Intel’s return to profitability is critical to its forward momentum

Intel released its financial results for the second quarter of 2023 on July 27. We now have profits after two quarters with losses. AMD’s numbers show that AMD is putting up a stronger fight against Intel as it puts up a bigger fight.

Intel has been the market leader for all of PC history. It is not uncommon for dominant companies to fall from their leadership positions due to internal decisions taken by the CEO and board.

Intel was a leader in the industry, but it also retained the manufacturing capabilities to allow the company to weather the pandemic initially relatively well. It didn’t face the same supply issues as some of its fabless competitors. This advantage was offset somewhat by the shortages of other components in Intel’s products.

We will talk about Intel this week and close with my Product Of The Week, Intel’s ARC graphics card, the A770. You might want to take a look at it if you’re building a PC that looks like mine.

Intelligence: Its Importance

Intel’s importance as a manufacturer of microprocessors is increasing due to the uncertainty in global politics.

Taiwan is home to a large portion of the world’s microprocessor production capacity. Taiwan is at present in danger of being attacked by China and destroyed. In a conflict, the ability to produce advanced weapons will be directly linked to the manufacturing capacity lost during the initial stages of the competition.

Even though there are other places in the world with more manufacturing capacity, this would not be enough to compensate for what could be lost in Taiwan. Moving parts internationally is difficult in a war of this magnitude, such as the one that China will likely become. China has aggressively bought or locked up some of these extra resources so that only the domestic manufacturing capability can provide what is needed to execute this war successfully.

Intel’s focus on the Chips Act, which builds up manufacturing capacity within the U.S., would be crucial to the U.S.’s ability to survive future pandemics or wars.

Intel also does the majority of the work in defending x86 against competing technologies such as ARM. However, ARM’s latest moves have made it less desirable. This technology is a threat to America’s dominant position in microprocessors. Intel is also responsible for the majority of developer support and building for x86. If it fails, it will be difficult for the x86 platforms, which are still dominant in PCs and workstations.

Intel’s survival is crucial to the U.S. and other Western countries that have significant investments in x86 technology. AMD, as good as it is, doesn’t have the potential to replace Intel.

Turning Around a Business

Turnarounds in corporations are not easy. This is something that Intel CEO Pat Gelsinger is well aware of. He has successfully brought VMware back to life before returning to Intel. Intel’s situation is more complex. Gelsinger assumed control of VMware when it was underperforming.

When Gelsinger assumed the leadership of Intel, it was in a much more difficult situation. Gelsinger’s and Bob Swan’s predecessors made a number of poor decisions, which led to the company’s problems. Swan had been a successful CEO despite having a background in finance. He was not qualified to lead Intel as a financial expert. However, he did his best.

Gelsinger took over Intel in the midst of a mess that included underfunded projects, alienated workers, and a company on its death spiral. Intel’s turnaround has not been completed, and there were mistakes made, such as laying off workers and reducing compensation for the remaining employees. These decisions can make employees resentful of management, resulting in unplanned turnover and fostering a climate of resentment.

Intel’s employees did a good job and managed to bring in a respectable quarter. This gives us hope that Intel has now gotten out of its rut and will continue improving even before the new manufacturing capabilities are available.

Intel’s Competition

Intel’s main competitors are AMD, Nvidia, and Qualcomm. AMD and Nvidia are both running smoothly with no noticeable mistakes. Nvidia is now the company Intel should be watching because it has leveraged its GPU capabilities to gain a strong CPU presence.

Qualcomm’s problems with Apple (and its customers) trying to force it out of business and its lack of a real PC solution are things that it needs to correct by increasing competitive pressure on Intel next year.

Nvidia’s dominance in AI has pushed the company up to valuations that are almost unheard of. Intel must have a stronger position in AI and robotics. This includes autonomous vehicles. This AI battle will determine the competitive landscape, and Nvidia won’t be easy to catch.

Intel’s financial results indicate that it will be a much better fighter in the future. It will be difficult to catch up with Nvidia unless it stumbles like Intel.

Wrapping up

Intel’s Q2 results are a strong argument that the company has recovered and that OEMs can have confidence in Intel.

The company’s AI-focused components will be in full force by next year, with products that are competitive on paper. They could change the game if they continue to operate as they do now. It will still have to compete with its competitors’ next-generation components. This fight is not going to be pretty.

The AI wars are not yet decided. Intel is becoming more organized, and this will make the AI wars a fair battle. Nvidia is currently in a big lead, but AI hasn’t reached maturity yet. This means that we are likely to see a lot of leadership changes before AI matures. These changes may restore Intel’s former glory.

Intel employees deserve praise for their exemplary performance during a difficult time when they faced layoffs and reduced income. After all these difficulties, I thought the company was going to die. It now appears that the company is on a path of recovery.