Intel’s new CEO plots overhaul of manufacturing and AI operations

SAN FRANCISCO: Intel’s incoming CEO Lip-Bu Tan has considered significant changes to its chip manufacturing methods and artificial intelligence strategies ahead of his return to the company on Tuesday, two people familiar with Tan’s thinking told Reuters, in a sweeping bid to revive the ailing technology giant.

The new trajectory includes restructuring the company’s approach to AI and staff cuts to address what Tan views as a slow-moving and bloated middle management layer. Revamping the company’s manufacturing operations, which at one time only made chips for Intel but have been repurposed to make semiconductors for outside clients such as Nvidia, is one of Tan’s core priorities, these sources said.

Intel shares rose more than 7% at the open on Nasdaq after the Reuters report. At a town hall meeting following his appointment as CEO last week, he told employees that the company will need to make “tough decisions,” according to two other people briefed on the meeting.

Semiconductor industry expert Dylan Patel said a big problem under former Intel CEO Pat Gelsinger, who left the company in December, was that he was “too nice.” “He did not want to fire a bunch of middle management in the way they needed to,” he said. Tan, 65, former CEO of chip design software firm Cadence and tech investor, was a member of Intel’s board until he resigned last August. In returning as CEO, Tan is set to take over the American icon after a decade of bad decisions by three CEOs in which it failed to build chips for smartphones and missed surging demand for AI processors, allowing competitors Arm Holdings and Nvidia to dominate those markets.

Intel reported an annual loss of $19 billion in 2024, its first since 1986. In the near term, Tan aims to improve performance at its manufacturing arm, Intel Foundry, which makes chips for other design companies such as Microsoft and Amazon, by aggressively wooing new customers, according to the people.

It will also restart plans to produce chips that power AI servers and look to areas beyond servers in several areas such as software, robotics and AI foundation models.

“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 in a prepared statement.

Intel declined to comment further or make Tan available for an interview. Tan’s venture firm, Walden Catalyst, did not respond to requests for comment.

At the outset, Tan’s strategy appears to be a fine-tuning of that of Gelsinger. The centerpiece of Gelsinger’s turnaround plan was to transform Intel into a contract chip manufacturer that would compete with Taiwan Semiconductor Manufacturing Co., or TSMC, which counts Apple, Nvidia and Qualcomm as customers.