Israel has major role to play in Intel revival

• Published date: 03 October 2021
• Publication title: Globes (Rishon LeZion, Israel)

At the same time, the US semiconductor giant is intensifying its hold on the Israeli technology industry. Its total chip exports from Israel last year reached an all-time high of $8 billion - double that of just six years ago - despite concerns among workers that the local plant's expansion would be delayed under former CEO Bob Swan. Out of total tech exports, Intel accounted for no less than 14%, another record, and at a time when Israeli tech is at a peak. Intel has also been critical to domestic product, at a record rate of about 2%.

This is a reciprocal relationship. Intel's Israeli operations are at the heart of its recovery strategy. New CEO Pat Gelsinger, who was appointed at the beginning of this year, wants to bring Intel back to its heyday. Gelsinger has outlined the areas where Intel's Israeli centers have an inherent advantage: computer and server chips, fields led by Intel Haifa in the 1990s and early 2000s; artificial intelligence (AI) chips and automotive chips through massive investment in Habana Labs in Caesarea and Mobileye in Jerusalem; and reentering the competition for Israeli engineers who, in the interim, have been in fierce demand by giants like Amazon, Nvidia and Facebook, and young semiconductor startups.

How did the PC revolution flagship become a company forced to reinvent itself? Veteran staffers from Intel and other chip giants have some answers. Some see Intel's 'original sin' as not having identified the mobile revolution in time, others think it fumbled the AI market, and still others blame the management style of former CEO Brian Krzanich.

Missing out on the mobile revolution

Mobile chips have long outstripped computers and servers in terms of market size. Some believe that Intel's failure to identify the revolution served this sector on a silver platter to competitors like Qualcomm, Samsung, and TSMC.

In the mid-2000s, Apple CEO Steve Jobs asked then-Intel CEO Paul Otellini to provide chips for the first iPhone. But Otellini thought the offer was too low, and that adapting Intel's high-performance CPU to small phones would require a lot of effort. Jobs then turned to Samsung, and the rest is history. A few years later Apple began to develop its own chips, with production at the TSMC factory in Taiwan that competes head-to-head with Intel. Ironically, the person who oversees all of Apple's semiconductor operations is Johny Srouji, formerly of Intel Haifa.

Intel has made several failed attempts to gain a foothold in the smartphone market. It acquired Infineon's mobile chip division for $1.4 billion, and invested capital on customers like LG for them to make devices based on its chip. Nonetheless, Qualcomm has maintained its lead. Intel's preference has been computer and server chips - with sophisticated performance capabilities - over mobile chips, where compromises must be made to extend battery life.

"Nvidia did an Intel on Intel"

AI and machine learning was another missed opportunity. Once perceived as a small niche market for robotics or computer game developers, today these clearly form the infrastructure for countless fields including cybersecurity, automotive, smart speakers, virtual reality, and more.

"Artificial intelligence is ubiquitous today, and Intel hasn't devoted enough time and thought to the matter, "a former senior executive at the company tells "Globes." "It was a gaming company, Nvidia that developed the field. Up until then, it was known as a graphics processing unit (GPU) developer for gamers who wanted to optimize their hardware to support high-performance computer games. Nvidia's value soared on the strength of that achievement, and today its market cap is double that of Intel, even though Intel sells a lot more chips."

Thanks to the software layer developed for its CUDA GPU, Nvidia has become a monopoly, holding 81% of the AI processor market, according to research firm Omdia. Despite competition from higher quality chips designed by companies like Google, AMD, Xilinx, and even Intel itself, Nvidia continued to benefit from its supremacy in the market, thanks to its proprietary software environment. "Engineers won't want to learn a new software language just to work with Intel hardware," the former senior executive tells "Globes." "Nvidia did to Intel what Intel had done to the world with its software monopoly that worked only on its own x86 microprocessor that unquestionably dominated the desktop, laptop, and server markets for years. In other words, Nvidia did an Intel on Intel to beat it in the future."

Intel can no longer be changed by fax

As mentioned, some attribute the company's current situation to Krzanich's management style. Krzanich, who served as CEO from 2013 to 2018, was known for overreacting to criticism, and strident arguments that sometimes devolved into ridicule and humiliation of others. The result: overlooked problems on the production line, postponements, delays, and missed opportunities. During his tenure, for the first time Intel failed in what it had always known how to do better than anyone else throughout its history: launch the most technologically...