Intel’s New CEO Plans Revamp of Manufacturing and AI Operations – One America News Network
By Max A. Cherney
March 17, 2025 – 7:14 AM PDT
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SAN FRANCISCO (Reuters) – Intel’s newly appointed CEO, Lip-Bu Tan, is contemplating major modifications to the company’s chip manufacturing practices and artificial intelligence strategies as he prepares to resume his role on Tuesday. Two individuals familiar with Tan’s thoughts spoke to Reuters, revealing his ambitious plans to rejuvenate the struggling tech titan.
This new direction involves a restructuring of the company’s AI approach, as well as workforce reductions to rectify what Tan perceives as an excessively slow-moving and overstaffed middle management. Central to his priorities is revamping the manufacturing processes, which were initially focused on producing chips solely for Intel but have since expanded to service external clients like Nvidia, according to these sources.
Intel’s shares surged over 7% at Nasdaq’s opening following the Reuters report.
During a town hall meeting shortly after his CEO appointment last week, Tan informed employees that the company would need to make “tough decisions,” according to two other attendees of the meeting.
Dylan Patel, a semiconductor industry expert, noted that a significant issue during former Intel CEO Pat Gelsinger’s tenure, who departed the firm in December, was his reluctance to eliminate middle management as necessary. “He was too nice,” Patel observed.
Tan, a 65-year-old former CEO of the chip design software firm Cadence and a technology investor, had served on Intel’s board until his resignation last August. As he takes over the leadership at Intel after a decade marked by missteps by three CEOs, he inherits a company that failed to manufacture chips for smartphones and missed the escalating demand for AI processors, allowing rivals such as Arm Holdings and Nvidia to take the lead in those sectors.
Intel (INTC.O) recorded a $19 billion loss in 2024, marking its first annual deficit since 1986.
In the immediate future, Tan aims to enhance the performance of Intel Foundry, the manufacturing division that produces chips for other design firms like Microsoft (MSFT.O) and Amazon (AMZN.O), by actively seeking new clients, according to the sources.
AI presents the tech industry with “a new set of tools,” asserts Siva Sivaram from QuantumScape.
Additionally, he plans to revive initiatives to create chips that power AI servers and explore opportunities beyond server-based applications in fields like software, robotics, and foundational AI models.
“Lip-Bu will dedicate considerable time to listening to customers, partners, and employees as he joins the company and collaborates closely with our leadership team to steer the business toward future success,” stated an Intel spokesperson in an official statement.
Intel refrained from offering further comments or providing Tan for interviews. Tan’s venture firm, Walden Catalyst, did not respond to inquiries.
Initially, Tan’s strategy appears to be a refinement of Gelsinger’s approach. Gelsinger’s turnaround plan centered on evolving Intel into a contract chip manufacturer, aiming to compete with Taiwan Semiconductor Manufacturing Company (2330.TW, TSMC), which serves clients like Apple (AAPL.O), Nvidia, and Qualcomm (QCOM.O).
Gelsinger had allocated tens of billions of dollars to establish manufacturing plants in the U.S. and Europe dedicated to producing chips for both Intel and external clients, but he was compelled to scale back those plans as the market for Intel’s core products softened.
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Tan has been an outspoken internal critic of Gelsinger’s execution, according to the two sources familiar with Tan’s strategy.
Historically, Intel has produced chips exclusively for its own use. Upon taking the helm in 2021, Gelsinger prioritized manufacturing chips for other companies but fell short in providing the level of customer service and technical support required to compete with TSMC, resulting in delays and unsuccessful tests, as revealed by former executives to Reuters.
Tan’s perspectives were shaped during months of reviewing Intel’s manufacturing operations after he was appointed to a specialized role overseeing them by the board in late 2023, according to a regulatory filing.
In his evaluations, he conveyed dissatisfaction with the corporate culture, stating it had abandoned the “only the paranoid survive” mentality established by former CEO Andy Grove. He also concluded that decision-making processes were hindered by an excessive workforce, Reuters reported.
Tan proposed several of his ideas to Intel’s board last year, but they opted not to implement them, according to sources. By August, conflicts with the board led to his unexpected resignation, reported Reuters.
Upon his return as CEO this week, he will take a fresh look at Intel’s workforce, which was reduced by approximately 15,000, leaving almost 109,000 employees at the end of the previous year, the sources indicated.
Apart from job cuts, Tan faces the necessity of optimizing Intel’s current manufacturing operations in the short term. The success of Intel’s next generation of advanced chips, featuring AI capabilities and named Panther Lake, will hinge on the company’s in-house factories adopting a new suite of techniques and technologies referred to as “18A.”
The financial success of Intel in the coming year is closely linked to robust sales of this upcoming chip.
In a memo published on Wednesday, Tan indicated his intention to retain oversight of manufacturing facilities, which will remain financially and operationally independent from the design division, aiming to restore Intel’s reputation as a “world-class foundry.”
Intel’s contract manufacturing division could thrive if Tan secures at least two significant clients to generate high volumes of chips, industry analysts and Intel executives conveyed to Reuters.
To attract major clients, efforts will focus on enhancing Intel’s chip manufacturing process, making it more user-friendly for potential customers like Nvidia and Alphabet’s (GOOGL.O) Google.
Recently, Intel has shown improvements in its manufacturing processes and garnered interest from Nvidia and Broadcom, which have commenced preliminary testing, as reported by Reuters. Advanced Micro Devices is also assessing Intel’s capabilities.
Tan is expected to explore ways to boost output or “yield,” aiming to produce a greater quantity of chips per silicon wafer as they transition to mass manufacturing of their first in-house chip utilizing the so-called 18A process this year.
The ambition is to establish an annual release schedule for AI chips, akin to Nvidia’s approach; however, achieving this will require significant time. Industry sources and one individual familiar with Intel’s progress indicated that it would likely be at least 2027 before Intel can unveil a compelling new architecture for its inaugural AI chip.
Max A. Cherney in San Francisco; editing by Kenneth Li and Michael Learmonth
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