive (for now), on the money saved from the layoffs and dividend pause. Government subsidies from the CHIPs Act, and investments from hedge funds like Brookstone and Apollo, which have bought into the foundry business, will also help. <\/p>\n

\u201cI think they are a critical infrastructure company to the US and to the world,\u201d Newman said. But getting back on track will depend on making sure the foundry business becomes profitable. <\/p>\n

\u201cEven if they\u2019re number two, or number three behind Samsung, we still need it \u2014\u00a0this demand for AI change, nobody can go fast enough,\u201d Newman told Vox.<\/p>\n

But even if Intel can slot itself into that number two or three spot, there\u2019s still the question of AI\u2019s place in the tech sector and society \u2014 whether it needs to be more tightly regulated, or if it\u2019s getting overhyped.<\/p>\n

\u201cIn general for AI, people are just nervous that the numbers have gotten so big, so quickly, you just worry about sustainability,\u201d Rasgon said. <\/p>\n

For now, the silver lining of Intel\u2019s current situation is that there\u2019s nowhere to go but up.<\/p>\n

\n

\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Visitors visit the booth of Intel at the 2023 Apsara Conference in Hangzhou, East China\u2019s Zhejiang province, November 1, 2023. | CFOTO\/Future Publishing via Getty Images<br> Intel stock is tumbling amid news that the company will lay off 15 percent of its staff after a steep decline in revenue and billions in losses in its chip foundry business.\u00a0 It\u2019s the largest drop for the company in half a century; at Friday\u2019s closing bell, shares were trading at $21.48 \u2014 a price not seen since 2013. The company is scrambling to shore up reserves\u00a0by introducing layoffs and suspending stock dividends.\u00a0But even those moves may not be enough to return the veteran tech company to its once-vaunted spot as an industry leader, especially\u00a0in the face of heavy competition, particularly from rival chipmaker Nvidia. Intel\u2019s bad week really is more of a bad quarter: It started back in April, when the company revealed during an investor presentation that its chip manufacturing unit had, through a series of poor decisions, sustained $7 billion in losses in 2023, on top of a 31 percent decrease in revenue from 2022. Cost-cutting and other measures will save the company $10 billion in 2025, according to CEO Pat Gelsinger. Semiconductor technology \u2014\u00a0which is crucial to everything from our phones to operating airplanes \u2014 was the foundation of Intel\u2019s business when the company started in the 1960s. (Co-founder Gordon Moore was responsible for Moore\u2019s Law, which theorized that semiconductor power would grow exponentially smaller, more powerful, and less expensive over time.) But as the company\u2019s recent announcements indicate, Intel is no longer the innovative leader it once was.\u00a0 There are also concerns about the global semiconductor industry \u2014 shares of other major chip companies like Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung were down at closing on Friday, too, and industry leader Nvidia is reportedly facing an antitrust investigation by the Department of Justice. But Intel is in a particularly difficult position. How did things get so bad for Intel? This is not the first time the company has had to implement cost-cutting measures \u2014 Intel did mass layoffs back in October 2022, after a brief, Covid-powered bump in the company\u2019s fortunes. \u201cIn February \u201922, they put out revenue targets that \u2014\u00a0I mean, I use the phrase outlandish, they were ridiculously high,\u201d Stacy Rasgon, senior analyst at Bernstein Research, told Vox. \u201cThey were sizing the company and sizing the investments to that COVID level of revenue,\u201d based on the need for technology that allowed people to work from home or for kids to attend school remotely \u2014\u00a0a business that collapsed nearly as quickly as it arose. But the current CEO, Pat Gelsinger, inherited a business that was coming off a decade of stumbles when he started in 2021. \u201cHe came into a situation that they were dire straits; they had no competitive product to really bring to market,\u201d while Jensen Huang\u2019s Nvidia dominated the curve on AI tech, Daniel Newman, CEO of the Futurum Group, told Vox. Intel\u2019s other recent big bet has been its foundry business \u2014\u00a0three facilities in the US and three overseas to manufacture semiconductor chips, with other facilities in Asia and Latin America for testing and assembly. But that\u2019s gotten a bumpy start; for instance, Intel declined to invest in cost-effective extreme ultraviolet machines for its manufacturing facilities, then had to outsource 30 percent of the manufacturing to a rival company, TSMC. Intel is no longer ahead of the technological pack \u201cHistorically, Intel has been the company that was pushing the leading edge,\u201d Newman said. But in the lead-up to Gelsinger\u2019s tenure, the company \u201cmissed the AI transition,\u201d he said \u2014 and companies like Nvidia, AMD, and TSMC, which are manufacturing semiconductor chips that can be used to accelerate AI technology, filled the market.  Nvidia, in particular, has become a dominant force. As my colleague Nicole Narea explained, some of the technical capabilities of its earlier work in graphics cards for gaming translated well to the needs of generative AI. Starting in 2018, well before ChatGPT came on the scene, the company bet big on that possibility: The company structured its research and development and mergers and acquisitions strategies to benefit from a coming AI boom. \u201cThey were playing the game when nobody else was,\u201d Newman said. Intel is now trying to catch up with its Gaudi technology, but in the meantime, companies that used to use Intel products are shifting away from the company. Apple, for instance, switched from Intel processors to manufacturing their own processors in 2020 and reportedly relied on Google to build Apple Intelligence \u2014 Intel wasn\u2019t even in the running. Intel will survive (for now), on the money saved from the layoffs and dividend pause. Government subsidies from the CHIPs Act, and investments from hedge funds like Brookstone and Apollo, which have bought into the foundry business, will also help.  \u201cI think they are a critical infrastructure company to the US and to the world,\u201d Newman said. But getting back on track will depend on making sure the foundry business becomes profitable.  \u201cEven if they\u2019re number two, or number three behind Samsung, we still need it \u2014\u00a0this demand for AI change, nobody can go fast enough,\u201d Newman told Vox. But even if Intel can slot itself into that number two or three spot, there\u2019s still the question of AI\u2019s place in the tech sector and society \u2014 whether it needs to be more tightly regulated, or if it\u2019s getting overhyped. \u201cIn general for AI, people are just nervous that the numbers have gotten so big, so quickly, you just worry about sustainability,\u201d Rasgon said. For now, the silver lining of Intel\u2019s current situation is that there\u2019s nowhere to go but up.<\/p>\n","protected":false},"author":1,"featured_media":2640,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-2638","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tech-policy"],"_links":{"self":[{"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/posts\/2638"}],"collection":[{"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/comments?post=2638"}],"version-history":[{"count":2,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/posts\/2638\/revisions"}],"predecessor-version":[{"id":2641,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/posts\/2638\/revisions\/2641"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/media\/2640"}],"wp:attachment":[{"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/media?parent=2638"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/categories?post=2638"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/mobiledave.me\/index.php\/wp-json\/wp\/v2\/tags?post=2638"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}