Yesterday the Intel board did the idiotic and fired CEO Pat Gelsinger. SemiAccurate told you our initial thoughts on the subject and then dug… and discovered.
Our views that Gelsinger did turn the ship are unchanged. Intel had a cultural problem, not a technical one and the one thing Pat did was change the culture for the better. There are green shoots of this popping up here and there if you know where to look with more coming every day. As we described yesterday, the problem is that technical changes happen over a three year timescale, finance looks at one year or less.
This difference lead to the company looking pretty bad for the pure finance folk but the technical observers knew better. Things were moving in the right direction more often than not and the painful financial news was simply Pat riding out the sh*tstorm that that was handed to him. If you followed the process side, you undoubtedly know about the 10nm debacle, but did you know that 14nm and even 22nm had many of the same issues? They were hidden but SemiAccurate documented them over the years.
Why was this mess allowed to not only fester but continue and grow? Because the internal incentive structure was so broken that it encouraged employees to lie for profit. Worse yet lies went unpunished. SemiAccurate has many emails, texts, and had conversations about meetings where this happened. An example would be when a design team asked the process side if node XYZ would be ready at time ABC with specs of DEF. Process would say yes it would, no question.
The first problem was that they knew it would not be ready on that date, not meet the intended specs, and usually wouldn’t be close. Design teams knew the other side was lying but what could they do? A few years later the process was indeed late, occasionally partially working, and met every letter of the law that governed bonus structures. Designers would then force a few working devices out to an OEM so that their bonuses, paid if device X shipped in quarter Y, did ship then. Sure yields were financially untenable but their new BMW had heated seats.
This isn’t to put the blame solely on the process side of the company, everyone lied. One great example was when Tim Cook met with Intel folk over their cellular modems. He directly asked someone I won’t name, “Will it be ready in time?”. The Intel exec said, “Yes”. He was lying, everyone on the Intel side knew he was lying but didn’t contradict the boss. From what we understand, Tim Cook also knew he was lying, and we know several Apple personnel in the room definitely knew it was well past a fib. If you have read this far, you understand how that program, and later the entire Apple/Intel relationship ended. It was for cause.
There are hundreds of these stories floating, go look up what the initial 14nm products were, what quantity they shipped in, and why. Those really attuned to Intel’s ways can see the same pattern at 22nm too. Why weren’t alarm bells set off? Because Intel had enough of a lead to hide the mess that was festering. That mess didn’t have consequences, to the contrary things were ‘going well’ so they continued. And got worse, far far worse. So they were repeated until things could not be hidden any more at 10nm and the company almost went under.
With that in mind, if you were aware of Intel and the issues they had in the 1990s, there were period where things taped out but didn’t post, errors upon errors, and at times they built up into critical pain points. Intel tasked a young engineer to fix the process, procedure not semiconductor, and he did. He put procedures in place to make sure the costly errors that were plaguing Intel could not happen or at least were either very rare and caught early on. Any guesses as to who that engineer was? Hint: His first name was Pat.
From that point on, Intel became an execution machine and it showed in marketshare, financial results, and just about every other relevant metric. Compare and contrast this to AMD in the Barcelona days. I won’t get into personal conversations but after the third attempt at launching a working version of that part, I had a conversation with the person in charge of that chip. I related the story about how Gelsinger put procedures in place to make sure things like what AMD was seeing didn’t reoccur. This person looked me in the eye and said, “We couldn’t have forseen these problems, they were human error”. At that very moment I knew AMD was dead, and they effectively were for a decade. What did AMD do? They promoted the guy. It wasn’t until a radical management change took place almost a decade later that the culture was forced to change and, well, AMD is now beating Intel like a drum.
As SemiAccurate keeps saying, Intel had a cultural problem, not a technical one. The technical problems were a symptom of the underlying culture and could not be fixed without a cultural sea change. Pat did that, or at least did most of it, and it was working. Sure he made some serious missteps and at times cheesed off many folk in the financial world, but he did the right things to fix the company. And he was just fired for it. I don’t have words that can express my disdain for the Intel board that will pass muster in a family publication such as SemiAccurate.
To make matters worse for the company, the question that SemiAccurate has been debating with many financial folk for the past few years just came to the fore. “If not Pat, who?”. This isn’t a slight against Mr Zinsner or Ms Johnston Holthaus, it is rhetorical. The one name that the board was trying to get before they settled on Gelsinger is not going to leave her current company so that exhausts SemiAccurate’s list of qualified candidates. There may be others but, well, good luck to them. Sure Pat cleaned out the big skeletons in the closet, took the beating for the financial mess that wasn’t his doing, and cleaned up the culture, but was that enough for the next chump who steps in to the position to survive? We will see.
So that brings up the big question, what caused the board to fire Pat? Yes we know that officially he ‘retired’ but, well, he didn’t. They summarily canned him and didn’t have the guts to own up to it. Either way, why? Well after some digging, SemiAccurate was told the reason and it is, err, stupid.
Note: The following is analysis for professional level subscribers only.
Disclosures: Charlie Demerjian and Stone Arch Networking Services, Inc. have no consulting relationships, investment relationships, or hold any investment positions with any of the companies mentioned in this report.
Charlie Demerjian
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