In a shocking turn of events, Pat Gelsinger has stepped down from his position as CEO of IntelThis announcement, made on the evening of December 2, came before the opening of the US stock market, marking a sudden end to his tenure effective December 1. Just a week prior, Gelsinger had heralded a $7.86 billion funding confirmation from the Chips and Science Act, the largest single disbursement to dateThese contrasting moments underscore not just the abruptness of his departure, but also the palpable disconnect between Intel's aspirations and its ongoing struggles.

Typically, in the realm of American technology firms, such sudden departures are accompanied by a transition period lasting one to two monthsHowever, the Intel board appeared to have exhausted its patience with Gelsinger, hastily announcing his exit without having identified a clear successorInstead, they appointed CFO David Zinser and product division CEO Michelle Johnston Holthaus as co-interim CEOs

It seems that the board believed that an empty seat in the corner office could not possibly inflict more damage than Gelsinger had already wrought on the company.

Gelsinger's initial rise to the top of Intel came with significant expectationsAppointed in early 2021, he spearheaded a series of sweeping reforms, including restructuring its foundry business and introducing the IDM 2.0 modelHowever, these bold initiatives instead saw Intel veering dangerously off course, plagued by a string of disappointing quarterly performancesThis culminated in an announcement in August that the company would suspend shareholder dividends while also unleashing significant layoffs worldwide.

Over the past four years, while the S&P 500 index surged by 53%, Intel found itself in dire straits, losing a staggering $150 billion in market capitalization during the same periodThus, Gelsinger's "undignified" exit, characterized by the board's decision to let him go without a replacement, was not without justification.

The question now is, where does Intel go from here? How will Gelsinger's successor navigate the choppy waters left in the wake of his predecessor's ambitious, yet ultimately faltering, strategies? Gelsinger had hoped to realize a vision that would elevate Intel, but it appears that aspiration did not materialize as planned.

Before his leadership at Intel, Gelsinger was cloaked in a mantle of accolades

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He was the protégé of Andy Grove, the legendary former CEO, and had made history as the company's youngest senior vice president and its first CTOEven during a brief departure from Intel to VMware, he managed to triple the company's revenue and was lauded as an exceptional CEO in his own rightAt VMware, Gelsinger successfully transitioned the company from a software service provider to a cloud computing giant within two years, perhaps sowing the seeds for his later ambition at Intel.

Upon returning to Intel, Gelsinger was eager to make his markIn his inaugural address, he immediately laid out plans to reorganize the foundry businessHowever, this vision faced skepticism from the outset, as the semiconductor industry was experiencing an increasing trend towards specialization, particularly distinguishing between chip design and a separate foundry processThe rationale rests on the understanding that design firms are indirect participants in the end-market competition, driven by the relentless pace of technological innovation necessitated by both the Internet and mobile revolutions

These chip designers cannot shoulder the massively capital-intensive burdens of establishing and optimizing fabrication lines, a reality that underpins the ascent of companies like TSMC.

In an industry that increasingly favors specialization, Intel's dual approach of manufacturing and design appeared to have become an anachronismGelsinger, however, believed that Intel's struggles in advancing its 10nm process stemmed from its own foundry operations being insufficiently robustThis perspective echoed sentiments from industry stalwarts, like AMD’s founder Jerry Sanders, whose famous quote – "Real men have their own fabs" – reflected a bygone belief that manufacturing prowess equated to market leadershipHowever, even AMD eventually succumbed to the fabless business model.

Gelsinger's ambition was not solely about reorganizing Intel’s foundry; he initiated the IDM 2.0 strategy, which redefined the company’s vertical integration model

This model kept manufacturing in-house while extending foundry services to third-party designers, allowing for dual dependencies that were intended to buttress Intel's capabilitiesCoupled with the "Four Nodes in Five Years" strategy—aiming to tackle five specific process nodes by 2025—Gelsinger projected an assertive recovery plan.

If everything had gone according to Gelsinger's plans, Intel could have potentially caught up with TSMC by next yearYet, a fundamental question lingered: why would competitors like Nvidia or AMD entrust their designs to Intel's foundry? Moreover, Gelsinger failed to address how the immense costs associated with the IDM 2.0 strategy were to be managed.

Intel's scheme envisioned building six advanced manufacturing plants across Arizona, New Mexico, Ohio, and Oregon, with a staggering projected investment exceeding $100 billionAlthough the Chips and Science Act promised subsidies, the reality remained that $7.86 billion was a drop in the bucket compared to the astronomical expenses tied to establishing foundries

The company's financial performance reflected an alarming trend; in the first three quarters of this year, Intel reported staggering net losses—$381 million in Q1, deepening to $1.61 billion in Q2, and culminating in a jaw-dropping $16.64 billion loss in Q3 after accounting for numerous one-time impairments.

The pit left by Gelsinger was nothing short of monumental, translating to tremendous challenges for his eventual successor.

In corporate parlance, major transformations within large companies are often likened to an "elephant turning around." The predicament facing Intel's new leader feels akin to an elephant having only partially turnedOn one hand, Intel is engaged in a global race to establish multiple factories, some of which are still in the infancy of construction while others are readying for productionWhat happens if the company pivots away from its chip business? Moreover, while Intel dives deep into AI investments, it has yet to make significant inroads against competitors like Nvidia, nor can it ignore the AMD encroachment in the PC sector

Should the new steward continue to "All in AI," or is it time to safeguard core business operations?

The imperative of reinstating the foundry (IFS) operations cannot be overstated; it will invariably be a focal point of investor and board expectationsIn particular, factories in Germany and Poland are likely to be shelved, given their lack of EU subsidies and local customer demandConversely, the two expanding packaging facilities in Malaysia are expected to be retained, as they represent Intel's investment in 3D packaging technology, a crucial competitive edge in the future.

Back on home turf, Intel's domestic factories present more of a double-edged swordMany of these facilities have been established, and halting their operations would raise significant asset impairment issuesLast year alone, Intel employed a massive 2 million cubic yards of concrete—enough to construct 32 Empire State Buildings

With the U.SDepartment of Commerce's subsidies now tied to these manufacturing projects, will there be governmental lenience for ongoing investments?

What about the factories that are already operational, such as those in Ohio and Arizona, which are set to commence production next year? If Intel were to divest, who would step into the fray? Given that domestic firms like GlobalFoundries or Texas Instruments lack the experience in advanced processes, their interest seems minimal at bestTSMC may be intrigued, yet it is likely that the incoming administration would balk at witnessing a retreat from plans aimed at revitalizing U.Schip manufacturing.

Apart from the thorny issue of foundry operations, the new leader must also find a way to solidify Intel's core business going forwardAs it stands, further investment in "AI servers" seems unwarranted, particularly as the GPU boom fizzles out

Despite this, the CPU/GPU combinations offered by Nvidia and AMD are well-positioned to fill the demand void for new processors.

Essentially, the focus for Intel should be on how to maintain its stronghold in traditional server marketsSimilarly, in the PC domain, Intel finds itself in a precarious situation; although the company was among the first to promote the "AI PC" concept, it has yet to capitalize effectively on industry advancementsFor instance, in its Q3 report, Intel revealed $7.33 billion in revenue from PC clients—a 6.8 percent decline year-on-year amidst a broader 2.4 percent drop in global PC shipmentsMeanwhile, AMD saw a 29.5 percent increase in PC revenue, a stark signal for concern.

Consequently, it’s evident that any prospective leader stepping into Gelsinger’s shoes will face an uphill battle in rejuvenating Intel’s former glory as the "Blue Giant" anytime soon