Intel’s New CEO’s Plans for Manufacturing Revival & AI Push

As global semiconductor competition intensifies and AI demand continues to surge, Intel's new Chief Executive Officer (CEO) Lip-Bu Tan has developed plans for substantial changes to the company.

According to Reuters, Tan aims to focus on the company’s chip production methods and AI strategies, including restructuring the company’s approach to AI and reducing staff numbers to address what is viewed by some as inefficiency in middle management. 

Revamping Intel's manufacturing operations – which once produced chips exclusively for Intel but now make semiconductors for external clients such as Nvidia – is also among Tan's main priorities. The news prompted Intel’s shares to increase by more than 7% on the Nasdaq exchange.

During a town hall meeting after his appointment as CEO, Tan told employees that the company would need to make “tough decisions,” according to people briefed on the meeting – but what are these decisions and how will they impact the company?

Tan’s vision for Intel’s opportunities 

The company reported an annual loss of US$19bn in 2024, its first deficit since 1986, under former Intel CEO Pat Gelsinger, who departed the company in December.

Tan previously led chip design software firm Cadence and worked as a technology investor – and served on Intel's board until his resignation last August.

Now, his return as CEO comes after a decade of some see as strategic missteps by three previous leaders, during which Intel failed to develop chips for smartphones and missed growing demand for AI processors, allowing competitors Arm Holdings and Nvidia to capture those markets.

Intel Foundry services to court Nvidia and Google as potential customers

In the short term, Tan aims to improve performance at the company's manufacturing division, Intel Foundry, which produces chips for other design companies such as Microsoft and Amazon.

This will involve actively pursuing new customers, sources told Reuters.

The company also plans to resume development of chips that power AI servers and explore opportunities beyond servers in areas including software, robotics and AI foundation models, which are large AI systems trained on vast datasets.

Initially, Tan's strategy appears to refine the approach of his predecessor Gelsinger – whose turnaround plan involved transforming Intel into a contract chip manufacturer that would compete with Taiwan Semiconductor Manufacturing (TSMC), which produces chips for companies including Apple, Nvidia and Qualcomm.

Gelsinger committed tens of billions of dollars to construct factories in the US and Europe to manufacture chips for both Intel and external customers, but was forced to reduce those plans as demand for Intel's main products declined.

Historical manufacturing shift creates challenges for Intel's core business

For most of its history, Intel has manufactured chips for only one client — itself.

When Gelsinger became CEO in 2021, he prioritised manufacturing chips for others but failed to provide the level of customer and technical service offered by rival TSMC, leading to delays and failed tests, former executives have told Reuters.

This led Tan's perspective to be influenced by months of reviewing Intel's manufacturing process after the board appointed him to oversee it in late 2023, according to regulatory filings.

In his assessment, he expressed frustration with the company's culture, sources said, stating it had lost the “only the paranoid survive” philosophy established by former CEO Andy Grove.

He also believed that decision-making was impeded by an excessive workforce.

Tan presented some of his ideas to Intel's board last year, but they declined to implement them – then by August, Tan resigned abruptly over disagreements with the board.

Tan’s plans for Panther Lake to accelerate Intel 

Intel's next generation of advanced chips with AI capabilities, called Panther Lake, will rely on its in-house factories using a new set of techniques and technologies Intel refers to as “18A.”

Intel's financial performance this year depends on strong sales of the forthcoming chip.

Tan indicated in a memo published on Wednesday that he plans to maintain control over the factories, which remain financially and operationally separate from the design business and restore Intel's position as a “world-class foundry” – a term for manufacturers that produce chips designed by other companies.

Intel's contract manufacturing operation can succeed if Tan secures at least two large customers to produce a high volume of chips, industry analysts and Intel executives said.

The effort to attract major customers will involve improving Intel's chip manufacturing process to make it more accessible for potential clients like Nvidia and Alphabet's Google.

Intel has already demonstrated improvements in its manufacturing processes recently and has attracted interest from Nvidia and Broadcom, which have initiated early test runs, while AMD is reportedly also evaluating Intel's process.

Tan is expected to work on methods to improve output or “yield” – the percentage of functioning chips produced from each silicon wafer – as they move to volume manufacturing of its first in-house chip using the 18A process this year.

The aim is to establish an annual release schedule of AI chips, similar to its competitors.  However it is believed that it will be at least 2027 before Intel can develop a compelling new architecture for a first AI chip, according to Reuters.

“Lip-Bu will be spending a lot of time listening to customers, partners and employees as he comes on board and works closely with our leadership team to position the business for future success,” an Intel spokesman said.

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