Intel, the company that “forgot to innovate,” seeks to recover lost ground

While millions of young nonconformists took to the streets of Europe and the United States against the Vietnam War and the capitalist system, another revolution was brewing in Palo Alto from which, in that same year 1968, a company called Integrated Electronics, later known as such as Intel Corporation. Its founders, Bob Noyce and Gordon Moore, believed that the world would need billions and billions of those tiny transistors that travel in the guts of electronic devices. And they got to work. “His dream was not to end the established order, but to remake it,” points out the American historian Chris Miller in his work The chip war (Peninsula, 2023)the most complete x-ray of the sector written to date.

The firm grew and grew, while Moore showed off his progress to the media. “We are the real revolutionaries in the world today, not the guys with long hair and beards who destroyed schools a few years ago,” he told a journalist in 1973. By then, Intel had already been listed on the American Stock Exchange for two years, which came out at a price of $23.50, equivalent to two cents today according to the company, due to the 13 splits it has carried out in this half century.

At its peak, in 2000, the company's stock price exceeded $70, but the turn of the century did not sit well with it. The dot-com bubble burst, and the Great Recession put the finishing touches on it, taking securities below $13 in 2009. Its dominance was clear in the personal computer and data center market, but technological advances have been leaving it behind despite to its multimillion-dollar investments to maintain its near-monopoly position (or duopoly, with AMD) that marked the turn of the century. The Dutch ASML became the world's largest manufacturer of lithography machines, essential to create next-generation microprocessors. Intel has thus encountered very tough competition from firms such as the Taiwanese TSMC or the Korean Samsung, as well as other firms specialized in hardware for mobile phones, a market that has grown as PC sales languished. Now, Nvidia has taken control of artificial intelligence chips, and its product is essential for the cloud computing load that the new technology requires.

Investors have lifted up chip companies. ASML occupies second place in the Eurostoxx 50 index, with more than 350 billion euros of capitalization, only behind the French company LVMH. And Nvidia has become the great stock market phenomenon of the year, climbing to third place among the most valued companies in the world, with more than two billion, after surpassing Meta first, and then Amazon, and only behind Microsoft and Apple . “Semiconductors may be to the 21st century what oil was to the 20th,” wrote Lawrence H. Summers, former US Treasury Secretary. And maybe it will come true.

In the midst of this boom, Intel has done nothing but lose positions. Its capitalization, below $200 billion, is lower than that of rivals it previously surpassed, such as AMD, and similar to that of Qualcomm and Texas Instruments. Outside the US, the Taiwanese manufacturer TSMC, valued at more than 700 billion, is also far ahead.

Lagging behind

What happened? Miller titles one of the chapters in his book as follows: “How Intel Forgot to Innovate.” In it, she recounts the list of missed trains. The most important, that of artificial intelligence, which has left it in a vulnerable position, given the stagnation of the personal computer market. AI chips purchased massively by technology companies such as Amazon, Google, Facebook or Microsoft, among many others, they are faster, use less energy, and take up less space. And the vendor that has taken over the market is Nvidia, ending Intel's decades of dominance in data centers.

It has also lagged behind TSMC or Samsung in its attempts to reduce the size of its chips, key to remaining competitive in an industry that works with microscopic products that are measured in nanometers.

The latest bad news for Intel came last week, when China announced that it was banning members of its government from using PCs with Intel and AMD processors, as well as from using Windows. But there are also reasons for optimism: the company will benefit from considerable aid from the multi-million dollar subsidy plans of the US Government and the European Union to reduce dependence on Asian chips. And last month it revealed that it hopes to be able to manufacture 1-nanometer chips by the end of 2027.

From pursued to pursuer, its status as a laggard can also be interpreted as an opportunity for the future: if the company that was once a pioneer in Silicon Valley is able to steal part of the AI ​​market from Nvidia, its potential is vast. There are no guarantees that it will happen.

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