Intel’s New CEO Plans Major Overhaul of Manufacturing and AI Operations

Intel’s incoming CEO, Lip-Bu Tan, is considering significant changes to the company’s chip manufacturing and artificial intelligence strategies as he prepares to take over on Tuesday, according to sources familiar with his plans.

Tan aims to restructure Intel’s approach to AI and streamline operations by cutting middle management, which he views as slow-moving and inefficient. One of his top priorities is revamping Intel’s manufacturing operations, which previously focused solely on in-house chip production but now also serve external clients such as Nvidia.

Intel shares rose more than 8% in mid-day trading on Nasdaq following reports of Tan’s plans.

At a recent town hall meeting, Tan told employees that the company would need to make "tough decisions," according to sources briefed on the meeting. Industry expert Dylan Patel noted that former CEO Pat Gelsinger, who left in December, was "too nice" and hesitant to make necessary cuts in middle management.

Tan, 65, previously served as CEO of chip design software firm Cadence and was a tech investor. He was also a member of Intel’s board until his resignation in last August. His return comes after a decade of missteps by three previous CEOs, during which Intel failed to capitalise on the smartphone chip market and missed the surge in AI processor demand, allowing competitors such as Arm Holdings and Nvidia to dominate.

Intel reported an annual loss of USD 19 billion in 2024, its first since 1986.

Focus on Manufacturing and AI

Tan’s immediate goal is to improve Intel Foundry, the company’s manufacturing arm, by aggressively pursuing new customers such as Microsoft and Amazon. He also plans to restart efforts to produce chips for AI servers and expand into areas such as software, robotics, and AI foundation models.

An Intel spokesperson stated that Tan will spend time listening to customers, partners, and employees while working with the leadership team to position the company for future success.

Tan has been a vocal critic of Gelsinger’s execution, particularly regarding Intel’s transition to contract chip manufacturing. Under Gelsinger, Intel aimed to compete with Taiwan Semiconductor Manufacturing Co. (TSMC) by building factories in the U.S. and Europe. However, these ambitions were scaled back due to a cooling market for Intel’s core products.

For most of its history, Intel manufactured chips exclusively for itself. When Gelsinger became CEO in 2021, he prioritised external manufacturing but struggled to match TSMC’s customer service and technical capabilities, leading to delays and failed tests.

Tan’s views on Intel’s manufacturing inefficiencies were shaped by months of reviewing the company’s processes after being appointed to a special oversight role in late 2023. He expressed frustration with Intel’s culture, believing it had lost the aggressive mindset championed by former CEO Andy Grove.

Workforce and AI Chip Development

Tan is expected to reassess Intel’s workforce, which was reduced by approximately 15,000 employees to 109,000 by the end of 2023. Beyond job cuts, he must ensure Intel’s manufacturing operations remain viable in the short term.

Intel’s upcoming Panther Lake chips, which feature AI capabilities, will rely on its in-house factories using a new manufacturing process called "18A." The company’s financial success this year depends on strong sales of these chips.

In a memo published last week, Tan indicated that he plans to maintain control over Intel’s factories, which remain financially and operationally separate from the design business. His goal is to restore Intel’s position as a "world-class foundry."

Industry analysts believe Intel’s contract manufacturing business can succeed if Tan secures at least two major customers for high-volume chip production. Improving Intel’s manufacturing process will be key to attracting clients such as Nvidia and Google.

Recent improvements in Intel’s manufacturing processes have drawn interest from Nvidia and Broadcom, which have begun early test runs. Advanced Micro Devices is also evaluating Intel’s capabilities.

Tan is expected to focus on increasing chip production efficiency as Intel moves to mass-produce its first in-house chip using the 18A process this year.

Intel aims to adopt an annual AI chip release schedule similar to Nvidia’s, but analysts estimate it will take until at least 2027 for the company to develop a competitive AI chip architecture.

Intel’s new CEO, Lip-Bu Tan, plans to restructure AI operations and cut middle management.
Manufacturing improvements and securing new customers are top priorities.
Intel reported a USD 19 billion loss in 2024, its first since 1986.

Source: REUTERS