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“Business success contains the seeds of its own destruction.” ― Andrew S. Grove, “Only the Paranoid Survive”  

The Wall Street Journal recently broke the initially shocking news that Qualcomm approached Intel with a takeover offer. Intel was once one of the most storied companies in the tech industry and the 6th most valuable companies in the world. Today its stock price is 60% lower than its recent high point in 2021. So what went wrong and are there critical enterprise risk lessons to be learned? Many factors are to blame, according to the current Pat Gelsinger CEO “We didn’t get into this mud hole because everything was going great…We had some serious issues in terms of leadership, people, methodology, et cetera that we needed to attack.”

Side Note: Our company name DelCreo was coined using Latin words “Deleo” and “Creo” to roughly signify “Creative Destruction” - meaning that new innovations must replace older, obsolete innovations for businesses to survive.

Leadership & Culture

“The person who is the star of the previous era is often the last one to adapt to change, the last one to yield to the logic of a strategic inflection point and tends to fall harder than most.” ― Andrew S. Grove, “Only the Paranoid Survive”

There have been criticisms about Intel's leadership, strategic decisions and culture. Some of the key leaders in the past did not have engineering backgrounds. Costly strategic misses, engineering challenges and product issues have occurred. Some have expressed concern that Intel has focused too much on cost-cutting, which have led to layoffs and losses of critical engineering talent, impacting its culture, engineering and manufacturing capabilities, innovation and product quality.

Product Development & Innovation

“In Technology, whatever can be done will be done” ― Andrew S. Grove, “Only the Paranoid Survive”

Intel has struggled with delays in its chip manufacturing technology. Notably, its transition to 10-nanometer and then to 7-nanometer processes faced significant setbacks, allowing TSMC to produce smaller, more efficient chips sooner. Intel's delays not only cost them technological leadership but also market share, particularly to AMD in both the PC and server markets.

Missed Market Shifts

“Businesses fail either because they leave their customers or because their customers leave them !” ― Andrew S. Grove, “Only the Paranoid Survive”

Intel’s x86 chip focus on raw processing power may have been the primary reason why it missed the mobile boom. Mobile chips require efficiency and minimal heat generation are critical. When it was approached by Apple in 2006 to produce chips for their upcoming new product the iPhone, Intel declined. Other companies like Qualcomm and Apple pursued the ARM's RISC (Reduced Instruction Set Computing) architecture which is energy efficient and well suited for phones and other mobile devices.

Intel missed another major market shift - AI chips and is now playing catch-up to NVIDIA. NVIDIA and Intel had the same market cap in 2019 (~$200B), now NVIDIA’s market cap is hovering near $3 trillion market cap versus Intel’s $100 billion market cap. Intel’s recent deal with Amazon to build custom AI chips for Amazon Web Services (AWS) as part of the multibillion-dollar deal provides hope for both the struggling Intel Foundry Business unit (discussed below) and that it can make progress in the AI space.

Intel Foundry Business Strategy and Execution

“The ability to recognize that the winds have shifted and to take appropriate action before you wreck your boat in crucial to the future of an enterprise” ― Andrew S. Grove, “Only the Paranoid Survive”

Intel is attempting to become a major foundry player through Intel Foundry Services (IFS). CEO Gelsinger’s plan is compete with TSMC and Samsun by investing hundreds of billions of dollars into new factories that would make semiconductors for other companies alongside Intel’s own chips. This initiative has already consumed considerable financial and leadership capital and operating losses have been significant.

Intel’s product strategy for years has relied on the tight integration between design and manufacturing. IFS will need to build entirely new customer service capabilities to achieve this shift:

  • Intel has well developed proprietary software tools for coordinating chip design and manufacturing. They will need to be repurposed or rebuilt to communicate with fabless customers.

  • New customer service processes will need to be created and once again stripped of Intel proprietary IP and processes. How will Intel manage balancing internal and external customer demands, production scheduling, etc.

  • New customer service talent and skills will need to be developed as well.

IFS has struggled to win customers in the past year.  “Tesla passed on working with Intel because Intel couldn’t provide extensive chip-design services that other major foundries offer, one of those people said. Qualcomm dialed back after technical missteps by Intel, according to some of those involved in the interaction.”

Although key strategic moves such as being acquired, becoming the acquirer or spinning off IFS may be taken to address the many challenges and risks discussed, its clear that key strategic, operational and innovation related risks have placed Intel in a dire situation with little time to waste.

Request more information on emerging risks, DelCreo’s Risk Universe and enterprise risk services.

As a reminder, here are our Risk Universe categories that we leverage to tackle and understand risk which include:

  • External Risk

  • Governance Risk

  • Strategic Risk

  • Product Risk

  • Business Operations Risk

  • Legal & Compliance Risk

  • Financial Risk

  • Technology Risk

We leverage our understanding of risk maps and risk universes to better advise our clients in strategic business decisions and to optimize the management of risk throughout the enterprise.

Weighing the Risks

Risk Universe Weekly Updates

Strategic Risk

Chip Giants TSMC and Samsung Discuss Building Middle Eastern Megafactories

  • TSMC and Samsung are in early discussions to build massive chip-making complexes in the U.A.E., potentially transforming the industry and supporting the region's AI ambitions, although significant technical and political challenges remain.

  • The U.A.E., leveraging its substantial sovereign wealth, aims to diversify its economy by investing in advanced technologies.

Google Paid $2.7 Billion to Bring Back an AI Genius Who Quit in Frustration

  • Google rehired AI pioneer Noam Shazeer by paying around $2.7 billion to license technology from his company, Character, which also secured Shazeer's return to Google.

  • Shazeer's return has sparked debate over whether tech giants are overspending in the AI race, and he is now one of the leaders in developing Google's next-generation AI technology, Gemini.

Challengers Are Coming for Nvidia’s Crown

  • Nvidia's AI dominance is driven by its GPUs' exceptional suitability for AI tasks and the extensive CUDA software ecosystem

  • Despite Nvidia's strong market position, competitors like AMD, Intel, and innovative startups such as Cerebras and SambaNova are developing alternative chip architectures and software platforms to challenge Nvidia’s supremacy.

Technology Risk

Small Businesses Show High AI Adoption Rates

  • Nearly all small businesses surveyed (98%) are utilizing AI tools, with 40% using generative AI, leading to significant time savings and reduced personnel costs, though human oversight remains crucial.

  • The survey also highlights that a majority of small businesses believe AI will drive future growth and plan to adopt more emerging technologies, with 91% expressing optimism about AI's impact on their business.

Offshore Wind Slowed by Broken Blades, Rising Costs and Angry Fishermen

  • The collapse of a giant wind turbine blade off Massachusetts has raised concerns about safety, reliability, and the potential hazards to fishing boats, highlighting the risks and challenges faced by the fledgling U.S. offshore wind industry.

  • The incident has delayed the $4 billion Vineyard Wind 1 project and added scrutiny to the industry, which already struggles with cost overruns, supply chain issues, and opposition from local communities and fishing groups.

Product Risk

Smart Cars at Heightened Risk of Attack

  • Automakers need to enhance the cybersecurity of vehicles with over-the-air software updates, as current systems are susceptible to unauthorized remote manipulation.

  • Experts recommend adopting opt-in options and additional authentication layers to empower drivers with control over security-related commands, while also raising consumer awareness about the potential vulnerabilities of connected cars.

OpenAI Messed With the Wrong Mega-Popular Parenting Forum

  • Mumsnet, a popular UK-based parenting forum, sought a licensing deal with OpenAI after discovering its data was being scraped, but negotiations fell apart when OpenAI deemed Mumsnet's 6 billion word dataset too small and publicly accessible.

  • OpenAI has entered various data-licensing deals with other media outlets and platforms, emphasizing partnerships that reflect broad human experiences and are not solely based on publicly available information.

It Cooks, It Cleans! When Will Robots Be Doing Our Chores?

  • Despite the promise of domestic robots like those depicted in the Jetsons, only the Roomba has seen widespread success, and more advanced robots like Stretch 3 are still primarily in research and development phases.

  • The complexity of home environments and the need for robots to navigate dynamic and unpredictable conditions, such as avoiding pets and adapting to various object types, present significant challenges to creating fully autonomous domestic robots.

Business Operations Risk

Big Tech Is Rushing to Find Clean Power to Fuel AI’s Insatiable Appetite

  • Tech giants are collaborating with utilities to invest in innovative green energy solutions, such as geothermal power and small nuclear reactors, to meet the increasing energy demands of data centers driven by AI advancements.

  • Despite pledging to reduce carbon emissions, tech companies have seen significant increases in emissions due to the rapid growth of data centers, highlighting the challenges in achieving their climate goals.

BlackRock, Microsoft Partner on Massive New AI Infrastructure Fund

  • The Global AI Infrastructure Investment Partnership, formed by BlackRock and Microsoft, aims to pool up to $100 billion in capital to finance AI infrastructure projects, including data centers and energy infrastructure, primarily in the U.S.

Sam Altman believes wars will be fought over AI

  • AI industry leaders, including OpenAI CEO Sam Altman, are advocating for substantial investments in AI infrastructure to avoid global conflicts and make AI accessible, but experts caution that this development will entail significant social and environmental costs.

  • The expansion of AI infrastructure, such as data centers, raises concerns about high resource consumption, unclear economic benefits, and potential negative impacts on social order and the environment.

What Amazon's Strict Return to Office Policy Says About Remote Work

  • Amazon's push to bring employees back to the office five days a week reflects a shift in power towards employers in the tech sector, amid a weakened labor market and recent layoffs.

  • While Amazon's move may influence other companies to tighten remote work policies, experts believe the hybrid work model will remain prevalent, as most companies recognize its benefits for employee satisfaction and retention.

Legal & Compliance Risk

Justice Department Pushes Companies to Consider AI Risks

  • The Justice Department has updated its guidance for assessing corporate compliance programs, emphasizing the need for companies to manage risks associated with AI, promote whistleblower protections, and use internal data effectively.

FTC report on predatory social media data hoarding hints at future regulations

  • The FTC's new report on data collection by social media and streaming sites highlights evasive responses from companies and aims to justify new regulations in the space.

  • Despite some changes and penalties since 2020, the FTC's findings underscore the need for stricter rules to curb the dominance and unchecked data practices of major tech firms.Access our LinkedIn