Back in May 2013, Intel's (NASDAQ: INTC) board of directors elected a new CEO to run the chip giant -- Brian Krzanich. He was a longtime Intel employee, starting as a process technology engineer and working his way up to Chief Operating Officer (COO). Krzanich was also in charge of the company's vast chip-manufacturing network.
A longtime Intel employee with experience in chip manufacturing seemed like a solid pick to run the company, especially considering that chip manufacturing was, up until that point, a key strength for the company.
In the years since Krzanich took the CEO role, however, the company's manufacturing efforts have been, to put it mildly, poor. The ramp up of the company's 14-nanometer manufacturing technology was both late and highly problematic from a technology and financial point of view, and the company's follow-up 10-nanometer technology is still, as of this writing, missing in action despite being originally slated to go into mass production more than three years ago.
Image source: Intel.
These manufacturing stumbles have not only eroded a critical competitive advantage that Intel once had over its competition -- Intel is arguably in last place among the three major chip-manufacturing companies as far as manufacturing technology goes -- but poor planning around those manufacturing stumbles has led Intel to field less-than-ideal products in the marketplace.
Although as CEO, Krzanich isn't directly responsible for Intel's manufacturing technology development, I still believe that it's appropriate to blame him for how things have shaken out. Here's why.
Not seeing the warning signs
It usually takes years to bring a manufacturing technology into mass production. When Krzanich became CEO, the company had been shipping its 22-nanometer technology for about a year and its 14-nanometer and 10-nanometer technologies should've been deep in development. I don't know what Krzanich knew or didn't know about the state of the development of these technologies, but my guess is that the company's manufacturing group essentially tried to pull the proverbial wool over his eyes.
As evidence, recall that back in September 2013, Krzanich told attendees of the company's annual developer conference that the company's first 14-nanometer product, known as Broadwell, was on track to ship by the end of the year. Just a month later on the company's earnings conference call, the executive admitted that 14-nanometer yields weren't where they needed to be, necessitating a push out of the production ramp of 14 nanometer.
Given Intel's strong track record of manufacturing technology excellence up until that point, a single slip could be forgiven -- after all, what company doesn't make mistakes? The problem is that despite the issues that Intel faced with 14 nanometer, the company seemingly didn't learn from those mistakes at all, despite public assurances from Intel technologists that they had, indeed, learned from the 14-nanometer issues.
In fact, while 14 nanometer was slightly late (less than a year), 10 nanometer has been nothing short of a disaster, as it's over three years late and counting.
The fact that Krzanich wasn't aware of the fact that 10-nanometer technology development wasn't going as planned -- or perhaps, he was aware but believed the technologists who failed to deliver 14 nanometer on time that 10 nanometer would be different -- is a huge red flag.
Is Krzanich going to do anything about it?
Ultimately, there's nothing that can be done about the past -- what's done is done. What I'm concerned about is that Intel has been very quiet about how it intends to correct these issues. In fact, Intel won't even admit to its issues publicly -- the company still insists that it has a significant manufacturing lead over the competition when this is very obviously not the case.
At this point, I think Krzanich needs to start cleaning house within the company's technology and manufacturing group. Moreover, I get the impression that current CFO Bob Swan is, perhaps, a bit too focused on keeping Intel's cost structure in check -- to please Wall Street in the short term -- so Intel's manufacturing group might not be getting the funding that it needs to rebound from its current situation.
Krzanich needs to take the long-term view and make sure that the company's manufacturing group gets every last penny that it needs to return to a leadership position in chip manufacturing. If he can do this, and if Intel once again is a clear leader in chip manufacturing within the next three-to-five years, then I'd be excited to see him continue in the role for as long as he's willing. If in that time, Intel's position in chip manufacturing hasn't improved or has even gotten worse, I hope that Intel's board of directors will choose a new CEO.
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