What's Happening to Intel? The Past, Present, and Future of a Semiconductor Giant

Intel, once a pioneer of semiconductor innovation, finds itself in one of its most challenging periods ever. From missed acquisition opportunities to failed product launches, the company’s declining fortunes contrast sharply with the soaring success of its rivals, especially in the artificial intelligence (AI) sector. Here, we explore Intel’s decline, missed opportunities in AI, and the possible road ahead for the once-dominant chipmaker.

Who are Intel?

Founded in 1968, Intel emerged as a revolutionary force in the semiconductor industry, famed for its innovation and the development of the microprocessor. Intel's vertically integrated model—where the company designs and manufactures its own chips—enabled it to dominate the market for decades. Co-founder Gordon Moore’s "Moore’s Law" predicted the exponential growth of semiconductor power, making Intel synonymous with high-tech leadership.

For many years, Intel was the largest semiconductor company by revenue, supporting everything from personal computers to data centers. Intel's x86 architecture became the backbone of computing globally, helping the company maintain dominance well into the early 2000s. But a shift in the semiconductor industry’s landscape, coupled with Intel’s strategic missteps, has since changed its trajectory.

The Decline of Intel

Once the crown jewel of American tech, Intel’s fall from grace has been a slow burn over two decades. The rise of fabless competitors like NVIDIA and AMD—who design chips but rely on third-party foundries like Taiwan Semiconductor Manufacturing Company (TSMC)—challenged Intel's integrated model. TSMC’s nimble foundry model, which separates design from manufacturing, allowed it to quickly scale and meet demand, capturing Intel’s former customers, including Apple, AMD, and even NVIDIA.

By 2022, Intel’s stock was down 72.5% from its 10-year high. The company has lost substantial market share in the data center and PC segments, with a revenue decline of 31% in its Network and Edge division alone. In 2023, it reported a 14% year-over-year revenue decline, further exacerbated by negative cash flow—a significant fall for a company that had always been cash-positive over the previous 25 years.

Intel's foundry efforts have also struggled. Despite launching Intel Foundry Services in 2021, the segment has yet to reach profitability, facing stiff competition from TSMC and Samsung. This slow response to shifting industry dynamics has fueled scepticism about Intel’s future.

Missed Opportunities with A.I.

Intel’s misjudgments are especially evident in the AI space. In 2005, Intel almost acquired NVIDIA for $20 billion, but the board rejected the idea due to concerns about integration challenges and cost. NVIDIA’s early bet on AI, however, has paid off spectacularly; it is now the dominant player in AI hardware, with GPUs that power everything from data centres to generative AI models like OpenAI’s ChatGPT.

In 2017, Intel had another shot at entering the AI race when OpenAI offered it a 15% stake for $1 billion. Former CEO Bob Swan dismissed the proposal, underestimating AI's potential impact. As a result, OpenAI remained reliant on NVIDIA, while Intel’s AI ambitions were reduced to trying to catch up with its Gaudi line of AI accelerators—a challenging task in a market where NVIDIA commands over 70% of sales.

Intel's failure to capitalize on AI’s early momentum is central to its current struggles. Even as demand for AI accelerates, Intel has had to lay off 15,000 employees to cut costs and sustain itself through 2025. Rival Qualcomm's recent approach to acquiring Intel underlines the vulnerability of the company.

What’s Next for Intel?

Intel faces a critical moment as it attempts to revamp its strategy under CEO Pat Gelsinger. The company’s immediate focus is on expanding its foundry business to secure a competitive foothold. In recent months, Intel signed a multibillion-dollar deal with Amazon Web Services to build custom AI chips, marking a positive step forward. Additionally, a partnership with Microsoft to manufacture chips could offer a much-needed boost to its foundry segment.

However, restructuring alone may not be enough. Intel is also exploring a potential separation of its design and manufacturing units, similar to AMD’s strategy in 2009. This move could allow Intel to improve its manufacturing efficiency while enabling its design business to focus on innovation and profitability. Such a split could also attract customers who see Intel as both a competitor and a manufacturer.

Support from the U.S. government via the CHIPS Act, which promises $39 billion in grants, may provide Intel with the funding needed to revive its U.S.-based semiconductor manufacturing. This support is vital not just for Intel, but for American semiconductor resilience in an industry increasingly dominated by Asia.

Intel’s story is far from over. While its decline reflects years of mismanagement and missed opportunities, the company remains an essential player in the semiconductor landscape. The urgency to modernize and capitalize on emerging trends like AI is clear, as is the need for strategic shifts to separate design and manufacturing. With the right moves and government support, Intel could still turn its fortunes around. For now, the company’s path forward hinges on swift action, bold decisions, and a little bit of luck.

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