Embattled chipmaker Intel Corp. is hopeful of better days ahead after hiring Lip-Bu Tan as its new chief executive, ending a months-long search for a new leader that followed the ouster of its previous CEO Pat Gelsinger in December.

Tan has previously served as the CEO of Cadence Design Systems Inc., which makes software used by all of the major chip designers in the world, including Intel. He previously sat on Intel’s board, only to depart last year prior to Gelsinger’s ouster, citing other commitments.

The new CEO will take over the reins from interim co-CEOs David Zinsner and Michelle Holthaus, who will remain in their existing roles as chief financial officer and CEO of the company’s products division, respectively. Tan will also rejoin Intel’s board, the company said.

Tan’s appointment closes a chaotic chapter in the company’s history that began when investors began pressuring it to start cutting costs and spin off some of its less profitable businesses in order to reverse a years-long decline. The company has been steadily losing market share over the years to rivals like Advanced Micro Devices Inc. in the personal computing and data center server markets, and it has failed to make any substantial impact in the booming artificial intelligence sector.

Intel’s stock gained more than 12% on news of Tan’s appointment.

In a statement posted on Intel’s website, Tan said the company needs to double down and extend its advantage in areas where it still has momentum. “In areas where we are behind the competition, we need to take calculated risks to disrupt and leapfrog,” he added. “And in areas where our progress has been slower than expected, we need to find ways to pick up the pace.”

Tan will become Intel’s fourth permanent CEO in just seven years. Previous CEO Brian Krzanich resigned from the company in 2018 after allegations of an inappropriate relationship with an employee emerged, and he was followed by former CFO Bob Swan, who took over the reins in January 2019.

But Swan left just two years later after the company lost substantial market share to AMD and suffered from numerous delays in releasing newer chips. Gelsinger came along in early 2021, implementing a bold plan to transform the company’s business model and manufacture chips for other companies, in addition to its own.

However, Intel’s overall revenue continued to decline under Gelsinger’s stewardship, while investors became increasingly concerned over the spiraling costs of investment into Intel’s chip fabrication business. Among other things, it had planned to invest $20 billion into building a new chip factory in Ohio.

Following a disappointing earnings report and the company’s biggest ever round of layoffs last fall, reports emerged that Intel might even be up for sale. It was said to have drawn interest from rivals such as Qualcomm Inc. and Broadcom Inc. Moreover, numerous analysts weighed in, stressing the need for Intel to spin off its foundry division or even sell its products unit.

All the while this was happening, Intel was being trounced in the AI industry by Nvidia Corp., whose graphics processing units became the de facto hardware of choice for all AI workloads.

Analyst Dave Vellante of theCUBE Research has long pushed for Intel to spin off its foundry business and focus purely on chip design, and in comments today he reiterated that stance, saying that the foundry business is of limited value to anyone but Taiwan Semiconductor Manufacturing Co. and the U.S. government, which still needs a domestic chip supply chain.

“In my view, the U.S.A. needs not only on-shore manufacturing for advanced semis but that entity needs to be a U.S.-headquartered firm,” Vellante said. “So a joint venture is a logical approach with the U.S. funneling CHIPS Act funding into the entity along with TSMC putting in cash and, very importantly, IP and skills. Without that IP, the U.S. doesn’t protect its long term interests.”

Vellante added that Tan’s appointment appears to be a step in that direction, though he warned it will take many years and a lot of money for this new joint venture to become competitive again.

“But the longer it takes the more expensive it becomes and the U.S. government should bring its full influence to make it happen fast,” he added.

Chip industry analyst Jack Gold of J. Gold Associates told Fierce Electronics that the appointment of Tan is a welcome boost for Intel. He pointed out that the CEO has an intrinsic understanding of the semiconductor industry on both the product design and the manufacturing side

“While I didn’t agree with the firing of Gelsinger, at least his replacement seems capable of continuing Intel’s turnaround,” Gold said. “But we still need to be realistic. While Intel has made much progress, a turnaround will still take one to two years to fully materialize. Patience is required.”

Not everyone is convinced by Tan’s appointment, though. Holger Mueller of Constellation Research Inc. told SiliconANGLE that Intel’s choice of a man who was previously known as a “chip vendor arms dealer” during his time at Cadence is one that raises eyebrows.

“Tan is certainly competent, having made Cadence more customer-friendly during his tenure there, but I do wonder if it was the case that Intel’s select committee simply couldn’t find anyone better,” the analyst mused. “Intel faces massive challenges in every area. But hopefully Tan will help it to overcome them, as a strong Intel is better for every enterprise.”

Frank Yeary, who served as interim executive chair during Intel’s CEO search and will now revert to being independent chair, stressed that Tan has a “proven track record” in terms of creating shareholder value.

“We are delighted to have Lip-Bu as our CEO as we work to accelerate our turnaround and capitalize on the significant growth opportunities ahead,” he said.

In its most recent earnings call in January, Intel beat expectations on earnings and revenue but offered weak guidance for the months to come, citing economic uncertainty, stiff competition, seasonality and the fact that many customers are still sitting on large inventories of chips. The prospect of tariffs further clouds the company’s near-term prospects.

Intel was notably removed from the Dow Jones Industrial Average last November and replaced with Nvidia, reflecting the dramatic change of fortunes of the two chipmakers. While Intel’s stock was down 60% last year, shares of Nvidia gained 171% as the industry feasted on its GPUs.

At the close of the market today, Intel’s market capitalization was just $89.5 billion, about 30 times smaller than Nvidia’s.

Photo: Intel