Intel’s stock price has fallen about 50% in recent months, CEO Pat Gelsinger has been fired, and the 25-year-old chipmaker will replace Nvidia in the Dow Jones Industrial Average index in November 2024. It was done. Unfortunately, shareholders have repeatedly sued the company over a variety of issues.
Despite being a pioneer in the semiconductor industry, Intel has recently struggled to sense and seize new opportunities, unlike competitors such as Nvidia, AMD, and ARM.
Founded in 1968 by Robert Noyce and Gordon Moore, Intel has powered the personal computer revolution with microprocessors and strengthened its dominance in the central processing unit (CPU) market. The company’s CPUs are often referred to as the “brains” of computers and were essential to the first IBM PCs. Moore’s Law, named after Intel’s co-founder, states that transistors on microchips double approximately every two years, driving exponential growth in computing power and paving the way for Intel’s innovation trajectory. predicted to lead to. Who can forget the wildly popular ad campaign and “Intel Inside” sticker on most computers? Professor Clayton Christensen, at the urging of prominent Intel leader Andy Grove, created a disruptive His visit to Intel to present his theory of innovation is said to have promoted Intel’s dominance in CPUs. However, some have recently suspected that Inter have forgotten about Christensen’s ideas.
The legendary Harvard Business School professor proposed that for long-term success, organizations must balance three types of innovation: Efficiency innovation (do things more efficiently, reduce costs, improve processes). Disruptive innovation (targeting underserved or niche markets with simpler, more affordable products that ultimately disrupt existing players). Intel’s innovations focus on sustainability and efficiency aspects, and downplay the disruptive ones.
missed the bus
Intel excels at sustaining innovation by continually enhancing its CPUs and delivering better performance and features to its existing customer base. Intel’s in-house manufacturing capabilities were a huge advantage. This has improved processes, reduced costs, and ensured a high degree of integration between manufacturing and design teams.
Intel failed to take advantage of the rise of edge computing and the AI revolution. ARM has become the standard for mobile computing, meeting the growing demand for low-power processors in smartphones and edge devices
Intel’s long-time rival AMD also took advantage of Intel’s strategic gap. By targeting the low-cost CPU segment, AMD attracted customers who felt Intel products were too expensive. It’s no surprise that AMD’s charismatic leader Lisa Su was named Time CEO of the Year in December 2024.
Nvidia identified a niche market in computer video games and produced GPUs that enabled parallel processing for faster video rendering. Nvidia pivoted GPUs to AI by creating the CUDA platform for AI research and development. Intel underestimated the disruptive potential of GPUs and missed an opportunity to lead in AI hardware.
What’s interesting is that back in 2005, well before the AI boom, Paul Otellini, then CEO of Intel, apparently suggested (to the board of directors) that they buy Nvidia for about $20 billion. Some Intel leaders saw potential in NVIDIA’s technology for future data center applications, but a lack of board support led Intel to pass on that opportunity. Nvidia currently controls the majority of the market with a valuation of $3.5 trillion.
Again around 2017, OpenAI approached Intel with an offer to provide hardware at a discount in exchange for an equity stake in the company, with the aim of avoiding sole dependence on Nvidia. After months of discussion, Intel executives rejected the deal, in part because they did not believe generative AI models would come to market quickly enough to justify the investment. This can be mentioned. As a result, OpenAI turned to Microsoft for support.
The rise of Taiwan Semiconductor Manufacturing Company (TSMC) has further complicated Intel’s position. TSMC’s focus on manufacturing and economies of scale has allowed it to produce high-yield, advanced chips for companies like Nvidia and AMD. While Intel struggled with production delays and supply chain issues, TSMC’s efficient processes enabled the client to meet market demands. Both Nvidia, which had never been in manufacturing, and AMD, which abandoned in-house manufacturing to focus on design, leveraged TSMC’s capabilities to focus on design and stay competitive.
Future direction
Intel’s recent efforts to keep up with rivals and remain relevant in this rapidly changing semiconductor industry include development of the Gaudi series of GPUs and flexible manufacturing, including outsourcing some parts to TSMC. model, and the introduction of OpenAPI as an alternative to Nvidia. CUDA. The U.S. CHIPS Act of 2022, aimed at boosting domestic semiconductor manufacturing, provides Intel with an opportunity to modernize its manufacturing capabilities and regain competitiveness. To rebuild its dominant leadership position in the hardware chip business, Intel needs to think and act like a startup and make bolder strategic investments in potentially disruptive opportunities. . Intel’s new CEO (searching) has a difficult task ahead of him.
(Shankar is an associate professor at Great Lakes Management University, Chennai, and Kuchi and Singh are assistant professors at the Gurgaon campus)
