Intel's new CEO takes decisive action! Plans to restructure foundry and AI businesses and lay off employees to return to being a "world-class foundry."

Media reports indicate that Chen Liwu, who is set to become the new CEO of Intel, is considering significant adjustments to the company's chip manufacturing methods and artificial intelligence strategy to revitalize the struggling tech giant.

Two insiders familiar with Chen Liwu's thoughts revealed to the media that before his official return to Intel on Tuesday, he has been formulating a comprehensive reform plan, including restructuring Intel's layout in the field of artificial intelligence and cutting some staff to address what he perceives as an oversized and inefficient middle management issue.

Additionally, insiders told the media that adjustments to Intel's manufacturing business will be one of Chen Liwu's core priorities, as this department, which once focused on producing chips for Intel itself, now also manufactures semiconductors for external clients like Nvidia. These plans are still in the formulation process and may be adjusted.

Driven by this news, Intel's stock price rose over 6.8% on Monday, closing at $25.69.

Insiders told the media that during an all-hands meeting after his appointment as CEO last week, Chen Liwu informed employees that the company needs to make "difficult decisions."

Semiconductor industry expert Dylan Patel stated to the media that a major issue with former CEO Pat Gelsinger was being "too lenient," noting that "he was unwilling to make large-scale cuts to middle management according to Intel's needs."

Analysts believe that over the past decade, Intel has experienced poor decision-making under three CEOs, including the failure to successfully enter the smartphone chip market and missing out on the explosive growth in demand for artificial intelligence chips, ultimately allowing Arm and Nvidia to dominate these fields. Intel reported an annual loss of $19 billion in 2024, marking its first annual loss since 1986.

Improving Foundry Business and Restarting AI Server Chip Production

At 65, Chen Liwu was previously the CEO of chip design software company Cadence and is also a seasoned tech investor. He was a member of Intel's board but resigned last August.

Upon returning to Intel, in the short term, Chen Liwu's goal is to improve the operations of Intel Foundry, which currently produces chips for companies like Microsoft and Amazon. His strategy includes actively attracting new customers to enhance business performance.

Additionally, Intel plans to restart its production plans for AI server chips and expand into areas such as software, robotics, and artificial intelligence foundational models.

An Intel spokesperson stated in a statement:

"Chen Liwu will spend a significant amount of time after taking office listening to the opinions of customers, partners, and employees, and will work closely with our leadership team to lay the groundwork for future success."

Media reports suggest that, for now, Chen Liwu's strategy somewhat continues Gelsinger's direction but also includes key adjustments Gelsinger once attempted to transform Intel into the world's top chip foundry, competing with TSMC. Gelsinger had promised to invest hundreds of billions of dollars to build factories in the United States and Europe to simultaneously produce Intel's own chips and those for external customers. However, due to a cooling market for Intel's core products, he had to scale back these plans.

Frustration with Intel's Corporate Culture

Two insiders told the media that Chen Liwu has been internally criticizing Gelsinger's decisions.

In Intel's history, the company has almost exclusively manufactured chips for itself. After Gelsinger took office in 2021, he opened chip manufacturing to external clients, but failed to meet TSMC's standards in customer service and technical support, leading to delivery delays and product testing failures, some former executives revealed to the media.

At the end of 2023, Intel's board appointed Chen Liwu as a special supervisor for manufacturing operations. In this role, he conducted an in-depth review of Intel's manufacturing processes and expressed frustration with Intel's corporate culture internally, stating that the company has lost the "only the paranoid survive" spirit advocated by former CEO Andy Grove.

Insiders told the media that Chen Liwu believes Intel's decision-making efficiency is hampered by a bloated organizational structure. Last year, he submitted several reform proposals to Intel's board, but the board refused to implement them, leading to his sudden resignation in August of last year.

Upon returning to the position of CEO at Intel this week, Chen Liwu will re-examine Intel's employee structure. As of the end of last year, Intel's global workforce had decreased from approximately 124,000 to 109,000, with about 15,000 layoffs.

Improving Foundry Quality and Betting on AI

Despite plans for workforce reduction, Chen Liwu still needs to quickly restore the competitiveness of Intel's existing manufacturing business in the short term.

Intel's next-generation high-end AI chip, Panther Lake, will rely on its new generation "18A" chip process. The success of this product is directly related to Intel's financial performance this year.

In an internal memo released by Intel, Chen Liwu hinted that he would continue to oversee Intel's manufacturing operations, ensuring that the department remains financially and operationally independent and restores Intel's status as a "world-class foundry."

Industry analysts and Intel executives told the media that the success of Intel's foundry business hinges on attracting at least two large clients to guarantee high-volume orders. To attract these clients, Intel needs to improve its chip manufacturing processes to make them more suitable for potential customers like Nvidia and Google.

Media reports indicate that Intel has recently showcased improvements in its manufacturing processes and has attracted Nvidia and Broadcom for preliminary test production. Additionally, AMD is also evaluating Intel's manufacturing processes.

Chen Liwu's goal is to improve the "yield rate," which means producing more qualified chips on each silicon wafer, in order to increase shipments when the first "18A" process chip goes into mass production in 2024.

Intel hopes to release a new generation of AI chips every year like Nvidia, but this may take several years. According to three industry insiders and one knowledgeable source familiar with Intel's progress, Intel may not develop a truly competitive AI chip architecture until as late as 2027