Intel’s (INTC) new CEO Lip-Bu Tan officially starts work today and he’s ready to make major changes at the chipmaker. He plans to overhaul the company’s strategic focus, concentrating on its foundry and artificial intelligence business. Large numbers of layoffs are anticipated.
But Tan plans to align his interests with that of the company. Within the next 30 days, the CEO will be purchasing some $25 million worth of INTC stock.
Reuters reports Tan is looking to shake up the chipmaker to turn its fortunes around, telling employees at a town hall meeting after his appointment that Intel needs to make “tough decisions.” Tan was previously CEO of Cadence Design Systems (CDNS). During his tenure between 2009 and 2021, CDNS stock gained more than 4,300%.
Intel was once the premier semiconductor stock, but years of mismanagement by consecutive executives has seen its business wane in critical areas while not entering key markets, such as smartphone chips, or delaying entering others, like AI, which left it far behind rivals.
Tan intends to focus on its third-party chipmaking business, Intel Foundry, which produces advanced chips for hyperscalers like Amazon (AMZN) and Microsoft (MSFT). He wants to bring even more customers on board, which is a necessary goal for its future growth, but it faces an uphill battle.
Global foundry pure play Taiwan Semiconductor Manufacturing (TSM) has a 60% share of the market, is planning on expanding capacity by the end of the year, and recently committed to spending $100 billion to build more facilities in the U.S. to serve chipmakers.
Yet Intel also plans to reignite efforts to produce chips for AI servers, foundation models, and robotics.
Tan’s foundry plan is not so different from that of his predecessor Pat Gelsinger, who also wanted to expand Intel’s third-party chipmaking business, but was forced to scale it back as core operations faltered.
The difference between the two approaches seems to rest on Tan’s willingness to operate a much more lean business. Although Intel shed some 15,000 jobs last year, eliminating more positions may be part of the “tough decisions” he makes.
However, Tan is willing to put his own money on the line to align his interests with those of the company and its future. While the new CEO will be getting generous stock options and performance-based stock units, Tan has said he will be purchasing $25 million worth of INTC stock within 30 days of his start date.
Shares recently approached their low point of $18.50 per share, but over the past week have regained 29% and closed Monday at $25.69 per share. INTC stock is still down 40% for the year.
Is this a good time for investors to jump on board with Tan? It might not be a bad strategy to take at least a small stake in the company. The new CEO has a track record of success and Intel needs to break away from its more myopic outlook regarding its business. Tan seems willing to do that.
Yet Intel is far behind the pack in areas that matter and regaining market confidence as well as the new customers needed will not be easy. Still, all Intel needs to do perhaps is not stumble over its own feet again this year. That alone could be a catalyst for increasing INTC’s stock value, though a full recovery still seems years away.
