Intel's Board Gets Some Much Needed Help as Its Stock Heads for Its Worst Year Ever

Intel Corp.’s recent decision to add two seasoned semiconductor experts to its board comes at a critical juncture for the company, which is enduring one of its most challenging years ever. This change follows the departure of Chief Executive Pat Gelsinger earlier this week, marking a significant shift in leadership during a period of upheaval for the chipmaking giant. Intel’s stock has faced steep declines, reinforcing the urgency for strategic redirection.

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The new board members, Eric Meurice and Steve Sanghi, bring extensive experience in the semiconductor industry. Meurice, the former CEO of ASML Holding NV, is a prominent figure in semiconductor lithography, while Sanghi has served as chairman and long-time CEO of Microchip Technology Inc., a company that still operates its own chip fabrication facilities. These appointments hint at the company’s intent to leverage deep industry expertise to tackle its pressing challenges, particularly in manufacturing and its foundry business.

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The future of Intel’s foundry division, a critical aspect of its strategy, will likely dominate discussions among the board and candidates for the CEO position. Analysts suggest that Intel's ability to secure substantial funding from the U.S. government’s Chips Act may hinge on how it structures its foundry operations. To qualify for billions in grants, Intel would need to maintain at least 50.1% ownership if the division is spun off into a private entity.

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Alternatively, if the foundry business goes public, Intel would need to remain its largest shareholder by retaining less than 35% ownership by external parties. These stipulations, embedded in the Chips Act agreements, are central to Intel's future plans.

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Meurice’s background in semiconductor manufacturing could prove invaluable to Intel, particularly as the company navigates its transition to next-generation manufacturing processes. His experience as CEO of ASML, the industry leader in advanced lithography equipment, positions him to provide insights into Intel’s ongoing efforts to improve its production capabilities. With advanced degrees in mechanics from the Ecole Centrale de Paris and an MBA from Stanford University, Meurice has a robust foundation for guiding Intel’s strategic direction.

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His tenure at ASML is especially pertinent, as Intel’s upcoming 18a process, which has recently achieved key milestones, relies on ASML’s extreme ultraviolet (EUV) lithography systems. This process is not expected to produce chips in significant volumes until next year, but it represents a crucial step in restoring Intel’s manufacturing prowess.

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Steve Sanghi, meanwhile, offers a wealth of experience in managing semiconductor manufacturing operations. Currently serving as interim CEO of Microchip Technology, Sanghi recently announced a restructuring plan involving the closure of a fabrication facility in Tempe, Arizona. This move aligns with his broader effort to optimize Microchip’s manufacturing footprint for growth and financial stability.

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His insights into such restructuring initiatives could be instrumental as Intel evaluates its own manufacturing plans, including those set forth by Gelsinger in October. Sanghi’s recent decision to pause Microchip’s application for $162 million in Chips Act grants underscores his pragmatic approach to navigating industry challenges, a perspective that could benefit Intel as it pursues its own grant opportunities.

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Intel’s struggles in manufacturing over the past six years have transformed what was once its competitive edge into a significant vulnerability. The company’s transition to advanced manufacturing technologies has been fraught with delays, impacting its ability to compete with industry rivals. By bringing Meurice and Sanghi onto the board, Intel signals a commitment to addressing these challenges head-on.

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The timing of these appointments also raises expectations for their role in selecting Intel’s next CEO, a decision that will shape the company’s trajectory for years to come. As Intel continues its search for a new leader, investors are keenly watching for signs of progress in the company’s manufacturing strategy and overall restructuring efforts. These board additions reflect a recognition that semiconductor expertise is essential for steering Intel through its current challenges.

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In the short term, Intel’s stock continues to struggle, with shares falling another 5% on Thursday and down nearly 60% year-to-date. These declines underscore the urgency of the company’s turnaround efforts. The board’s decisions in the coming months, particularly concerning the foundry business and the CEO appointment, will be pivotal in determining Intel’s ability to regain its competitive edge in the semiconductor market.

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Ultimately, Intel’s move to strengthen its board with experienced semiconductor leaders is a step in the right direction, albeit one that many analysts believe should have been taken years ago. The expertise of Meurice and Sanghi will likely be critical in navigating the complex challenges Intel faces, from advancing its manufacturing processes to capitalizing on Chips Act funding. As the company works to recover its reputation as a manufacturing leader, these board appointments offer a glimmer of hope for a brighter future.

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