In a remarkable turn of events, Intel, once hailed as a crown jewel of American enterprise, finds itself at the center of a controversy that could reshape not only the career of its CEO, Lip-Bu Tan, but also the future of the semiconductor industry. This drama ignited on August 7 when former President Donald Trump took to Truth Social to declare, “The CEO of INTEL is highly CONFLICTED and must resign, immediately. There is no other solution to this problem.” His statement drew immediate attention to a letter from Senator Tom Cotton (R-Ark.) directed at Intel’s board chairman, alleging that Tan has ties to numerous Chinese companies and highlighting a multinational company’s recent guilty plea regarding U.S. export control violations during Tan's leadership.
By the end of the day, Tan responded with a letter to Intel employees, asserting, “There has been a lot of misinformation circulating about my past roles.... I have always operated within the highest legal and ethical standards.” Despite his reassurances, Intel's stock plummeted by 5% on a generally positive day for the market, further disappointing shareholders who had hoped the company's fortunes were turning around.
Intel's current predicament could have been a fleeting news story if not for the company's significant legacy as the world’s largest and most advanced computer chip manufacturer. However, its decline began nearly two decades ago, primarily due to a series of unsuccessful acquisitions, particularly in the telecommunications and wireless technology sectors. According to David Yoffie, a Harvard Business School professor and former Intel board member, “100% of those acquisitions failed. We spent $12 billion, and the return was zero or negative.” This miscalculation set the stage for Intel's ongoing struggles.
The company also faced challenges in capitalizing on the booming cell phone market. Despite initially supplying chips for the popular BlackBerry, Intel opted to abandon Arm architecture in favor of its own x86 design, a decision that Yoffie later described as a “major strategic error.” The shift aimed to introduce a competitive product within a year but resulted in a decade-long delay in innovation.
As time went on, mismanagement compounded Intel's challenges. The company consistently missed new chip deadlines, leading to a significant loss of market share. By 2021, Intel found itself two generations behind competitors like Taiwan’s TSMC and South Korea’s Samsung, marking a historic low point for the semiconductor giant. In response, Intel's board reinstated Pat Gelsinger, a seasoned engineer with a 30-year history at the company, who unveiled an ambitious plan aimed at restoring Intel's leadership in chip technology.
Despite its setbacks, Intel remains critically important, being the only U.S. company with the expertise to manufacture cutting-edge chips domestically—a capability it has not exercised in eight years. This fact has not gone unnoticed at the highest levels of geopolitics, where control over chip technology is increasingly seen as essential to national security. The passage of the CHIPS and Science Act in 2022, which allocated billions to American and foreign chipmakers, reflects this urgency. Intel was the largest recipient of these subsidies, receiving approximately $8 billion, although it has yet to access most of these funds, which are tied to project milestones.
The opportunity for Intel to reclaim its position in the market is significant, according to Gaurav Gupta, an analyst at Gartner. However, he believes that execution has been a major hurdle. “They were getting all these subsidies from the government. But I think they just could not execute,” he noted. The erosion of confidence in the company has been palpable, with analysts like Alvin Nguyen from Forrester observing a shift from optimism to skepticism regarding Intel's prospects.
If Tan were to resign, the question arises: “Who would want that job?” reflects Stacy Rasgon, a tech analyst at Bernstein. He highlights Tan's wealth and other commitments, suggesting that while he is motivated to act in Intel's best interest, the uncertainties surrounding his leadership could deter potential successors. Finding a competent leader willing to steer the company in a new direction has proven challenging in the past, as Gupta points out.
Former Intel directors, including Yoffie, advocate for a complete overhaul, proposing a new company structure and board, and even spinning off Intel's manufacturing division to secure America’s chip-making dominance. Trump's recent remarks have thrust Intel into the spotlight, underscoring the critical nature of addressing its challenges. As Commerce Secretary Gina Raimondo emphasized, chips are “the most important piece of hardware” in the modern era, making Intel's role as a domestic supplier crucial amidst rising competition from TSMC, which is expanding its operations in the U.S. with the help of the CHIPS Act.
While TSMC continues to dominate the market, Rasgon notes that the best technology from the Taiwanese firm is unlikely to be accessible to the U.S. anytime soon, leaving Intel as the last American bastion capable of producing leading-edge chips. However, the company must prove its ability to deliver on these promises, a challenge it has struggled with for years. As Intel faces these pivotal moments, the path forward remains fraught with uncertainties, making the company's future all the more compelling to watch.
