Only the Paranoid…

The last week has been awash with former coworkers lamenting the state of Intel Corporation.

Who could have POSSIBLY predicted this downfall? Anyone paying attention.

That's not to underplay traumatic issues associated with layoffs or forced retirements. Just that it shouldn't be a surprise - it's been more than a decade coming.

For those of you that don't keep up with it, Intel was once the most important company in the world. In the 90s, it drove productivity gains for much of the world economy, was the envy of every other company, and had a near-monopoly on the hardware used on the vast majority of computing devices in the world. It was the best of manufacturing, design, sales, and marketing.

This was the company started in 1968 by Gordon Moore (of Moore's Law fame), who passed away in 2023, and industry pioneer Bob Noyce, when they left Fairchild as 2 of the "traitorous 8" that formed most of the companies in Silicon Valley. Andy Grove, the Hungarian immigrant who was credited for leading a flagging memory company to be the dominant producer of the most valuable assets in the fastest growing sector of the economy. When I joined Intel in 1990 (the year of Noyce's death), my parents had never heard of the company. When I first left after 10 years, it was a household name and a Wall Street darling.

Last week, Intel announced disastrous financial results and laid off 15,000 workers while other companies in the sector are soaring. Intel is 2 generations behind the competition (TSMC) on manufacturing technology and perhaps 10 years behind Nvidia in AI.

I recently had a conversation with a millennial CEO who didn't know about Grove, his famous "Only the Paranoid Survive" quote, Intel's industry battles, or corporate culture. I was shocked, but it reminded me that the technology industry is shortsighted and doomed to repeat it's mistakes.

Intel under Grove was far from perfect, but it was a formidable beast, exciting, sometimes ruthless, with a dynamic corporate culture. When I was lured back in 2005, the culture had completely changed, and not for the better. It had become much more tops-down, much less nimble with more infighting. I built successful programs despite the organization, not because of it.

In 2010 I told an executive VP and his entire staff (many of whom ran Fortune 500 companies within this Fortune 50 company) that I didn't believe they had any intention to adapt to changing market conditions and I was leaving the company as a result. I'd just spent 4 hours going over some new strategic directions while corporate VPs picked fights with each other or ignored the content completely. They were fat, happy, and complacent.

I had literally done everything that I could do to try to change a multi-billion dollar company yet failed and quit despite being overpaid and not having another job. I wrote a detailed note to the executive VP detailing all the reasons that I was leaving, mentioning that Intel would be a cash cow for another decade if they did NOTHING but that changes in the industry were clear. I sold all of my Intel stock a few years later, realizing that I was a hypocrite for holding it.

This is Clayton Christensen's "Innovator's Dilemma" writ large.

Intel was unwilling to seriously invest in new directions since it took resources away from the cash cow leaving room for competitors to eat away at margins and market dominance. I did not foresee that they would get so fat and sloppy. Intel invested in many things, but always pulled back just when they were starting to reap success for fear that it would detract from the cash cow.

When I joined Intel in 1990, it was in the Neural Network Group (which was my engineering grad work). It will surprise many of you that Intel was investing this far ahead of the industry in hardware for AI - before NVidia was even founded. They were also too early, but gleefully sold the technology and disbanded the expertise before broad commercialization despite almost no cost to the company. Before you argue that the technology is very different today, I'll remind you that the biggest changes since then are (1) Advances in Moore's Law, and (2) availability of vast amounts of training data. Algorithms haven't significantly changed. That's an oversimplification, but a valid statement nonetheless.?

Intel had a unique license for ARM processors (the poorly named "StrongArm" later renamed "Xscale" line) but sold it off to Marvell just as ARM was taking off in mobile products (the year before iPhone was introduced) opting instead for the poorly designed Atom processors. Instead of displacing ARM, Intel found themselves with approximately 0% market share in high-margin handset silicon after billions in investment. They could have easily taken a 2-pronged approach and owned the mobile market (they were still 2 generations ahead of everyone on manufacturing technology at the time).

Worst of all was Intel's downfall in manufacturing. When Intel's designs were crushing the competition, the infighting would begin, managers would build fiefdoms, and competition would slowly take market share, but Intel's manufacturing powerhouse would rescue the company since NOBODY could compete on that basis. Even marginal design coupled with superior manufacturing yields pretty good products.

Moore's Law (that the number of transistors on the same size silicon chip doubles approx. every 2 years) doesn't come about by accident. Intel MADE it happen, with investment in people, research, and factories. Until it didn't. Now TSMC drives Moore's Law.

Were the people at Intel lazy? Stupid? Definitely not. I worked with brilliant and passionate engineers, marketers, and visionaries at Intel. But after the 90s, few of them were in management.

And that's the problem - it's simply been bad management. Management that lectured to their employees rather than listen to the smartest people in their organizations. I remember VPs walking into my office in the 90s to pick the brain of a junior engineer, . It wasn't unusual, and it made us all feel like we were seriously contributing to the big picture, and they actually listened.

On my second round from 2005-2010, management would hold court choose from the menu of options that they'd told us to build. Everyone was afraid to disagree with their menu demands or their dietary choices.

In 2007, I had one foot out the door again when I was pulled in to do Internet strategy for the group building phones (although they didn't believe that they were building phones). I knew it was disaster when I realized that the VP wanted to do all of the strategy and I'd just be taking notes or fighting unwinnable wars.

Grove's culture was long since dead.

Intel's new CEO, Pat Gelsinger would be the savior, the prodigal son returning to right the ship. He'd justify a massive salary with claims that he'd magically "leapfrog" the competition by taking $8.6B in direct funding, $11B in low-interest loans, and untold billions more in tax credits from the federal government to onshore the semiconductor industry.

But Intel's downfall wasn't due to insufficient resources. They had all the money in the world and failed to deliver. Money is more likely to prop up this failing company than rejuvenate it.

Is it possible that Intel will deliver this time? Maybe, but first there needs to be a massive overhaul in corporate culture. It needs to get back to basics. Back to an engineering company, not one of hyperbole and intimidation. Gone are the days when customers would purchase whatever Intel was building.

This has been a rant about one company's decline, but it isn't just an Intel problem. If you think Apple, NVidia, or any other company is immune from the innovator's dilemma, then you haven't internalized the problem and you're exactly where Intel was when I told them that the ship was sinking.

Don't be surprised when it sinks.

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