With Pat Gelsinger at the helm, Intel’s fate will be decided by whether it can revive its innovation-driven legacy or remain a cautionary tale of financial mismanagement.
Intel’s story is a textbook case of how chasing short-term gains can lead to long-term disaster. Once a titan of innovation, Intel now struggles under the weight of its own financial myopia. As the company faces a major overhaul, let’s assess its troubled trajectory and why America’s future may well hinge on its success.
Riding a Revolution
When the Intel Corporation was founded on July 18, 1968, by Robert Noyce and Gordon Moore, most people had never seen a computer — bulky, expensive things confined to research labs, universities, and large corporations.
The semiconductor revolution was about to change that.
In the Cold War era, semiconductors—crucial for controlling electrical currents—were evolving fast. The breakthrough came with the 1947 transistor by John Bardeen, Walter Brattain, and William Shockley, ditching vacuum tubes for sleek electronics. (Shockley, despite his Nobel, became infamous for his toxic views on race and eugenics.)
By the late 1950s, Jack Kilby and Noyce, working separately, pushed the field further with the integrated circuit, enabling the packing of multiple components into one chip. Intel cofounders Noyce and Gordon Moore—of Moore’s Law fame—set their sights on making electronics increasingly smaller, cheaper, and faster. Their work led to explosive advancements in tech.
Intel’s big moment came in 1971 with the Intel 4004 microprocessor, a revolutionary chip that put a CPU (Central Processing Unit) onto a single piece of silicon. At first, many thought it was impossible – a whole computer on a chip? But the 4004 shattered old views. In November 1971, Popular Electronics hailed it as a “giant leap forward in computing.” This advance supercharged the power and efficiency of electronic devices, eventually catapulting Intel from a startup into a powerhouse of the tech world.
Intel’s breakthrough didn’t just change how people interact with technology—it kicked off the era of affordable computing. The 4004’s influence went far beyond its debut, sparking innovations that made powerful, budget-friendly tech accessible to the masses.
So far, so good. Intel was doing what we want a company to do: making things people need at prices they can afford.
In the 1980s, Intel solidified its tech prowess with a string of crucial innovations. The 8086 and 8088 microprocessors became the backbone of the personal computer boom, especially with IBM’s PC. Intel then ramped up with the 80286 and 80386 chips, dramatically boosting computing power and performance. Their strategic investment in semiconductor tech and microprocessor leadership made Intel the go-to for PC makers and paved the way for its long-term industry dominance.
Up to this point, Intel’s business model was focused on using profits for innovation and reinvesting in R&D. Situated in Silicon Valley’s hotbed of entrepreneurship and free-market zeal, Intel saw itself as a torchbearer of technological progress and business acumen. The company poured money into new products and fine-tuning manufacturing processes, and it paid off. By running its own manufacturing and prioritizing technological advancement over quick profits, Intel didn’t just participate in the tech boom—it helped to define it.
Then something began to change. The curtain was rising on an age where greed took center stage.
From Tech Dreams to Wall Street Schemes
In the late 1990s and early 2000s, Intel stumbled as America’s obsession with financialization and shareholder value took over—a trend studied by economist and business historian William Lazonick. The new philosophy: companies were defined not by their products and leadership, but by how much they could enrich shareholders – and how fast they could do it.
Big companies, driven by short-term profits, mirrored this mindset. Intel, once a tech leader, shifted focus from cutting-edge R&D to boosting shareholder returns. The name of the game was stock buybacks — basically shoveling cash to shareholders by manipulating the company’s stock price. The impact on the quality of Intel’s products became glaringly apparent with its 1999 “Netburst” architecture, which promised high speeds but delivered overheating and performance issues. It was a flop.
Things began to go downhill because, as Lazonick’s work on shareholder value ideology has repeatedly shown, financialization and innovation do not go well together.
“From 2001-2020, Intel blew $128 billion on buybacks (64% of net income) on top of paying out $68 billion as dividends (35% of net income),” notes Lazonick. That’s money that couldn’t go into innovation, retaining and training employees, R&D, and other critical areas.
With executives and shareholders set on squeezing every last dollar from the company for themselves, the idea of putting Intel’s long-term health at the forefront of decision-making became a quaint relic of the past—like those old room-sized mainframe computers.
The company’s financial shenanigans, aligned with this new obsession with quick gains, led to product fizzles and a sluggish response to the mobile computing surge and ARM processors used in smartphones and tablets. By the mid-2000s, these blunders, along with rising competition from AMD (Advanced Micro Devices), among others, and a failure to adapt to market shifts, started to erode Intel’s position.
By the mid-2010s, Intel’s situation was spiraling into disaster. The company’s inability to crack the mobile market left it floundering as smartphones and tablets surged, while its manufacturing delays turned its once-vaunted chip-making prowess into a punchline. The failure to advance to smaller process nodes handed competitors like Samsung Electronics and TSMC (Taiwan Semiconductor Manufacturing Company) the upper hand, and Intel’s strategic mistakes and leadership changes only deepened the mess.
CEOs Paul Otellini (2005–2013) and Brian Krzanich (2013–2018) faced sharp criticism for their lackluster performance. Otellini’s leadership saw the company lag behind the mobile computing boom, clinging to its PC dominance as competitors surged ahead, while Krzanich’s term was marked by manufacturing delays and mishandling of Spectre and Meltdown vulnerabilities (his tenure ended over a scandal involving a relationship with an employee). CEO Bob Swan, who succeeded Krzanich, continued to face criticism for persistent delays and strategic missteps, highlighting systemic issues that went beyond individual leadership.
Shareholder activists, predatory financiers who use equity stakes to force their will on companies, played a significant role in Intel’s decline. These include Elliott Management, led by Paul Singer, known for his extravagance, including a $100 million yacht, and Third Point LLC, helmed by Dan Loeb, who flaunts a $70 million Manhattan penthouse. Their relentless push for short-term financial gains and cost-cutting led Intel to prioritize immediate shareholder returns over long-term R&D and advanced manufacturing. This shift undermined Intel’s technological edge and competitive standing. Loeb pushed to split off chip manufacturing from design, a move that threatened Intel’s unique advantage of in-house production. (Lazonick has called for limits on the activities of hedge fund activists in his book, Predatory Value Extraction, co-authored with Jang-Sup Shin).
Intel’s shift to short-term financial gains over long-term innovation ravaged its foundry business—the segment of the semiconductor industry dedicated to manufacturing chips for other companies. As Intel cut back on R&D and neglected manufacturing upgrades, it fell behind in producing the latest chip technologies. This created an opening for rivals like TSMC, which seized on Intel’s errors by advancing rapidly, establishing itself as the premier player in chip fabrication.
The pursuit of Wall Street-driven profits took a serious human toll at Intel. The company’s workplace grew toxic, with employees enduring grueling workloads and burnout. Budgets for training and career growth were slashed in favor of immediate financial returns, and job security evaporated due to frequent layoffs. Amid the relentless push for results that appealed to shareholders, Intel earned a reputation for a work culture so harsh that one Reddit user described it succinctly as “hell given physical form.” As morale plummeted, talented employees fled into the arms of competitors and startups that offered better work environments.
Trying to Right the Ship
In February 2021, Intel made a big announcement: Pat Gelsinger was stepping in as CEO to try to drag the company out of its financial quicksand and refocus on actual innovation. Bringing in Gelsinger was pretty much a 180, Lazonick notes: “They got a guy tasked with restoring Intel’s position as a global leader in semiconductor fabrication – a guy who said right from the beginning that a condition of him becoming CEO was no more buybacks. Instead, he’s doing capital expenditures at twice the rate of his predecessors.”
As Gelsinger works to revive Intel’s tech edge by shifting the company’s strategy to make chips for other customers, the company is grappling with ongoing supply chain issues and tricky geopolitical challenges involving China.
On August 2, Intel’s shares plunged 26%—its steepest drop since 1974—erasing over $30 billion in market value. This dramatic fall followed the suspension of its dividend and a 15% workforce reduction. Shareholders, used to the profits rolling in, are outraged by the stock plunge and are now suing.
“It just goes to show, if you try to actually invest in the long-term, and you make deep investments, that’s not what shareholders are in it for,” said Lazonick.
Gelsinger was blunt in comments about Intel’s problems, acknowledging the company’s issues with leadership, personnel, and methodology. “We didn’t get into this mud hole because everything was going great,” he admitted.
Does America Need Intel?
American taxpayers have a big stake in Intel. Gelsinger’s lobbying for U.S. chipmaker funding paid off with up to $8.5 billion in grants announced in March 2024 — the largest grant ever for a chipmaker. The agreement highlighted Intel’s key role in President Biden’s plan to revitalize U.S. semiconductor manufacturing with $100 billion in investments for projects in Arizona, Ohio, New Mexico, and Oregon, along with up to $11 billion in government loans and a new tax credit for capital expenses. These funds are supposed to boost Intel’s chip production and improve its financial outlook. But so far, Americans aren’t getting much of a return.
Intel’s collapse would mark a major shift in America’s technological identity and manufacturing dominance, disrupting the tech sector and economy while reshaping perceptions of U.S. competitiveness on the global stage. As Lazonick puts it, “It’s a big problem if the U.S. isn’t creating jobs in cutting-edge tech, especially when Intel is one of the few U.S. companies capable of investing in state-of-the-art fabs. If that’s not seen as crucial, we might as well outsource everything to TSMC and Samsung – but I think this underscores a recurring weakness in U.S. technological leadership and our ability to produce the latest tech domestically, with significant economic consequences.”
He highlights that the U.S. has the capability to produce EV batteries but lacks companies doing so. According to Lazonick, the loss of such capabilities has not only economic but also geopolitical repercussions. “Intel is the only company that possibly has a chance to compete with TSMC and Samsung Electronics. Do we really want to rely on foreign companies for chips?”
Lazonick points out that the choice of Intel’s board to remain in the fabrication business, despite significant pressure, was a key reason for bringing in Gelsinger. The company faced a critical decision: continue stock buybacks and fall further behind, or invest in cutting-edge technology.
“They decided to bring in someone who isn’t a finance guy but a production specialist,” says Lazonick. “Let’s not forget that Intel got itself—and the United States—into this situation by blowing enormous amount of money on stock buybacks, a strategy that was never going to work.”
Before joining Intel as CEO, Gelsinger had a notable career as the CEO of VMware, where he led significant growth and innovation in cloud computing and virtualization. Prior to VMware, he spent over 30 years at Intel, rising through the ranks to become the company’s first Chief Technology Officer. Gelsinger’s early career included pivotal roles in developing key technologies such as the original 80486 microprocessor, highlighting his deep technical expertise and leadership in the semiconductor industry.
Lazonick observes that Gelsinger has his work cut out for him due to fierce competition and two decades of a flawed business model that prioritized funneling profits to shareholders over reinvesting profits in sustainable growth. The layoffs are a painful move, but he attributes them not to Gelsinger, but to conditions he inherited as CEO, highlighting that the company expanded its workforce significantly during the pandemic to meet high chip demand.
“You don’t know what the effect of the layoffs is going to be in terms of morale, how deep those cuts go, and whether they’ll actually hurt their attempt to implement a high-end chip fabrication,” says Lazonick. “I don’t know. But if I was in the Biden administration, I would still say, yeah, back Intel.”
Intel has enjoyed a pretty sweet deal from government support over the years, thanks to hefty subsidies and incentives aimed at bolstering domestic semiconductor manufacturing and research, like the CHIPS and Science Act of 2022. This kind of taxpayer largesse is supposed to be a win-win: Intel gets to ramp up its manufacturing and tech prowess, and Americans get to support homegrown innovation. But so far we’re still waiting for the real returns on our investment.
Even beyond such subsidies, businesses like Intel thrive on societal resources and stability. Shouldn’t it be a given that they focus on employee well-being, honoring their obligations to taxpayers, and investing in creating genuine value?
Lazonick advocates for the U.S. government to ban stock buybacks or at least impose a high tax—say 40%—on them, emphasizing that such gains could fund initiatives that use the skills of laid-off workers. “With major semiconductor investments like Samsung’s Texas plant and TSMC’s Arizona facility, there is likely strong demand for their expertise,” he explains, “though given the U.S. tech sector’s dependence on Asian professionals, many Intel layoffs might end up working for Intel’s competitors in Asia.”
Although the CHIPS and Science Act didn’t impose buyback restrictions, there was significant pressure from figures like Elizabeth Warren (as well as research by Lazonick and colleagues) to include such guardrails. Yet despite the Department of Commerce being assigned to enforce the guardrails, Lazonick notes that the Biden administration’s decision to hire Wall Street professionals for subsidy allocation has not exactly resulted in vigorous enforcement. So, even though Intel has decided to stop buybacks on its own, there’s been a serious lack of oversight to keep other companies from using those subsidies to boost shareholder payouts instead.
Lazonick stresses the need for accountability and a seat at the table for taxpayers in exchange for our support. “With all that investment, I would want a representative of the taxpayers on the board—someone from the government,” he says. “Who that person is would matter a lot to me, as they would ensure we’re making this bet with full transparency and oversight.”
In the end, Intel’s significant role in the semiconductor industry, its economic impact, and potential government intervention make its complete collapse unlikely — though not impossible. It’s still the biggest player among U.S. semiconductor companies, but if Intel continues to face challenges, other companies like TSMC could step up and take over, leveraging their own growing capabilities and investments.
America needs Intel, but only an Intel committed to long-term vision over short-term gains. The myth of shareholder value is crumbling, proving that true social responsibility isn’t just a PR tactic—it’s smart business. Treating employees and taxpayers well isn’t just noble; it’s essential for genuine, lasting success. And Intel’s saga makes it painfully clear: chasing stock prices at the expense of innovation and real productivity is a dead end.
