How Intel Fell From Global Chip Champion to Takeover Target

Strategic missteps and an unexpected AI boom have weakened America’s most storied semiconductor company

Sep 21, 2024, The Wall Street Journal

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Three years ago, Intel was worth more than double its current value, and Chief Executive Pat Gelsinger was on the prowl for acquisitions.

Now Intel itself is a takeover target, in a sign of how strategic missteps and the artificial-intelligence boom have combined to reshape the fortunes of America’s most storied semiconductor company.

A recent acquisition approach by Qualcomm, reported by The Wall Street Journal on Friday, reflects a vulnerability with few precedents in Intel’s 56-year history. The problems started with manufacturing setbacks before Gelsinger took the helm. And they have worsened as the CEO pursued a costly turnaround strategy that failed to foresee how the explosion of interest in AI would fundamentally redirect demand toward a type of chips made by rival Nvidia.

“Over the past two to three years the shift to AI was really the nail in the coffin for them,” said Angelo Zino, a veteran industry analyst at CFRA Research. “They just didn’t have the right capabilities.”

Even if Intel proves receptive, a deal with Qualcomm is far from certain for regulatory and other reasons. But the idea of the smartphone-chip giant acquiring Intel would have been almost unthinkable not that long ago.

Intel reigned for decades as the world’s most valuable semiconductor company, its chips nearly ubiquitous in personal computers and servers. In an industry where specialization was increasingly the norm, it was a rare company that designed and manufactured its own chips—and it was the world leader in both.

By the time Gelsinger became CEO in early 2021, Intel had lost some of its mojo, having fallen behind rivals in Asia in the race to manufacture the fastest-performing chips with the smallest transistors.

Gelsinger, who had previously worked at Intel for decades and was its first chief technology officer, had a plan to bring back the swagger Intel enjoyed under chiefs such as Andy Grove and Paul Otellini.

Doing so would entail catching up to those Asian rivals, Taiwan Semiconductor Manufacturing Co.and Samsung Electronics. He also planned to spend heavily to build out Intel’s manufacturing operations, and to sell that production capacity to design-only chip companies such as Qualcomm—breaking into the so-called foundry business that TSMC and Samsung dominate.

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