According to a report by the "Daily Economic News" on September 3, chip giant Intel is facing the risk of being removed from the famous US stock market index Dow Jones Industrial Average (DJIA) (hereinafter referred to as the "Dow Jones Index"). As of the close of the US stock market that day, Intel's stock price had fallen by more than 8%, reflecting the market's deep concern about its prospects.
According to public records, Intel and Microsoft were the first two technology companies to be included in the Dow Jones Index during the Internet bubble in 1999, demonstrating their pioneering position in the technology field.
According to industry analysts, Intel's stock price has fallen by nearly 60% this year, making it one of the worst performing companies in the Dow Jones Index. Given that the Dow Jones Index uses a unique price-weighted calculation mechanism, the continued slump in Intel's stock price has significantly weakened its weight and influence in the index.
Ryan Detrick, chief market strategist at Carson Group, commented that it seems only a matter of time before Intel is removed from the Dow Jones Index, and the recently released performance data may accelerate this process and become the last straw that breaks the camel's back.
Intel's second quarter financial report for fiscal year 2024 released in August this year showed that the company's revenue reached US$12.8 billion, but it was slightly down 1% from the same period last year; more strikingly, the company suffered a net loss of US$1.6 billion and predicted that its third quarter revenue would fall short of market expectations. In response to the current severe economic situation, Intel has announced a series of austerity measures, including laying off 15% of its employees and suspending dividend payments to shareholders from the fourth fiscal quarter, in an effort to revive and overcome the difficulties. What happened to Intel?
Is the former technological hegemon now in decline?
Intel created a legend of the era, the "W-intel alliance" with Microsoft. In the 1980s and 1990s, Intel's chips and Microsoft's Windows operating system, like a pair of swords, not only defined the standard of personal computers, but also created a monopoly dynasty that lasted for more than 20 years. Everyone knows "W-intel". They were the unshakable technology duo of that era.
However, time flies and the changes in the technology world are always beyond imagination. The former hegemon who dominated the technology stage now seems to have been washed away by the torrent of time and has become dim. When Microsoft's market value soared to 3.04 trillion US dollars like a rocket, still standing at the top of technology and surpassing its peers, Intel has quietly slipped to a sad situation: its market value is only a fraction of its former ally, only 85.9 billion US dollars. This number seems so small in the vast technology landscape that it is almost forgotten in the corner.
"Thirty years on the east side of the river, thirty years on the west side of the river", this old saying has been most vividly interpreted by Intel. From the peak of technology in the past, it has fallen to the bottom. This year's stock market has been a nightmare baptism for Intel. The stock price plummeted by 59.7%, which is not only a heavy blow to its performance, but also a cruel reshuffle of its market position. In this war without gunpowder, Intel unfortunately became a loser and fell out of the ranks of the top ten chip manufacturers in the world.
What is even more regrettable is that compared with its former competitors, Intel's decline is particularly glaring. Nvidia, a new generation chip giant, has a market value of over $3 trillion due to its outstanding performance in AI, gaming, and data centers. Even with the market correction during the fluctuations, it has remained firmly at a high of $2.65 trillion. This number is thirty times that of Intel, and the gap is staggering. TSMC, a giant in the chip manufacturing field, has a market value of $835.2 billion, close to the sum of ten Intels, thanks to its leading position in advanced process technology.
Even AMD, the "little brother" that was suppressed by Intel for many years, has achieved a brilliant turnaround with its own efforts and innovations, with its market value soaring to 221.6 billion US dollars, equivalent to 2.57 Intels, and has successfully counterattacked and become a force that cannot be ignored in the industry. Even ARM, which is only responsible for chip design and not involved in manufacturing, has a market value of nearly 130 billion US dollars with its unique business model and wide market share, making Intel's situation even more embarrassing.
Intel's decline is not only the result of its own strategic mistakes and market changes, but also a microcosm of the rapid iteration and intensified competition in the entire technology industry. Intel has clearly fallen behind in this technology marathon.
Why has it fallen to this point?
How did Intel fall to this point? The turning point of the story seems to have started with Intel’s latest performance report.
Intel released its second quarter report on August 1. The report showed that the second quarter revenue was $12.83 billion, down 1% year-on-year, far below the market's expectations; net income plummeted 85% to only $83 million, a far cry from the $1.5 billion net profit in the same period last year, and directly slid into the abyss of losses of $1.6 billion.
After the financial report was released, Intel's stock price plummeted by 26.06% that day, and its market value evaporated by about $32 billion in an instant, setting the largest single-day drop in more than 40 years. At that moment, Intel seemed to have fallen from the clouds to the dust, and its glory was no longer there.
Why is the performance so poor? Intel CEO Pat Gelsinger admitted in an internal letter: "Our revenue has not grown as expected, and we have not yet fully enjoyed the dividends of powerful trends such as AI; costs are high and profits are thin; core business is declining, and new business investment is huge, resulting in huge losses." This is not just Gelsinger's reflection, but also the reality that all Intel employees have to face.
Looking back, Intel's performance decline did not happen overnight. Since 2019, quarterly sales and operating profits have been ups and downs like a roller coaster. In 2021, the special demand brought about by the epidemic briefly rebounded, but the good times did not last long. After the special demand receded in 2022, sales and profits fell like a cliff. Especially since the second quarter, operating income has almost continued to lose money. Intel seems to be trapped in endless darkness.
In order to save itself, Intel had to take a series of painful measures: layoffs of 15,000 employees, accounting for 15% of the company's total number of employees, which was a reluctance to part with employees and a helplessness for the future; suspending dividend payments in the fourth quarter of fiscal year 2024, which was the first time in the company's 32 years, symbolizing Intel's financial difficulties. But can these measures really save Intel from the dire situation?
What's worse is that Intel is facing an unprecedented crisis of trust. Its flagship processors, the Core series that once made countless players and developers crazy, are now frequently exposed to quality problems. The 13th and 14th generation Raptor Lake desktop processors are like suffering from a chronic disease, with blue screen crashes, unstable performance, and even laptop chips are not immune. The joke that "i3 fights A8, i5 kills the whole family in seconds, and i7 is blasted into slag" has now become a sharp irony of Intel's technological capabilities. From assembly process defects to through-hole oxidation to microcode errors, Intel's road to repair is long and difficult, and the repair effect is disappointing.
Under the siege from all sides, Intel seems to be seeking a way out. Investment banks such as Goldman Sachs and Morgan Stanley have all lent a hand to help it cope with the most difficult period in its 56-year history. Can Intel's separation of product design and manufacturing business, sale of programmable chip division Altera...become a lifeline for Intel? The outside world is full of doubts and expectations.
One wrong step leads to all wrong steps?
Intel's strategic mistakes came one after another, which really proves the old saying: one wrong step leads to all.
The story begins in the early 21st century, when technology companies around the world were looking to the future, eager to catch the next wave of technological revolution. However, in this race, Intel clung to its crown as the leader in PC processors and turned a blind eye to the coming era of mobile computing.
When smartphones sprang up like mushrooms after rain and the mobile computing market rose rapidly, Intel was still sleeping in the comfort zone of PC. Its rival, Qualcomm, relied on its keen market insight and technical strength to quietly occupy this blue ocean and become the overlord of the mobile chip field. Intel's X86 architecture, which was invincible in the PC era, suffered a Waterloo in the mobile computing market. It watched helplessly as the ARM architecture emerged and gradually replaced the X86's dominance in the consumer electronics market.
If missing the mobile computing era is a regret for Intel, then the advent of the AI revolution is another heavy blow to Intel. The rise of AI has completely overturned the computing industry, and GPUs and dedicated AI accelerators have become new arenas. Companies such as Nvidia and AMD have keenly captured this trend and quickly adjusted their strategies to seize market opportunities. However, despite its deep technical background, Intel has been hesitant and slow in the face of the AI wave. Even after trying to make up for the gap by acquiring companies such as Habana Labs and Nervana, it failed to regain market dominance.
In the wave of AI, Intel also missed the opportunity to join hands with OpenAI. That was a moment that could have rewritten history - between 2017 and 2018, Intel had the opportunity to acquire 15% of OpenAI's shares for $1 billion and promised to provide hardware support at cost price in exchange for an additional 15% equity. This is a seemingly win-win cooperation: OpenAI is eager to reduce its dependence on competitors such as Nvidia, while Intel is expected to hold the key to the future of AI.
However, Intel CEO Bob Swan failed to foresee the huge potential of generative AI, which ultimately led to the failure of the deal. Looking back now, Microsoft's close cooperation with OpenAI has made it shine in the field of AI, which makes people wonder: if it was Intel that took the AI express train at the time, what would the technology landscape look like today?
Today, Intel stands at a crossroads, facing unprecedented opportunities and missing them one by one. Intel's decline is not so much a tragedy of the times as it is the inevitable result of its failure to adjust its strategy in time and miss development opportunities in the changing environment. Perhaps, only when Intel truly understands the truth that "when the times abandon you, they won't even say hello", can it regain its former glory and continue to write its own technological legend.
This article comes from "BT Finance", author: T800, and is authorized to be published by 36Kr.
