Intel’s New CEO Faces a Major Challenge

Intel’s new CEO Brian M. Krzanich, elected by the board today to replace retiring chief executive Paul Otellini, is a longtime Intel insider whose vision must now guide the company through a time of tumult in the computing industry.

The world’s largest chipmaker faces challenges due to slumping PC sales, and has made only small inroads into the mobile computing world so far. The vast majority of smartphones and tablets use ARM-based designs, and as a result, Intel’s market share for all CPUs shipped has dropped dramatically over the last few years (see chart below).

Still, Intel is the only major company aside from Samsung that still manufactures the chips it sells, and earlier this year outgoing CEO Otellini called the company’s “leading-edge fabs” Intel’s greatest asset (see “Intel’s Mobile Chips Advance, But Are Still a Tough Sell”). The company’s estimated $13 billion in capital expenditures this year will go partly to completing a $5 billion factory in Arizona that will make its next generation of 14 nanometer chips (see “Intel Bets on Fabs, Again”). Manufacturing is where Krzanich shines. He started at Intel in 1982 as a process engineer and led the company’s manufacturing and supply chain operations before become chief operating officer. During his tenure, he oversaw important transitions in Intel’s manufacturing technology that have helped maintain Moore’s law, a prediction that the number of integrated circuits that can be fitted onto a chip will continue doubling every two years.

In choosing Krzanich, Intel is sticking with its tried-and-true strategies of the past. And he, more than anyone, knows that Intel must keep selling chips (or start taking orders from others) to justify its massive manufacturing investments. As he told MIT Technology Review in 2010, “The most expensive thing on the planet is a half-empty fab.” (see “The High Cost of Upholding Moore’s Law”.)