Lip-Bu Tan Takes Over Intel: Spin-Off Strategy Expected to Continue, New Solutions Still Needed to Reverse Downturn

After Lip-Bu Tan takes the helm at Intel, the market widely expects him to continue the spin-off strategy initiated by his predecessor, CEO Pat Gelsinger, separating Intel’s design and manufacturing businesses to enhance efficiency and focus on their respective competitive strengths. However, to truly turn around Intel’s current slump, relying solely on this spin-off may not suffice to address all challenges, and he will need to propose new solutions. Below is an analysis and outlook:

Likelihood of Continuing the Spin-Off Strategy

Lip-Bu Tan officially assumed the role of Intel’s CEO on March 18, 2025. He previously joined the board in 2022 and stepped down in August 2024 due to strategic differences with Gelsinger over execution. His return is seen as a refinement of Gelsinger’s “IDM 2.0” plan rather than a complete overhaul. Gelsinger’s vision was to transform Intel into a chip manufacturer that balances its own products with foundry services, challenging TSMC’s dominance while investing billions of dollars in new factories in the U.S. and Europe. However, hampered by weak demand for core products and poor execution, progress has been slow.

Following Tan’s appointment, the market anticipates he will push further for the operational separation of design and manufacturing, potentially even splitting them into two distinct companies. This aligns with his past experience at Cadence Design Systems, where he excelled at transforming businesses into more focused and efficient entities. The benefits of a spin-off include:

• The design business could respond more flexibly to market demands, focusing on innovation in AI chips and emerging fields.

• The manufacturing business (Intel Foundry) could operate independently, attracting external clients (e.g., AWS, the Department of Defense) and securing government subsidies to offset the high costs of factory construction.

  
  

However, whether a full spin-off becomes the final strategy remains uncertain. In public statements, Tan has emphasized the goal of “building a world-class foundry,” suggesting he might lean toward retaining an integrated model but executing it more efficiently.

Challenges in Turning Around the Slump

Intel currently faces multiple predicaments:

1. Loss of Market Share: In the PC and server chip markets, Intel has lost ground to AMD and ARM architectures; in the AI chip sector, it lags far behind NVIDIA.

2. Financial Pressure: The 2024 financial report showed an annual loss of $1.9 billion (the first since 1986), with the foundry business accumulating losses exceeding $10 billion.

3. Technological Lag: Although Intel 4 and Intel 3 processes have made progress, they still trail TSMC’s 3nm and even 2nm technologies.

   
   

While the spin-off strategy might improve financial transparency and attract investment in the short term, it cannot immediately resolve the fundamental issues of technological competitiveness and market demand. Tan will need fresh solutions to reverse the situation.

Potential Solutions

1. Accelerating AI Focus: Tan’s interest in AI (evidenced by his investments in AI and semiconductor startups at Walden Catalyst Ventures) could be pivotal. He might drive Intel to develop chips tailored for AI training and inference, competing with NVIDIA’s GPUs and leveraging Intel’s existing customer base (e.g., PC and server manufacturers) to capture market share.

2. Deepening External Partnerships: Strategic alliances with TSMC or Samsung could bridge the manufacturing technology gap while reducing the financial burden of building factories. Rumors suggest Intel and TSMC might collaborate on advanced chip production, which could be one of Tan’s options.

3. Cost Control and Organizational Streamlining: Tan has hinted at layoffs and reducing middle-management redundancies, freeing up funds for R&D and market expansion.

4. Targeting Emerging Markets: Areas like automotive chips and edge computing, where demand for cutting-edge processes is lower, could leverage Intel’s existing technological strengths.

Conclusion

After taking over Intel, Lip-Bu Tan is expected to continue the spin-off strategy as a first step to boost efficiency and restore market confidence. However, to genuinely turn around Intel’s downturn, he must go beyond his predecessor’s framework and offer innovative solutions targeting AI, technological advancement, and financial recovery. Whether Intel can reclaim its former glory by 2034 hinges on Tan’s ability to deliver tangible results in the coming years. The market holds high expectations for his leadership, but the challenges remain formidable.