Intel CEO Who Won Over Trump and Musk Now Needs a Breakthrough

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Former business rivals, including Nvidia Chief Executive Officer Jensen Huang, have started talking about how central processing units, Intel’s main product, will play a major role in the artificial intelligence data center. But over the last decade, the capability of Intel’s factories has plummeted, to the point where it outsources manufacturing of some of its most important products to Taiwan Semiconductor Manufacturing Co. To prove reliability, the company needs to start meeting its timetables for introductions of new technology, said Naga Chandrasekaran, who has led Intel’s factory business for almost two years.

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Chandrasekaran said one of his first goals is to win back his own product teams’ business, meaning they can stop outsourcing production. But even that won’t be enough. “Intel products alone, even in a wildly successful scenario, cannot fund the capital and filling the fabs and the scale that’s needed to be successful enough in a silicon business today,” he said.

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He and Tan talk a lot about winning back Intel’s trust with customers. “He’ll sit in front of me, and he’ll tell me what the customer is telling him,’’ said Chandrasekaran, a former Micron Technology Inc. executive. “Ten pages worth of notes, and there’s no escaping.” Tan has prioritized telling prospective users of its plants that they’ll get at least equal treatment with Intel’s own product divisions, if not better. 

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Tan said he has plans for where he wants Intel to be in two years, five years and 10 years. “Credibility comes from results,’’ he said.  But in internal communications, while not pulling punches about Intel’s performance, he relies on executives such as Chandrasekaran to come up with details of plans, employees said.

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Those who know Tan or have worked for him said his management style mirrors his approach to venture capital investing. When he looks for someone to hire, he doesn’t want details and business plans, they said. Instead, he prefers a high-level conversation about the state of the industry. If they make a good impression, he backs them and devotes his energy to opening doors to help them to succeed, rather than scrutinizing their strategies or numbers, they said.

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But in the chip industry, success and failure comes in the details.

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Chip factories that aren’t running flat out, or even as efficiently as they could, can be ruinous to own. According to New Street Research, Intel is struggling with as much as three times the cost per chip as industry leader TSMC. The biggest chunk of that — more than 40% — is tied to yield, the number of good chips it gets per production run. Intel’s yield rate is about 65%, compared with more than 80% at the Taiwanese company. Only 8% of the difference in those costs is accounted for by the relatively more expensive price of labor in the US.

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Even if Intel’s rivals decide to trust him, the brutal economics of the chip industry mean that they are reluctant to spend the money it takes to switch, even partially, to a new supplier. They need proof it’ll pay off immediately, and no one wants to go first, according to Daiwa Capital Markets analyst Louis Miscioscia.

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“You want another company to be the one that partners with Intel and takes the pain,’’ he said. 

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Some at Intel still believe the company should be broken up, to split manufacturing and product design and accelerate progress. Tan said that can’t happen anytime soon and that there are advantages to keeping the two units tied together. Over time, he could see an arrangement along the lines of EMC Corp.’s former operation of VMware as a majority-owned subsidiary.

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For now, Tan will need to instill momentum at the company. As former CEO Pat Gelsinger put it: Intel, which once had 99% share of data center processors, was built to lead, not to compete.

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Kevork Kechichian, who Tan brought in to run the company’s crucial server chip unit, said that when he speaks with some teams that have fallen behind on a deadline by a couple of weeks, he gets a response that he’s not heard at Qualcomm Inc., Arm Holdings Plc or other companies he’s worked at.