(Bloomberg) -- Intel Corp. named Lip-Bu Tan as its next chief executive officer, entrusting a former board member and semiconductor veteran with one of the toughest jobs in the chip industry.
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Tan, 65, will assume the role on March 18, the company said in a statement Wednesday. He will rejoin the board as well after stepping down in August 2024.
Tan, the former head of Cadence Design Systems Inc., is tasked with restoring the fortunes of a pioneering chipmaker that’s become an industry laggard. Intel, which dominated the semiconductor field for decades, is struggling with market-share losses, manufacturing setbacks and a precipitous decline in its earnings. It’s also burdened with debt and recently had to slash about 15,000 jobs.
In a memo to Intel employees, Tan said he’s confident he can turn the business around.
“That’s not to say it will be easy. It won’t be,” he said. “But I am joining because I believe with every fiber of my being that we have what it takes to win. Intel plays an essential role in the technology ecosystem, both in the US and around the world.”
Intel shares jumped more than 10% on the news, after rising 4.6% in regular New York trading on Wednesday. The stock was down more than 54% in the past 12 months as the company’s future became increasingly murky, leaving its market value at $89.5 billion.
Tan’s predecessor, Pat Gelsinger, was pushed out by the board for a perceived failure to rejuvenate Intel’s product lineup. One of the most glaring challenges: creating an artificial intelligence accelerator chip that can rival the products of Nvidia Corp. That company, once in Intel’s shadow, has seen its revenue and valuation skyrocket over the past two years due to the AI computing boom.
“This is good for Intel,” said Stacy Rasgon, an analyst at Bernstein. “If I had to pick somebody, Lip-Bu would have been at the top of that list.”
Gelsinger had also set out to turn Intel into a chip foundry — a contract manufacturer that makes products for outside clients — but that effort is still in its early stages.
Tan signaled that he would continue down that path. “We will work hard to restore Intel’s position as a world-class products company, establish ourselves as a world-class foundry and delight our customers like never before,” he said in the memo, which was posted on the company’s website. “That’s what this moment demands of us as we remake Intel for the future.”
Intel remains one of the world’s biggest chipmakers by revenue, with more than $50 billion in annual sales. Its processors are the main component in more than 70% of the world’s personal computers and server machines. And the company’s factories still represent a large chunk of worldwide capacity for advanced manufacturing.
But slip-ups in product development have allowed rivals to gain an edge. Besides Nvidia, Advanced Micro Devices Inc. has won market share in PCs and servers — and is better poised than Intel to make inroads in AI chips. In the shadow of those challenges, Intel isn’t even in the top 10 chip industry companies worldwide by market value.
For More: Big Take: How Intel Lost Its Edge (Podcast)
Tan, a Malaysian-born executive, grew up in Singapore, where he attended Nanyang University and studied physics. He later went to the Massachusetts Institute of Technology, gaining a masters in nuclear engineering. He gave up his studies for a doctorate in that field and left for the University of San Francisco, where he got an MBA.
After working in venture investing, he joined the Cadence board in 2004. He became co-CEO in 2008 after incumbent Michael Fister left and then took sole possession of that role in 2009. Tan ran the company for more than a decade before moving to the position of chairman, which he occupied until 2023.
Cadence, along with rival Synopsys Inc., dominates the market for computer-aided design used to create semiconductors. Their software and services have become increasingly important with the rise in complexity of the devices. Engineers use their products to create blueprints for the arrangement of tens of billions of transistors and connecting wires — the underlying architecture of the tiny components.
Running Intel would have once been the most prestigious position in the industry. In its heyday, Intel’s profitability was unusually high for a manufacturing company. Its gross margin — the percentage of sales remaining after deducting the cost of production — was north of 60%. The benchmark is currently languishing at about half that level.
When Gelsinger took the helm in 2021, he was seen as a potential savior of the company. But Wall Street soured on his turnaround plan after a string of disappointing quarterly results — including an August 2024 report that analysts described as the worst in its history.
In 2024, Intel was by far the lowest performer on the Philadelphia Stock Exchange Semiconductor Index, declining 60%. As the company’s valuation plummeted back to 1990s levels, the once-unthinkable idea of an Intel takeover has become more plausible.
Intel’s new leader will have to navigate approaches from suitors and decide whether to stick with Gelsinger’s stance that a breakup is unnecessary. Some on Wall Street have suggested splitting up the company’s chip-design and manufacturing units, which are already separated operationally.
Qualcomm Inc., Broadcom Inc. and Arm Holdings Plc have explored the idea of acquiring all or part of Intel, Bloomberg News has reported. If formal approaches are made, Intel’s board will be under pressure to consider scenarios that Gelsinger may have rejected.
Separately, the Trump administration approached rival Taiwan Semiconductor Manufacturing Co. and asked it to consider taking a stake in a spinoff of Intel’s factories. Under that proposal, which Bloomberg News reported on last month, TSMC would run the plants and reconfigure them to use its technology — something that might make them more attractive to outside customers. Intel’s plants currently focus primarily on its own designs.
The plan also included trying to get TSMC’s biggest clients — a list that includes Qualcomm, AMD and Apple Inc. — to invest in the Intel spinoff. But that report was followed a week later by TSMC’s announcement at the White House that it would increase investments in its own complex in Arizona. That suggests it would prefer not to get involved in outside projects.
Santa Clara, California-based Intel is the biggest recipient of grants from the US government under the Chips and Science Act, a Biden administration push to reinvigorate domestic semiconductor production.
The Chips Act money, totaling nearly $8 billion, is contingent on Intel completing milestones, including the building and equipping of new factories around the US. Intel has already delayed some of its building plans, including for a complex in Ohio. President Donald Trump also has spoken out against the program.
Intel Chairman Frank Yeary said in a separate statement that Tan could leverage his experience reinventing Cadence. Tan “drove a cultural transformation centered on customer-centric innovation,” he said.
“During his time as CEO, Cadence more than doubled its revenue, expanded operating margins and delivered a stock price appreciation of more than 3,200%,” Yeary said. “He also knows Intel well, both as a partner when he ran Cadence and having recently served on our board.”
If Tan can’t orchestrate a similar turnaround at Intel, said Bernstein’s Rasgon, “it was probably unfixable.”
(Updates with analyst’s comment in eighth paragraph.)
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