This manufacturer was once a dominant force in the tech sector. Here’s why it’s playing catch up with its rivals.

From the desk of Miles Everson: Hello! Welcome to today’s edition of “Return Driven Strategy (RDS).” I’m excited to share another business insight in this article. For those of you who are not yet familiar with this, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these principles help businesses achieve high levels of performance. Let’s apply this framework in the context of a specific company. Keep reading below to know why this company, once synonymous with innovation, is currently in its most tumultuous period in its entire history.

This manufacturer was once a dominant force in the tech sector. Here’s why it’s playing catch up with its rivals. Intel, a company that was once synonymous with innovation and a market leader in the semiconductor industry, now finds itself in a tumultuous period in its 56-year history. The company became a juggernaut by designing and selling powerful microprocessors that powered countless devices such as personal computers (PCs). It also solidified its position in the tech space by running a semiconductor manufacturing business. However, declining revenue, sales, and missed opportunities to capitalize on the artificial intelligence (AI) boom have put significant pressure on the tech giant’s financial prospects. Once considered a juggernaut, Intel’s fortunes have waned throughout the years. However, the company’s decline over the past 12 months has been dramatic. Following a net USD 1.6 billion loss in Q2 2024, the company announced that it was laying off 15,000 employees as part of its USD 10 billion cost reduction plan. Additionally, Intel also revealed plans to transform its ailing chip manufacturing business into an independent subsidiary. What’s worse? As of 2024, Intel is only worth approximately USD 100 billion—a sharp decline from its 2023 valuation of USD 211 billion. So, what led to the company’s decline? To answer that question, we need to take a closer look at its history. A Tech Juggernaut Intel was founded in 1968 by American engineers Robert Noyce and Gordon Moore, both of whom were key figures in the creation of the integrated circuit. A few years after its founding, the company quickly established itself as a leading figure in semiconductor technology with the release of the Intel 4004, the world’s first microprocessor. In the decades that followed, Intel played a pivotal role in the personal computing revolution as its processors powered PCs, data centers, and cloud computing infrastructures. Additionally, the company’s manufacturing process, where it designs and manufactures its own chips, became a key competitive advantage over competitors who outsourced processor production to third-party foundries. Simply said, Intel was an undisputed leader in the semiconductor space. Unfortunately, this dominance wasn’t bound to last. Missteps and Competition During its dominant years, Intel held a massive lead over its competitors like Advanced Micro Devices (AMD), NVIDIA, and ARM Holdings. However by the start of the 2010s, Intel’s dominance started to wane as its rivals slowly but surely closed the gap. This can be attributed to a few key factors. Failure to Dominate the Mobile Devices Market Apple’s iPhone could have been powered by an Intel chip had both sides agreed to pricing and who would own the intellectual property. Since the deal fell through, Apple went with Samsung-powered chips when it launched the iPhone in 2007. By 2010, Apple was able to manufacture its own chips for its iPhones. Unfortunately, that was only the beginning of Intel’s problems. As demand for consumer electronic devices such as smartphones, tablets, wearables, and other mobile devices continued to rise, it became imperative for companies to create chips that could power these devices. This is where ARM Holdings came into play as chips based on this company’s proprietary design became the go-to for mobile devices. ARM-based chips were smaller and operated on a simpler set of instructions, allowing for more efficient processing and lower power consumption. On the other hand, Intel-powered (x86) chips were better suited for high performance as these could handle a larger and more complex set of instructions. However, the biggest drawback was they consumed more power. Since mobile devices were smaller and more portable, they were better suited with ARM-based chips. This is precisely why Apple, Samsung, and other manufacturers tend to favor ARM-based chips over ones made by Intel. Due to this, Intel wasn’t able to establish a foothold in the highly lucrative mobile devices market. Stiff Competition from AMD and Production Delays Even though Intel missed out on the mobile devices market, it still had a sizable foothold in the PC and server markets and other sectors of the tech industry that demanded higher performance chips. … at least until the 2010s. You see, for most of that decade, AMD played second fiddle to Intel as the latter was the go-to choice in both consumer and enterprise segments due to the price-to-performance ratio of its offerings at every price segment. However, Intel’s dominance in this segment of the market started to wane once AMD saw a resurgence and gradually took a bigger chunk of the available market share. Launched in 2017, AMD’s Ryzen and EPYC series of processors won critical acclaim and positive consumer feedback since they offered better price-to-performance ratios in certain market segments. To make things worse, Intel suffered from manufacturing delays that greatly hampered its ability to produce more powerful, efficient, and faster chips. Missing Out on the AI Boom Throughout its period of dominance, Intel was known for pushing the limits of technology. Unfortunately, the tech giant wasn’t able to position itself as a leader in the transition to AI. Instead, it was NVIDIA that became a dominant force in that market. Despite NVIDIA being known for selling graphics processor units (GPUs)—tech intended to aid in digital image processing, video editing, and playing video games—it dabbled in creating high-performance chips suitable for AI workloads. In response, Intel has designed its own AI chips to compete with NVIDIA. However, it will take some years for Intel to even have a chance of catching up. Down But Not Out Even though Intel is no longer ahead of the pack, it’s not exactly on the brink of total collapse and will survive for now. Due to heightened geopolitical tensions, the Biden administration has funneled billions of dollars through the CHIPS Act to boost domestic semiconductor manufacturing, research, and development. The legislation has incentivized companies like Intel, Samsung, and Taiwan Semiconductor Manufacturing Company (TSMC) to invest in the creation of semiconductor manufacturing facilities in the U.S. In 2024, Intel was able to secure USD 8.5 billion in a separate agreement with the U.S. Department of Defence where it will provide domestically manufactured chips for the government agency and its programs. The government subsidies alongside investments from hedge funds like Brookstone and Apollo are expected to bolster Intel’s long-term prospects. Intel’s Woes as Seen through RDS Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven” highlighted the importance of harnessing the power of innovation. According to them, high performing businesses harness innovative endeavors not only to improve products and services but also to develop and deliver offerings that fulfill needs in ways no other offering previously has. Intel is struggling now because it wasn’t able to innovate at a pace where its rivals couldn’t catch up with it. While it’s still uncertain whether Intel’s woes would continue long term, it’s clear that it has lots of catching up to do if it wants to reach its previous highs. The tech company’s story is a reminder that businesses must continue to innovate, especially ones that are considered market leaders. … that’s if they want to maintain high levels of performance over a long period of time. — If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you’ve found this week’s insights interesting and helpful. EXCITING NEWS AHEAD The world of work has shifted, and there’s no going back. 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Let this book help you future-proof your career and organization in the new world of work.     Stay tuned for next Tuesday’s Return Driven Strategy! On a scale of 1 to 10, how would you rate the importance of communication in the whole of life? Learn more about the importance of holistic communication in next week’s article!