Intel's New CEO Plans Overhaul of Manufacturing and AI

Intel’s new CEO, Lip-Bu Tan, is preparing to introduce major revisions to the company’s approach to chip production and its strategic direction in artificial intelligence (AI). Tan’s strategy includes restructuring AI operations and addressing inefficiencies within the company’s management structure.

Revamping the company’s manufacturing operations is a core priority for Tan. Previously focused solely on producing chips for Intel, the company has shifted to manufacturing semiconductors for external clients such as Nvidia.

The plans for these changes are still in development and may evolve over time, according to sources. During a recent town hall meeting, Tan informed employees that “tough decisions” would be necessary.

Tan, who previously served as CEO of Cadence and was an Intel board member until August 2024, is returning to the company after a decade of challenges under previous leadership. In 2024, Intel posted a $19bn annual loss—the company’s first negative yearly result since 1986.

Tan’s immediate goal is to enhance the performance of Intel Foundry, which manufactures chips for companies such as Microsoft and Amazon. The company also plans to resume efforts to produce chips for AI servers and explore areas such as software, robotics, and AI foundation models.

“Lip-Bu will be spending a lot of time listening to customers, partners, and employees as he comes on board and works closely with our leadership team to position the business for future success,” a company representative was quoted by the news agency as saying.

Intel declined to comment further or make Tan available for interviews, Reuters reported. Tan’s venture firm, Walden Catalyst, did not respond to requests for comment.

Tan’s strategy appears to be a refinement of former CEO Gelsinger’s plan, which aimed to transform Intel into a contract chip manufacturer. Gelsinger committed billions to building factories in the US and Europe but had to scale back due to cooling demand for Intel’s core products.

Tan has been critical of Gelsinger’s execution, sources told the publication. Traditionally, Intel manufactured chips exclusively for itself. Gelsinger prioritized manufacturing for others but faced challenges in meeting customer and technical service expectations.

Tan’s views were influenced by a review of Intel’s manufacturing process, which he oversaw after being appointed to a special role by the board in late 2023. He expressed frustration with Intel’s culture, noting a departure from the ethos of former CEO Andy Grove.

According to Reuters, Tan also concluded that an oversized workforce was hindering decision-making. He had shared some of his proposals with Intel’s board last year, but two sources familiar with the situation said the board chose not to implement them. By August, Tan unexpectedly stepped down due to disagreements with the board.

Upon his return as CEO, Tan will reassess Intel’s workforce, which was reduced by approximately 15,000 to nearly 109,000 by the end of 2024. Beyond workforce adjustments, Tan must optimize Intel’s existing manufacturing operations. The success of Intel’s forthcoming Panther Lake chips, equipped with AI features, hinges on in-house factories using new techniques and technologies known as “18A”.

Intel’s financial success for 2025 is linked to strong sales of this chip. Tan has signalled his intention to maintain control over the factories, aiming to restore Intel’s position as a “world-class foundry”. Intel’s contract manufacturing success depends on securing at least two large customers for high-volume chip production. Improving Intel’s chip manufacturing process will be crucial in attracting potential clients such as Nvidia and Google’s Alphabet.

Tan’s vision for Intel’s future is clear: a leaner, more agile company with a renewed focus on innovation and customer satisfaction. The coming months will reveal the impact of his strategic changes on Intel’s performance and industry standing.