Intel: A Giant's Decline

Introduction: 英特尔 , once the undisputed leader in semiconductors, faces a critical juncture following the departure of its CEO, Pat Gelsinger, on December 1st. While market dynamics have shifted and new players have risen, many of Intel’s challenges stem from internal missteps—decisions and missed opportunities that defined its trajectory. No need to look further than the 5 year returns, the S&P is up ~91% while Intel is down ~64% in that same period. Meanwhile 英伟达 is up a staggering ~2,400% in that same 5 year period. On a standalone basis, INTC closed at ~$33/share 10 years ago, and today trades at ~$21/share!

This retrospective examines these strategic errors and what they reveal about Intel's struggle to remain at the forefront of innovation. Despite these challenges, does Intel have unique opportunities to leverage emerging geopolitical trends and government support to secure its future?

1. Smartphone and ARM: The Missed Gold Rush Intel’s failure to adapt to the mobile era remains one of its most significant strategic blunders. The company’s x86 architecture, dominant in PCs, was ill-suited for low-power applications in smartphones. Instead of prioritizing this shift, Intel clung to its high-performance chips, ceding the market to ARM-based processors. Intel notably sold off its XScale division (ARM based chip) to Marvell in 2006 (a year before the iPhone launch).

2. Apple: Intel’s Biggest What-If

According to former CEO Paul Otellini, Intel famously turned down an offer to supply 苹果 with Intel processors for the original iPhone. Had Intel been the sole supplier for the now ubiquitous smartphone, the trajectory and capabilities of the firm could have been massively different. On the Mac line up, Apple has a long history of changing chip architectures—shifting from Motorola to PowerPC, then to Intel’s x86, and now to its own ARM-based silicon. It is unlikely Intel didn't see this coming, and from the outside tough to tell what Intel did to prevent it. However, it likely goes back to the x86 vs. ARM power consumption, heat, and lack of vertical integration Apple prides itself on to deliver a superior user experience. But the writing was on the wall.

3. M&A Missteps Intel has a history of costly and underperforming acquisitions that reflect a lack of clear strategic vision:

• McAfee (2010): A $7.7 billion acquisition aimed at integrating security with silicon. However, the integration faltered, and Intel eventually spun it off.
• Altera (2015): A $16.7 billion acquisition to expand into field programmable chips (FPGAs). While somewhat strategic, the impact has been muted.
• Mobileye (2017): A $15.3 billion bet on autonomous driving. Though Mobileye has seen success, it’s not central to Intel’s core compute market, diluting focus.

4. Smartphones: Missed Gold Rush Part 2: Another notable acquisition was of Infineon Wireless Solutions in 2010. This should have given Intel the ability to compete in wireless / baseband chips (for wireless communication with cell phone towers). Despite the acquisition, Intel exited the 5G modem business in 2019, unable to compete with Qualcomm. This was a missed opportunity given the dominance Qualcomm has in the space (further complicated with Qualcomm’s treasure trove of patents in the space).

5. Neglecting the Rise of GPUs and Compute Diversity As the compute landscape evolved, Intel remained overly focused on CPUs, ignoring the rapid rise of GPUs. GPU architecture, based on many smaller cores, allows GPUs to massively parallelize processing. In contrast, CPUs have fewer cores that are larger and more complex for single threaded applications (oversimplification). In the early days GPUs were useful for gaming/visualization, but use cases exploded: autonomous driving, cryptocurrency mining, and of course AI applications.

Geopolitics: A Possible Lifeline Despite its challenges, Intel has unique opportunities to leverage geopolitical trends and emerging government support.

• Geopolitical advantage: With semiconductor manufacturing concentrated in Asia—particularly Taiwan—geopolitical tensions have highlighted the strategic importance of domestic chip production. Intel’s U.S.-based fabs could serve as a critical alternative for companies and governments looking to diversify their supply chains.
• The CHIPS Act: The U.S. government’s commitment to bolstering domestic semiconductor production through the CHIPS Act has already provided Intel with significant support. The previous CEO’s focus on expanding onshore fabrication aligns with this strategy and could become a cornerstone of Intel’s resurgence.
• Strategic pivot: If Intel can capitalize on these tailwinds, it has the potential to become a critical player not just in traditional computing but as a leader in securing resilient semiconductor supply chains globally.

Fab manufacturing, and building a foundry capability (a la TSMC) was at the core of Gelsinger’s strategy. Up until that point, Intel fabs predominantly manufactured Intel's designs. While a sound one, it’s likely that there have been very minimal returns after huge investments over the past few years.

Conclusion: There are probably cultural and strategic blind spots in this retrospective. A few examples are: the Innovator’s Dilemma, a margin first mindset (mobile silicon has much lower margins than PC and server chips), overreliance on existing architecture, and M&A execution gaps. Intel’s decline from semiconductor supremacy to underdog status is a story of missed opportunities, strategic blunders, and execution missteps. The story isn’t over yet, as geopolitical tailwinds could offer a rare second chance. Or Intel risks being acquired. While the story is still being told, Intel’s story is a cautionary tale of how even the most dominant players can falter when they fail to adapt.