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Intel’s Interim Co-CEO Highlights Foundry Experience as Key for Next CEO Amid Turnaround Challenges

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Intel’s next chief executive will need a strong background in manufacturing and product development, according to interim co-CEO David Zinsner. Speaking at the UBS Technology Conference on Wednesday, Zinsner emphasized the importance of foundry expertise as the chipmaker navigates a critical phase in its turnaround strategy.

The leadership search comes after CEO Pat Gelsinger announced his resignation earlier this week, following growing impatience with Intel’s progress on its ambitious and costly restructuring efforts. Sources indicate that Intel is evaluating several external candidates, including former board member Lip-Bu Tan, to steer the company forward.

“I’m not directly involved in the selection process, but I believe the next CEO will bring capabilities in both foundry operations and product innovation,” Zinsner noted, underscoring that Intel’s core strategy remains unchanged.

Cultural and Strategic Shifts Needed

Intel faces significant hurdles, particularly in transforming its culture to excel in the foundry and semiconductor businesses. Naga Chandrasekaran, Intel’s head of foundry manufacturing and supply chain, highlighted the need for this cultural overhaul, calling it essential for the company’s long-term success.

Chandrasekaran also reported steady progress on Intel’s 18A advanced node manufacturing process, with milestones being met despite initial challenges. “The remaining obstacles involve yield and defect density improvements, but there are no fundamental roadblocks at this stage,” he said.

Intel plans to deliver 18A chip samples to customers in the first half of 2024 and ramp up production at its Oregon facility in the second half of the year.

Struggles and the Path Forward

Intel’s share price has plummeted by more than 55% this year, as the company lagged behind competitors like Nvidia in the artificial intelligence (AI) chip market. The company was removed from the Dow Jones Industrial Average in October, replaced by Nvidia, further reflecting its challenges in maintaining a leadership position in the semiconductor industry.

Intel’s Lunar Lake processors, central to its foundry revival strategy, are expected to begin improving the foundry division’s margins by next year. Zinsner stated that cost reductions and a shift toward higher-margin wafers will also contribute to strengthening the foundry business.

Despite these efforts, Intel continues to trail industry giant Taiwan Semiconductor Manufacturing Co. (TSMC), which dominates advanced chip manufacturing and serves competitors such as Nvidia.

Outlook

Zinsner reiterated Intel’s optimism about its PC and server businesses, maintaining the revenue guidance provided in October’s earnings report. The company’s leadership transition and focus on cultural and technical transformations are viewed as critical to regaining its competitive edge in the semiconductor market.

As Intel moves forward, its manufacturing investments and product diversification will be under scrutiny, with hopes that the next CEO can deliver the expertise needed to restore the company’s standing in the industry.

Can New CVS CEO David Joyner Overcome the Aetna Challenge?

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With CVS Health’s recent leadership transition, David Joyner faces a tough road ahead as the new CEO, following the sudden departure of Karen Lynch. While Joyner’s previous role involved overseeing Caremark, CVS’s pharmacy benefit management (PBM) business, questions arise about whether his experience equips him to tackle the significant challenges facing Aetna, the health insurance division.

Aetna has been struggling with rising medical costs, particularly in its Medicare Advantage plans for seniors, reflecting broader industry issues but more acutely affecting CVS. Joyner’s appointment coincided with the company’s decision to withdraw its 2024 earnings forecast and warn of disappointing third-quarter profits, sending CVS shares down 5%. Over the past year, CVS stock has dropped 24%, lagging far behind the broader market’s gains.

Wall Street analysts and investors have expressed concern over Joyner’s lack of direct experience in health insurance and public company leadership. Andrew Mok, a Barclays analyst, pointed to a “leadership gap at Aetna” that needs urgent attention, echoing the doubts of several others. Aetna’s struggles, including its rising medical services costs, have exacerbated investor worries, with the company paying out 95% of premiums for medical services—well above the target ratio of 80%.

Joyner, however, insists he’s ready for the challenge. In a joint interview with Executive Chairman Roger Farah, who described the board’s selection process as “very thorough,” Joyner defended his qualifications and stressed his commitment to addressing Aetna’s issues. He plans to form a new management team, including leadership for Aetna, which has been without a permanent head since the departure of Brian Kane two months ago. Lynch had been overseeing Aetna during this interim period.

Some analysts remain optimistic about Joyner’s appointment. Lisa Gill from J.P. Morgan recalled his past success in revitalizing Caremark in the early 2000s and praised his direct, candid management style, believing it could prove valuable as CVS navigates through these turbulent times.

CVS’s strategic review also revealed plans to sell off non-core assets and close 271 retail pharmacies as the company seeks to improve efficiency. However, speculation around a potential breakup of CVS’s pharmacy and insurance businesses persists. Farah acknowledged these discussions but affirmed that the company’s leadership believes in the value of keeping the divisions together, focusing instead on executing better.

With his experience and an ambitious agenda, Joyner must now work to stabilize Aetna, rebuild investor confidence, and chart a path forward for CVS in an increasingly competitive healthcare market.