Caveat
Even though it’s more fun to oversimplify and blame bad outcomes on the CEO or a factor, the reality of business is never that simple. Ultimately, current and recent CEOs should own the outcomes. But, more comprehensive case studies may help us to learn more. They are means to copy-and-paste. It’s always better to extrapolate and get creative.
Days After the Innovation Music Stops
30 years ago when I started my career, Intel was a fantastic company to work for. They were the king, leading CPU innovations that moved the PC industry forward. For example, in 1994, the Intel Pentium CPU took off because it delivered twice the processing power for your money. Intel was building for the future.
On August 2, 2024, Intel’s stock price dropped 26%, the worse in 40 years. Things could be worse if Intel weren’t a favorite of the US and EU governments. Just this March, Intel secured up to $8.5B in direct funding from US taxpayers. And, Intel also asked $10B from the EU. Because Intel is a very “important” strategic asset for those nations “to reimagine and rebuild a new economy.” We’re all kind of in the same boat now. While there is a hope the >$10B cost-reduction plan to turn Intel around. But, we should also ask: what else can Intel strategize and do better?
Innovator’s Dilemma
From my experience, I’ve witnessed a few Intel strategies that started strong but ended poorly. I hope Intel conducts proper postmortems because there are many lessons to be learned.
- Missing the Mobile Revolution: In 2006, Intel gave up on the world’s biggest chip market. At the time, there were 2 billion mobile phones in the world. I was sad because my work on the first 3G feature phone with Asus & Intel at TTPCom never launched.
- Missing the Smartphone Revolution: Intel tried again with a big bet on Android smartphones. In 2012, I helped them launch the first compatible x86 Android phone: the Lava Xolo X900. By 2016, quitting became Intel’s new smartphone strategy.
- Missing the Smartwatch Evolution: In 2016, “Intel Inside” became a thing for luxury smartwatches, like Tag Heuer Connected. Then in 2017, Intel axed its entire smartwatch group to focus on augmented reality.
- Flip-flopping on Smartcar Disruption: Intel chips powered the first wave of smart cars, such as Tesla and Polestar 2. Since then, there haven’t been many updates from Intel regarding “Creating an Amazing Android Automotive Experiences”. In 2022, Tesla’s infotainment system switched to AMD, and “Intel Inside” was no more. Now in 2024, Intel plans to focus again to anew on automotive for strategic growth.
Even as Intel failed in all these bets, it was okay because their core business was doing fine as usual. That’s the luxury of being a big giant: Goliath. However, that is also an opportunity for smaller players: David.
Losing Ground
The problem now is that Intel’s cash cow isn’t growing as it used to be. This didn’t happen overnight. Disruptions on the edge have been creeping in for a while. Intel may have become too complacent for too long. For examples:
- In 2017, AMD launched its Zen line of CPUs. Zen is a hybrid, multi-chip microarchitecture. Taking the System-on-Chip (SoC) approach, Zen microarchitecture integrate the memory controllers, etc., into the same chip as the CPU cores to deliver high performance.
- In 2012, ASML got funding from Intel: $4.1B, TSMC: $1.4B, and Samsung: $0.9B to develop Extreme UltraViolet (EUV) lithography. But in 2017 when EUV was ready for production, Intel betted that EUV wouldn’t be profitable, and Intel would be fine without it. By 2018, TSMC overtook Intel for the first time because TSMC was making chips with the EUV machines and Intel wasn’t.
- In 2020, Apple switched the CPU for MacBooks from Intel chips to its own SoC M1 chips. This was another phase change for personal computers. By 2024, the beginning of the end for Intel on PC, its main business are not reversible anymore.
Asset-Light Actual
In 2021, I bet “2 Intels is better than 1”. I asked what if there are 2 Intels. Intel#1 focus is on designing & selling the chips. And Intel#2 focus on IC Manufacturing as a Service. Sure, it’s easy for me to say. It’s also easier for Intel to take the easy path to set up Intel Foundry business unit instead. Now in Q2 2024, Intel Foundry revenue is $4.3B with a $2.8B operating loss. Even worse, the trend is going down. It’s not just bad anymore, it’s very, very ugly.
In 2008, AMD was in a similar situation. After struggling for nearly 2 years to keep their operations profitable and the debt manageable, AMD spun off its chip fabrication facilities becoming “fabless”. This bold move made AMD asset-light actual. Which is a key factor to AMD’s success today. Because AMD can focus all its talent and resource to design better CPUs and later better GPUs since. Also thanks to TSMC’s advanced fabrication capability, AMD can compete better with Intel and iterate faster. It’ll be more fun if Intel#1 can focus to innovate CPU & GPU.
This year, Intel bets on next generation lithography scanner: ASML’s High Numerical Aperture (High NA) Extreme Ultraviolet (EUV). Intel hopes to take back the No1 from TSMC. For me, the real test is if Intel#2 can secure orders from Apple & NVIDIA.
