After of string of unprecedented technical setbacks, Intel said Wednesday that VMWare chief executive Pat Gelsinger will step into the top job in place of current Intel CEO Bob Swan. Gelsinger was one of Intel’s top Oregon executives before leaving the company in 2009, after 30 years with the chipmaker.
Intel has endured a succession of manufacturing failures, with three consecutive generations of chip technology suffering years of delays. The chipmaker is facing a deadline just eight days from now on whether to outsource its leading-edge technology, currently developed and produced in Hillsboro, to rival manufacturers in Asia.
CNBC first reported the news on Gelsinger. Intel said the shocking development was unrelated to its financial performance, and the chipmaker said its fourth-quarter financial results exceeded the forecasts it issued in October. Swan will step down February 15 after two difficult years at Intel’s helm.
“Pat is a proven technology leader with a distinguished track record of innovation, talent development, and a deep knowledge of Intel,” Intel Chairman Omar Ishrak said in a statement Wednesday. “He will continue a values-based cultural leadership approach with a hyper focus on operational execution.”
Intel’s shares jumped 10% on the news, to $58.51. The company didn’t immediately disclose Gelsinger’s compensation package. VMWare paid him more than $20 million annually, mostly in stock.
Intel’s technical challenges have been accompanied by upheaval in its executive ranks. The company replaced former CEO Brian Krzanich in 2018 after the board uncovered what it called “a past consensual relationship with an Intel employee” in violation of corporate policy.
After a seven-month search, Intel promoted Swan from chief financial officer to make him CEO in January 2019. A finance professional who was relatively new to the company, Swan lacked the technical background Intel has traditionally sought in its leaders. And less than two years later, Intel is moving on again.
Gelsinger had been a candidate to run Intel in both 2013, when the company hired Krzanich, and again in 2018. Both times Gelsinger said publicly that he was happy running VMWare and ruled out returning to Intel.
It’s not clear what changed for Gelsinger, but Intel’s need for strong technical leadership has never been more apparent.
The company’s vaunted manufacturing technology is in crisis. Intel’s research factories in Hillsboro have suffered setbacks with its 14-nanometer, 10nm and now 7nm generations of production technology.
Persistent defects delayed the introduction of each new class of microprocessor, enabling rivals ARM Holdings, Taiwan Semiconductor Manufacturing Co. and AMD to catch up – and, in some cases, surpass – Intel’s most advanced technology.
Last year, Apple began using its own chips in its Mac computers. And rival technologies threaten to upend Intel’s dominance in the highly lucrative data center market, too.
Facing the prospect that its own manufacturing technology may not be able to keep up anymore, Intel set a deadline this month to decide whether to begin outsourcing its most advanced production to TSMC or another contract manufacturer.
It’s a humiliating prospect, which might permanently erode Intel’s leadership position in the chip industry and compromise its profit margins. It would also upend Oregon’s central role in developing and producing each new generation of Intel chip technology, which the company then replicates at its factories around the world.
Intel did not say Wednesday if it plans to stick to its deadline to make a decision on outsourcing when it announces quarterly financial results on January 21.
“After careful consideration, the Board concluded that now is the right time to make this leadership change to draw on Pat’s technology and engineering expertise during this critical period of transformation at Intel,” Ishrak said.
Intel is Oregon’s largest corporate employer, with more than 21,000 people working at its factories and campuses in Washington County. Gelsinger lived in Oregon for many years, even after leaving Intel, but has lived in California since becoming VMware’s CEO in 2012.
In Wednesday’s announcement, Gelsinger cited Intel’s technical heritage as a reason to return.
“I have tremendous regard for the company’s rich history and powerful technologies that have created the world’s digital infrastructure,” he said. “I believe Intel has significant potential to continue to reshape the future of technology and look forward to working with the incredibly talented global Intel team to accelerate innovation and create value for our customers and shareholders.”
