Intel CEO Pat Gelsinger Forced Out By Board

Big changes afoot at troubled Intel, after CEO Pat Gelsinger is reportedly forced out after a contentious board meeting last week.

Intel announced that Gelsinger “retired from the company after a distinguished 40-plus-year career and has stepped down from the board of directors, effective 1 December 2024.”

It comes after a central thrust part of Gelsinger’s transformation – that Intel would spin off Intel Foundry (aka its chip manufacturing business) as an “independent subsidiary inside of Intel” – was put into doubt last week.

Gelsinger “retired”

Last week the Biden administration had finalised an award of $7.86 billion (£6.27bn) in federal funding to Intel under the Chips and Science Act, in order to advance the company’s manufacturing and semiconductor packaging projects in Arizona, New Mexico, Ohio and Oregon.

But Intel in a filing revealed its deal for $7.86 billion in US government subsidies, would restrict it’s ability to sell stakes in its chip-making unit if it becomes an independent entity.

CNBC reported that the board then forced Gelsinger out over the weekend.

According to a person familiar with the matter, Gelsinger’s departure came after a contentious board meeting last week over his perceived failure to respond to Nvidia’s competitive edge and a lack of confidence in his turnaround plans.

Intel veteran

Gelsinger, 63, is an Intel veteran, rising to become the company’s first chief technical officer (CTO) from 2001 to 2009.

However, he left Intel in 2009 taking a senior role at EMC, and later CEO of VMware.

Gelsinger returned to Intel in February 2021 after the firm had announced in January of that year that CEO Bob Swan was to step down, to be replaced by Pat Gelsinger.

Now nearly four years later and Gelsinger has been replaced by two interim CEOs.

“Intel has named two senior leaders, David Zinsner and Michelle (MJ) Johnston Holthaus, as interim co-chief executive officers while the board of directors conducts a search for a new CEO,” Intel stated.

“Frank Yeary, independent chair of the board of Intel, will become interim executive chair during the period of transition,” the firm stated. “Intel Foundry leadership structure remains unchanged.

Intel’s board has apparently formed a search committee and “will work diligently and expeditiously to find a permanent successor to Gelsinger.”

“On behalf of the board, I want to thank Pat for his many years of service and dedication to Intel across a long career in technology leadership,” said Frank Yeary. “Pat spent his formative years at Intel, then returned at a critical time for the company in 2021. As a leader, Pat helped launch and revitalize process manufacturing by investing in state-of-the-art semiconductor manufacturing, while working tirelessly to drive innovation throughout the company.”

“While we have made significant progress in regaining manufacturing competitiveness and building the capabilities to be a world-class foundry, we know that we have much more work to do at the company and are committed to restoring investor confidence,” said Yeary.

“As a board, we know first and foremost that we must put our product group at the center of all we do. Our customers demand this from us, and we will deliver for them,” said Yeary. “With MJ’s permanent elevation to CEO of Intel Products along with her interim co-CEO role of Intel, we are ensuring the product group will have the resources needed to deliver for our customers. Ultimately, returning to process leadership is central to product leadership, and we will remain focused on that mission while driving greater efficiency and improved profitability.”

“With Dave and MJ’s leadership, we will continue to act with urgency on our priorities: simplifying and strengthening our product portfolio and advancing our manufacturing and foundry capabilities while optimizing our operating expenses and capital,” said Yeary. “We are working to create a leaner, simpler, more agile Intel.”

Honour of my lifetime

Gelsinger bowed out with a graceful statement, considering the nature of his departure.

“Leading Intel has been the honour of my lifetime – this group of people is among the best and the brightest in the business, and I’m honoured to call each and every one a colleague,” said Gelsinger.

“Today is, of course, bittersweet as this company has been my life for the bulk of my working career,” he said. “I can look back with pride at all that we have accomplished together.”

“It has been a challenging year for all of us as we have made tough but necessary decisions to position Intel for the current market dynamics,” said Gelsinger. “I am forever grateful for the many colleagues around the world who I have worked with as part of the Intel family.”

Intel’s troubles

It was back in March 2021 when Gelsinger had implemented Intel’s turnaround plan (IDM 2.0), which was designed to regain the company’s competitive edge, and help it focus on revitalising its manufacturing capabilities, investing in advanced chip technologies, and expanding into new markets.

However industry observers warned it would take years to realise the plan to turn around Intel’s foundry business, and many expect TSMC to maintain its foundry lead in the coming years.

Intel shed staff in both 2022 and 2023, but then the firm in August 2024 shocked the world when it revealed disappointing second quarter financial results, and confirmed it would cut 15 percent of its 116,500 strong workforce (roughly 15,000 jobs).

Gelsinger’s confirmation that “costs are too high, our margins are too low”, coupled with weak forecasts and the suspension of dividend payments to investors, triggered the largest single day drop in Intel’s stock price in 50 years, after it plummeted 26 percent on 2 August. This caused Intel’s market value to sink more than $32 billion in a single day.

Angry Intel shareholders then sued the firm, alleging the chipmaker fraudulently concealed problems that led it to post weak Q2 results, slash jobs and suspend its dividend payment.

Intel then sold its stake in UK chip designer ARM Holdings, and then semiconductor veteran Lip-Bu Tan resigned “effective immediately” from Intel’s board of directors, amid reports of differences with CEO Gelsinger over what Tan considered Intel’s bloated workforce, risk-averse culture, and lagging AI strategy.

Tan’s exit reportedly left a vacuum of chip-industry technical and business acumen on Intel’s board, which is said to be mostly populated by leaders in academia and finance, and former senior executives from the medical, tech and aerospace industries.

In August it was reported that Intel was exploring its strategic options, allowing the board to consider a full range of options, including splitting off and selling the businesses.

In the end the board opted to halt its factories in Germany and Poland, and spin off its foundry business, alongside the huge number of job layoffs.

And now Gelsinger has been “retired”.