latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/amid-chip-delays-intel-tries-to-reassure-wall-street-with-leadership-changes-59611511 content esgSubNav
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us
In This List

Amid chip delays, Intel tries to reassure Wall Street with leadership changes


ESG hits the mainstream for European private equity sponsors


What’s the Bottom Line: Credit Impact of COVID-19 on US Municipals


Banking Essentials Newsletter - February Edition, Part 2


Episode 1: Origins of 451 Research - Part 1

Amid chip delays, Intel tries to reassure Wall Street with leadership changes

Intel Corp.'s management shake-up, triggered by the impending departure of its chief engineering officer, is clearly aimed at reassuring Wall Street that the company has addressed its technology development struggles — but big questions remain, analysts said.

Chief Engineering Officer Venkata "Murthy" Renduchintala will leave the company Aug. 3. He is the first executive to take a fall for the delays and manufacturing problems that may drive Intel Corp. to hire an outside foundry to help get its next-generation 7-nanometer chip products onto the market. Intel said the executive reshuffling around Renduchintala's departure would "accelerate product leadership and improve focus and accountability in process technology execution."

The announcement of Renduchintala's departure followed a contentious July 23 earnings call during which financial analysts grilled Intel CEO Bob Swan over his admission that the company was 12 months behind its internal goals for production of the next-generation 7-nanometer (nm) processor that would bring it back up to parity with competitors, including Advanced Micro Devices Inc. and NVIDIA Corp.

Notably, Intel executives said during the call that they did not know for sure what was causing the manufacturing problems and that the company may have to hire a third-party foundry to build its processors. Shares of Intel fell more than 16% the day after the announcement, while those of rival AMD rose by a similar amount. For the year-to-date as of July 27, Intel's stock was down 17.2%, while those of rivals AMD and Nvidia were both up significantly, gaining 50.4% and 77.2%, respectively.

SNL Image

While technical problems are to be expected during development processes, the admission undercuts Intel's efforts to demonstrate it had overcome the problems that delayed its current-generation 10-nm chips, according to Matt Bryson, senior vice president at Wedbush Securities.

Stacy Rasgon, managing director and senior analyst at Sanford C. Bernstein & Co. LLC, said the delays are becoming a troubling pattern for Intel.

"With 10-nm, [Intel] just tried to bite off too much ... It was too big a leap, with new materials and their first time using multiple patterning," Rasgon said. "There were problems with 14-nm, as well, which was delayed for like a year. 7-nm was supposed to be easier ... Whatever is going on with 7-nm, it's different from the things they fixed with 10-nm, which is kind of worrisome."

It is not clear that Renduchintala is the one at fault for manufacturing problems, but he had all the engineering and manufacturing divisions reporting to him, so "it was certainly part of his job to make sure they didn't get worse, and that's why he's gone," Rasgon said.

Intel hired Renduchintala to lead its PC and client-processor business in 2015, with a pay package totaling more than $25 million, including signing and performance bonuses. Renduchintala previously worked at QUALCOMM Inc. as executive vice president and co-president of the company's chip business. In early 2016, The Oregonian newspaper published a leaked memo from Renduchintala blasting Intel for "a lack of product/customer focus in execution that is creating schedule and competitiveness gaps in our products," focusing especially on problems with the development of 14-nm and 10-nm chips.

Following Renduchintala's departure from Intel next month, management of research and development for chips based on 7-nm and 5-nm processes will fall to Ann Kelleher, former head of Intel manufacturing, who kept the company's fabrication plants humming through the COVID-19 emergency while increasing manufacturing capacity and accelerating the ramp-up of intel 10-nm chips toward full production, according to Intel's announcement.

Intel supply chain chief Ranhir Thakur remains in place, but he is being promoted to chief supply chain officer and will report directly to Intel's CEO.

Having more people report directly to the CEO is a good way for Swan to acknowledge responsibility, but may not be the best way to make long-range technology decisions, said Bernstein's Rasgon, noting that Swan previously was Intel's CFO and may not be the best person to troubleshoot complex manufacturing problems.

Most of the negative market reaction seems to be the perception that Intel chips cannot compete if they do not have the right number label on them, which is far from true, according to Mike Demler, senior analyst with the Linley Group. Process-node sizes do not reflect the actual size of chip components as they once did, but shrinking a chip design to a smaller node delivers significantly more computing power in a smaller, more power-efficient package, Demler noted. Intel optimizes for PC or data-center functions more than a generic foundry might, Demler said, so Intel's 10-nm chip might keep up with someone else's 7-nm, under some circumstances.

Brian Matas, vice president of market research at semiconductor analyst firm IC Insights, said there is some truth but also a lot of marketing spin to Intel's claim that its 10-nm can compete with someone else's 7-nm chip. But he said Intel's problem is not just the number; it is the inability to get from one process size to the next in any kind of order.

"The fact is that Samsung [Electronics Co. Ltd.] and TSMC [Taiwan Semiconductor Manufacturing Co. Ltd.] are both at 7-nm and are getting ready for 5nm and are making a killing at it while Intel is still at 10-nm," he said. "Intel has been the process technology leader for 25 or 30 years, but this makes you wonder if they still have the process capabilities that they did."