What Happened?
The announcement and abrupt nature of Intel CEO Pat Gelsinger’s retirement leaves many questions. What does this mean for Intel’s turnaround plan? Who is Intel going to get to tackle this complex situation? How is it going to impact Intel going forward? And how will it impact Intel’s partners and customers?
Earlier this year, Intel had a strategy, separating its Products and Foundry businesses, as well as promoting an “AI Everywhere” message. Unfortunately, numerous issues have forced Intel into dire circumstances, and the existing turnaround strategy may be up for some changes.
What It Means
Tech execs need to pay attention to who Intel brings in as CEO. What the company does next will impact your purchasing decisions for your workplace, data center, and cloud services. Forrester expects that this news will have the following impact on Intel.
Increases the importance of the Foundry business. Intel’s investment in the Foundry business and its importance to bringing back product manufacturing in house cannot be overstated. There’s huge risk in terms of the Foundry technology not panning out (see Samsung’s efforts in the US with two-nanometer as an example), but getting a technological advantage here would help drive more business and not just Intel’s own. There has been a push for Intel to spin off this business. This is understandable due to how different it is in terms of investments, time frame to see a return on investment, and risk profile. But there are synergies that can be leveraged with a healthy Foundry and healthy products being manufactured. Unfortunately, Intel is not yet there. Spinning off the Foundry business may also have complications due to CHIPS Act conditions for accepting funding and having foundries that may not be running at full capacity with customers.
Be on the lookout for:
- Intel receiving the expected CHIPS Act funding and other government assistance to defray the enormous investments needed to regain the technological lead in semiconductor manufacturing and mitigate the risk of potential failures in converting research into production technology.
- How the incoming administration addresses the semiconductor industry and the importance placed on it versus other key US industries.
Increases the importance of Intel’s data center products to gain market share from AMD and NVIDIA. Data center product growth, especially in AI with NVIDIA and now AMD, shows Intel falling behind in a rapidly growing market. Its data center CPUs are also behind AMD’s offerings, but the new Xeon 6 release following AMD’s latest processors is an opportunity to gain back some thought leadership and market share.
Be on the lookout for:
- Gaudi 3 acceptance — AMD has been able to gain some market share from NVIDIA, however minor it may seem, so Intel needs to show the same.
- Xeon 6 acceptance — Can Xeon 6 stem the tide with AMD on the data center CPU market, and will its NPU capabilities and “AI everywhere” strategy help it with the acceptance of smaller generative AI models?
For more perspective on this issue or other related issues, Forrester clients can book an inquiry or guidance session at inquiry@forrester.com.
