Here's What Intel's New CEO Needs To Do To Stop Intel's Decline

IntelIntel COO Brian KrzanichThere’s no question that Intel is in a quandary. The PC business it depends on is in a free fall and the next generation of devices –– smartphones and tablets, usually use chips from Intel’s competitor, ARM Holdings.

Intel’s new CEO, Brian Krzanich is going to need to shake things up.

Krzanich was named CEO earlier this week, replacing Paul Otellini who is retiring. Krzanich was no surprise. He had been COO.

But he can’t simply carry on. He needs to get Intel growing again. Microsoft’s Ben Thompson and Marco Arment, creator of Instapaper, each wrote thoughtful blog posts with some good advice for him:

  • recognise that past strengths have become so-whats: Intel designs the highest-performance chips around. That’s great for PCs and servers, but not so important for mobile devices where low-power/long battery life rules. Today, anyone can licence ARM chips designs, modify them and send them to a manufacturer to be produced. That’s what Apple does.
  • Intel’s secret strength is its massive foundry. Intel is one of the four biggest chip manufacturers in the world, Thompson points out. That won’t change any time soon because it’s too expensive to build a new foundry. This could be where Intel finds new growth.
  • Become a contract manufacturer. If Intel can get over its “not-designed-here” mentality, it can become one of the world’s biggest contract manufacturers even producing custom ARM chips. Custom silicon is a $30.7 billion market, market researchers say. Intel designs and manufactures its own chips, unlike ARM.
  • Augment, don’t torpedo. This doesn’t mean that Intel should stop designing its own chips and “torpedo” its “cash cows,” Arment says. Selling its own designs is why Intel’s gross margins, while declining, are still over 50%. It means Intel should be willing to develop a contract manufacturing business alongside its good work in new areas like chips for next-generation low-power servers, such as HP’s new Moonshoot servers.

In fact, Intel is already trying to become a contract manufacturer. Sources say it has even signed up Cisco as its first big customer.

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