Being key players in the PC market, Intel and Microsoft have always worked closely as one developed PC hardware, and the other delivered PC software. Thus, we saw the long-running dominance of ‘Wintel’ PC systems. Despite this success, both Intel and Microsoft missed the smartphone revolution in the late 2000s – early 2010s. But while Microsoft has managed to recover, Intel is struggling. Bill Gates, a co-founder of Microsoft, admitted in an interview with the Associated Press that Intel had lost its way, and it would be tough to resurrect.
Gates is particularly shocked that Intel, once known for being at the forefront of innovation, has fallen behind in both chip design and manufacturing. Competitors like Nvidia and Qualcomm lead in AI and smartphone processors, whereas TSMC is ahead in terms of process technologies. These issues, combined with the high costs of modern semiconductor development and production, put Intel in a difficult position. Now, with the recent ousting of CEO Pat Gelsinger in December, concerns about the company’s ability to survive have intensified.
“I am stunned that Intel basically lost its way,” Gates told the Associated Press. “Gordon Moore always kept Intel at the state of the art. And now they are kind of behind in terms of chip design and they are kind of behind in chip fabrication. […] I thought Pat Gelsinger was very brave to say, ‘No, I am going to fix the design side, I am going to fix the fab side.’ I was hoping for his sake, for the country’s sake that he would be successful. I hope Intel recovers, but it looks pretty tough for them at this stage.”
While both Intel and Microsoft missed the start of the smartphone megatrend some 15 – 18 years ago, both companies took advantage of the cloud computing rise in mid-2010s, which was another industry megatrend. However, the situation was a bit different with 5G and AI megatrends. While Intel rested on its laurels and then missed the entire rise of AI both in terms of hardware and in terms of investment in Open AI and other startups, Microsoft became one of the leaders of the artificial intelligence world. While Intel sells processors for 5G base stations, it did not benefit from the transition to 5G as significantly as other market players.
Having missed two out of three industry megatrends and having lost its leadership in semiconductor manufacturing, Intel will have to find its way to recover. Last year the company began to cut its costs and fired some 15,000 employees. While Intel can hardly go bankrupt considering that it owns some of the best semiconductor production facilities in the industry and sells the lion’s share of CPUs for PCs and datacenters, how exactly the company’s next chief executive will navigate the blue giant is something that remains to be seen.
