Intel has long been at the heart of the silicon revolution.
It was created in 1968 by chemist Gordon Moore (the man behind Moore's Law), physicist Robert Noyce (co-inventor of the integrated circuit), and venture capitalist Arthur Rock, (who went on to become an early backer of Apple).
In its early years Intel was focused on computer memory – that’s where the bulk of its business was done for the first decade of its existence. At the same time, though, it was at the forefront of the development of microprocessors.
They, in the early 1970s, were a totally new idea. As the name suggests, they took many of the parts that allowed computers to process complex calculations, and shrunk them down onto one, small chip. It was a key innovation that allowed powerful computing to move from those big cabinets that filled entire rooms, all the way down to a small machine that could sit under a monitor on an office desk.
But high cost, challenges in manufacturing and a lack of demand means it’s not until the 1980s that the potential of the microprocessor starts to be realised. Then, IBM start to use one of Intel’s early central processing units (or CPUs) in one of its devices, and it proves to be popular.
At the same time - something that echoes Intel’s current challenges - competition from Asian rivals makes the memory market far less profitable.
And so Intel decides to shift its focus towards CPUs.
And it’s in the wake of that shift that Intel arrives in Ireland…
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Yes – Intel begins to set up international manufacturing facilities in the 1980s. By the late 80s it’s looking for a European base.
In 1989 it selects Ireland - though it’s not until 1993 that it chips actually start to come off its Leixlip production line.
However it does grow incredibly quickly from that point. It had 1,000 employees by late 1993; that hit 2,000 a year later and was close to 3,000 by the end of 1994.
And that’s matched by the money Intel pumps into Leixlip.
Around £500m is spent on getting established in Ireland, and it then announces another £850m investment in 1995. There is a further $2bn investment announced in 2004 and, most recently, another large-scale investment is announced in 2019 – the pricetag of which eventually grows to $17bn.
Just how big did Intel become in its heyday?
Intel’s shift towards microprocessors – or CPUs – in the 80s makes it the leader in that field by the end of that decade.
That means it’s perfectly positioned to benefit from the PC boom of the 90s, which sees computers rapidly shift from being premium pieces of office equipment, to standard issue machines for most workers and – eventually – a common feature in people’s homes.
This goes hand-in-hand with the growth of Microsoft’s Windows platform – which really hits the mainstream with Windows 95.
And it quickly gets to the point where, if you’re buying a PC – be it a desktop or laptop – it’s almost certainly powered by an Intel chip.
Its 'Intel Inside’ ad campaign from the 90s quickly became iconic – from the distinct soundmark all the way down to the Intel sticker on every PC. Manufacturers bragged about which Pentium processor their latest device had inside.
What people saw less, though, was the fact that Intel was also dominating in the computer server market – which eventually morphs into the cloud and data centre market.
Of course there were other chip-makers out there – like AMD and Nvidia – and in some instances they were actually offering better and better-value technology than Intel. But they remain niche players. AMD tended to be favoured by high-end gamers, for example, and Nvidia specialised in graphics cards – which is something Intel dabbled in but never really took too seriously.
But they probably felt like they didn’t really have to. I’s hard to find reliable data on market share in the 90s and early 2000s, but Intel probably held at least 80% of the processor market – and realistically its actual share was probably well above 90%.
When did that begin to change?
The period between August 2006 and January 2007 can be seen as a crucial point for Intel. Because two things happened in a very short period of time that represent a high water mark for Intel – and the beginning of its fall from grace.
In August 2006, Apple completed a project to move all of its computers from an IBM-made chip to ones made by Intel.
It was a huge undertaking that required the company to completely re-write its software – but then CEO Steve Jobs said it was worthwhile because they wanted to be making the best computers for its customers.
The Mac line has long been niche compared to Windows-based PCs - in 2005 Macs made up about 2% of all personal computer sales. So, from a revenue point of view, supplying the chips didn’t do much for Intel’s bottom line. However it was a hugely symbolic win for the company.
Macs may be niche but they’ve long been associated with premium users – especially graphics designers, photographers and so on. So to have their CEO saying Intel was the only choice that could deliver the kind of power they needed was hugely significant.
But then, just five months later, Steve Jobs makes another big announcement – Apple’s first ever smartphone..
But the iPhone didn’t have an Intel inside.
The reason for that is because Intel’s chips were too power-hungry – a major issue on a mobile device with a big screen and a small battery, which needed to be constantly sending and receiving data wirelessly.
Steve Jobs later told his biographer Walter Isaacson that Apple worked hard to get Intel to make a chip that could be used in the phone, but they wouldn’t listen to him.
He said Intel built the fastest chips, as long as you don’t care about power and cost.
So, instead of Intel, Apple gets a chip based on ARM - an architecture that companies can customise and tweak. It’s nowhere near as powerful as what Intel has to offer – but it’s cheaper, cooler and less battery-intensive – which is crucial for a smartphone.
And while Intel did eventually try to compete in the mobile chip space it was too little, too late. Quite quickly, all smartphone (and tablet) manufacturers opted for ARM-based chips – which were made by companies like Samsung and Taiwan’s TSMC.
And, as we know, the smartphone – and to a lesser extent the tablet – business has exploded in the following 18 years. And Intel simply does not have a seat at that table.
It is still the go-to chip-maker for the PC business – but even there it is under threat.
For a start the market is shrinking and facing squeezed margins – in part because of the success of smartphones and tablets.
At the same time rivals like AMD have had far more success in offering more powerful and budget-friendly alternatives to Intel.
Meanwhile Intel has developed a reputation for being slow to react to competition, and slow to adopt new technology and advance its offering.
That ultimately led to Apple announcing that it was ditching Intel in its Macs – just 14 years after it had made the move to their platform. Apple had reportedly lost patience with Intel after its inability to deliver on promised chip advancements forced compromises on some devices.
In the end Apple moved the Mac range to its own ARM-based chips – the same kind that it had been using in its iPhones and iPads for years.
Because, while early ARM-based chips weren’t nearly as powerful as Intel’s offering, over time companies like Apple began to find ways to close the performance gap. Today ARM based chips, like those designed by Apple, can now outpace Intel’s equivalents across a range of benchmarks, all while still being cheaper and more energy efficient.
The irony is that, had Intel been able to offer a competitive mobile chip in 2007, Apple would likely have chosen it – and not spent more than a decade learning how to make ARM chips run as well as they do today.
What about data centres?
Intel is still the biggest chip-supplier to servers and data centres, but a growing portion of that is focused on the mid-to-lower end of the market.
And once again that share is under threat – because like in PCs, Intel is no longer seen as having the best chips on the market.
Nvidia originally built an expertise in graphics processors or GPUs - an area Intel briefly tried to compete in before abandoning. For a long time the people who wanted the latest and greatest GPU tended to be the likes of hardcore gamers – a relatively small market.
But about a decade ago, as manufacturers struggled to squeeze more performance out of CPUs, they started to find ways to use the power of the GPU for more advanced computational tasks. Today GPUs are critical in powering the various artificial intelligence applications that have come to market.
That means that anyone building a cutting edge server stack or data centre, who wants to have the best GPUs, are looking for Nvidia hardware.
And that has seen that company’s sales absolutely explode.
Back at the start of 2020, Nvidia reported revenues of less than $11bn. At the start of this year, its revenues were more than $13bn.
In the past five years, its share price has risen by more than 1,300%.
What has Intel done to try and turn the business around?
In 2021 it brought it a company veteran Pat Gelsinger to help turn the ship around.
Shortly afterwards he announced what was essentially a two-prong strategy – one part of which aimed to catch up with the competition by developing more advanced manufacturing at its major sites.
This was a key part of what made its most recent investment in Leixlip so significant.
The other prong in the strategy was to create a separate foundry business – which would be a chip company that would make processors on behalf of other companies. In theory this could have led to Intel making chips for like the likes of Apple and Nvidia – using different designs than its own.
But shareholders eventually grew impatient with Gelsinger’s turnaround plan, and he stood down late last year.
Now the company is headed up by Lip Bu Tan – who’s focusing on streaming-lining operations, cutting costs and trying to catch Nvidia on an AI-friendly chip.
His tenure hit a rocky patch quite early on when US President Donald Trump called for him to resign over alleged links to China.
But the tone changed quite quickly after that, and he was then brought to the White House to talk about the US government investing in the company.
And now they plan to take a 10% stake - what does the US investment mean in practice?
It’s not the first time we’ve seen a government take a stake in a private company.
We saw it around the world after the financial crash – and we saw it happen again during Covid.
However governments usually they prefer to be a relatively silent partner, and often make clear it’s a short-term investment to help a company stay afloat.
But it is already clear that the Trump Administration is far more willing to get involved with what a company does – even one it doesn’t invest in. As part of the America First policy, Trump is putting significant pressure on firms to invest in the US and create or retain jobs there.
And with a 10% stake, it will have a decent voice at Intel’s table to insist they do the same. At the very least, that means places like Ireland could fall further down the pecking order when it comes to future investment plans. It may also have to take a greater share of whatever future pain may come.
One of Lip Bu Tan’s first moves as CEO was to announce plans to cut around 20% of its global workforce – around 20,000 people worldwide.
Its Irish operations were affected by that – but nowhere near as badly as others. It saw around a 4% cut in staffing levels.
According to industry sources, there are so many high-skilled staff at Leixlip – some have skills that only a handful of others in the world share – so it made solid business sense to avoid laying those people off. But that logic may not gain much favour from now on, especially if it means that cuts are more focused on US operations.
Intel has pumped huge amounts of money and resources into Leixlip over the decades – and it is still an important part of its attempted recovery. Little could change that in the short-term.
But the fear now is that it will struggle to draw in future investment to ensure it remains relevant to the business – and if that happens it could eventually fall out of favour within the company entirely.
