New Intel (NASDAQ: INTC) CEO Lip-Bu Tan will try to rescue a fallen giant
Past achievements do not predict future success, but that’s not going to stop Intel’s (NASDAQ: INTC) new CEO from trying. He said as much last week in a letter to employees of the company, once the dominant giant in US tech that’s now found itself a troubled underdog behind competitors, hemorrhaging cash and at risk of being picked apart for its assets or bought out altogether.
“I believe with every fiber of my being that we have what it takes to win,” Lip-Bu Tan said, recounting his days as a university athlete and adding that there is nothing he dislikes more than losing. “One of the things you will learn about me is that I am never deterred by challenges.”
Unlike previous CEO Pat Gelsinger—who rose up through Intel as the chief architect of the i486 chip way back in the 1980s—Tan is expected to bring an outsider’s perspective to the struggling giant that is rushing to play catchup with competitors like NVIDIA (NASDAQ: NVDA) whose chips have dominated the AI boom. He’s no stranger to semiconductors, however, and has deep connections and roots across Silicon Valley having founded a venture capital firm known as Walden International nearly four decades ago that focuses on investments across information technology. He’s even been called “Mr. Chip” because of his longtime involvement in the semiconductor space.
Tan also has previous turnaround experience at Cadence Design Systems (NASDAQ: CDNS), where his 12-year stint as CEO of the company that makes software used to design semiconductors saw revenue more than double while the stock price gained more than 3,200%. He reportedly has a penchant for outsourcing, which could help Intel focus on its core capabilities while looking for outside help where it’s needed. Tan is said to have already considered making significant changes to manufacturing processes and the company’s overall AI strategy, in addition to a purge of middle management.
Shake-up looms
While his expected initial strategy bears some similarities to the one Gelsinger tried to use to save the company, Reuters reported that Tan has been extremely critical of his predecessor’s execution that had been viewed by some to be “too nice.” Tan had previously stepped down from a stint on Intel’s board last year after privately airing frustrations with the company’s culture, which makes his appointment something of an about-face and suggests that a drastic shift could soon unfold. Investors have responded positively to the news, with shares rallying 30% since Tan was named to the top spot last week after previously falling as much as 57% over the past year.
When he takes the reins this week, Tan will likely first have to assess how to deal with the company’s struggling foundry unit amid recent speculation that it could be cut loose. Intel took steps to restructure its chip manufacturing unit last year before Gelsinger was pushed out in December, and there have been reports that both Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) and Broadcom (NASDAQ: AVGO) could be interested in acquiring parts of the business. Tan hasn’t yet provided much initial insight into how he might be thinking on that front, only saying that Intel will be an “engineering-focused company.”
“In areas where we have momentum, we need to double down and extend our advantage,” he told employees. “In areas where we are behind the competition, we need to take calculated risks to disrupt and leapfrog.”
Walden Pond
Tan—who first studied physics at Nanyang Technological University in Singapore and also holds a Master of Science in nuclear engineering from the Massachusetts Institute of Technology, as well as an MBA from the University of San Francisco—says he enjoys swimming, snow skiing, fly fishing, hiking, and spending time with his family and church. He also likes to read, and his literary references may offer the clearest clues to his long-term vision for Intel.
Tan famously named his VC firm after the classic book Walden by Henry David Thoreau. Praising the American writer in a 2020 speech, the executive said lessons from Thoreau’s solitary time on Walden Pond in the 1840s that served as inspiration for the work could be applied to the semiconductor industry because of its long investment cycles.
“He led an extraordinarily simple life and finally achieved a peak of world philosophy, leaving a story that will be remembered for ages in the history of literature,” Tan said. “The essence of investment is similar: the great truths are always simple.”
It’s another writer, however, whose work might hint at what Tan now intends to do at Intel. In that same speech, he recounted a story told by Dutch theologian Henri Nouwen of a sculptor carving out a lion from a block of marble. “Before I saw the lion, I already knew that it was inside the marble, because I have seen it in my heart,” Tan quoted Nouwen as saying. “The trick is that the lion at heart recognizes the lion hidden in marble.”
Tan’s job now at Intel is essentially the same: he sees a lion trapped inside and is now tasked with surgically carving it out in one last rescue attempt. His selection as CEO suggests a longer-term strategy is at play, with a march to the beat of a different drummer as Thoreau described in Walden. The question now is how long investors will indulge him with their patience, as fixing Intel could take years. Michelangelo didn’t carve David overnight.
