In the semiconductor industry, Intel used to be synonymous with innovation for several decades. It was the beast in PC chips, and set the standard for personal computers. But Intel has lurched from challenge to misstep in recent years and now it is struggling mightily to remain relevant in the industry that it once owned.
The Missed OpenAI Opportunity
The largest missed opportunity for Intel came in 2017 and 2018 as the company had an on-the-table investment into what was at that time a nascent research organization of OpenAI. It had been announced that Intel was considering buying a 15% stake in OpenAI for $1 billion, plus an option to buy another 15%, with the cost of equipment at no profit. But ultimately, despite the buzz around generative AI models, Intel passed on pursuing a deal — split over whether they could be commercially viable soon or not. (Source: Yahoo)
OpenAI then followed up in 2022 and ChatGPT launched it to bring another $80 billion valuation (Source: Forbes). Had Intel invested, it would’ve lessened OpenAI’s dependence on Nvidia’s chips and made the company a major player in the AI revolution. Instead, the reluctance of Intel became an early sign for its deterioration in AI.
Falling Behind in AI and Manufacturing
But Intel’s struggles are not limited to missed investments. More and more, other companies such as Nvidia or AMD have been eating its lunch in this specific AI chip market. Nvidia, which started in video game graphics and went into the AI chip business, is worth 16 times more than Intel.
Intel was another company that suffered due to its not moving with the times: it was established in internalizing all of its chipset manufacturing, which led to slow and relatively outdated product lines. For generations (in chip tech, a “single size” change is referred to as generational), Intel held the crown for making chips that were the smallest and most advanced. Its rivals, Taiwan Semiconductor Manufacturing Co. (TSMC) and South Korea’s Samsung, have long since taken pole position on shrinking transistor sizes with Intel now playing catch up.
Financial Troubles and Strategic Missteps
These financial woes have amplified Intel’s struggles. Its recent earnings report caused the stock to fall down by 26%, which represents its worst trading day since almost half a century. Intel responded by announcing it would cut 15% of its worldwide workforce and suspend dividends to achieve $10 billion in savings next year. (Source:Livemint)
In addition, Intel’s failed efforts in the mobile chip market at the beginning of this decade put it on a path to decline for most of that ten year period. Intel also missed the phone boom with its x86-based mobile chip, Atom, allowing competition to seize the market.
The Path Forward: Can Intel Rebound?
Intel now has its hopes set on its new CEO Pat Gelsinger to turn around the company’s misfortunes with a high risk strategy. The company has and is continuing to invest billions to regain its spot in semiconductor manufacturing catching up to TMC by 2026. Intel wants to become the supplier for the majority of processors in the market in hopes to attract customers like Apple and nvidia.
The path to recuperation is going to be hard, from skeptical investors to facing huge losses, Intel’s CEO stands optimistic as to reclaim the throne they once sat on.
Written by Moeez Ajmal
