Intel is in by far the most serious trouble the company has faced since they exited the DRAM business. SemiAccurate realizes this was decades ago but the problems they face now are at least that bad and the board shows no intention of righting the ship.
Note: SemiAccurate has never, and will never write about specific personal issues related to employees of companies we cover. This doesn’t mean we don’t know who is doing what, where, and why, just that we both think that is a personal matter, and that we don’t usually care. The only time we mention such things is when they are done in such a way that they affect the company. This is one of those times, and even now we won’t go into true detail because those details are not relevant to the story.
Last week Intel fired their CEO Brian Krzanich, allegedly for a consensual affair with a staffer which violated their non-fraternization policy. This flimsy excuse is just that. To us it looks like a cover for what is really happening and a sign that the deep and abiding problems at the company are not going to be honestly addressed by the board. Instead they will be swept under the rug as much as possible for as long as possible. Things are really that bad.
Why do we not take the board at their word when they say BK was fired because of his dalliances? There are three reasons; the ‘affair’ in question, past CEO/CxO behavior, and credibility. On the credibility front the problem is simple, Intel has none. The problems that started over three years ago like 14nm yields, and ended up with the 10nm fiasco have been spun well past the breaking point. There is no message that Intel sends anymore that you can take at face value, and that is by design. No member of the press SemiAccurate talks to believes a word Intel says until they prove it unquestionably, and even then they usually verify it independently.
The first rule of holes seems to have been lost on Intel of late. Lack of credibility isn’t a problem in and of itself, several other companies in the sector are worse in this regard, but it is emblematic of the malaise at the top. A company doesn’t get to this point by accident, you need buy-in from the very top before things get this bad. Over the past 3+ years Intel has been actively moving in the wrong direction, the only ray of hope is the canning of CMO Steve Fund who most said was driving the messaging malaise.
But He Did It Too!:
Against this window into the minds of the Intel hierarchy we have the second problem, past CxO behavior. We won’t name names but do know where hard evidence of the things we describe are should need arise. These behaviors included things of both sexual nature, substances, and more at official Intel sanctioned events, the IDF after-parties for high end customers being a regular venue for this.
The sheer number of Intel employees who came to SemiAccurate saying, “I got pictures of X doing Y with a Z”, or “Want to see a picture of X using Y?” was staggering, and it occurred regularly after major company events. This is not Folsom pond skinny dipping, nor is it Broadcom drugged sex dungeon level, but if we had to choose it would be closer to the latter in nature.
These behaviors were not hidden, not secret, and given how many years this carried on for, there was no way it was thought of as unsanctioned. Past CEOs and CxO partook and everyone knew. If there is truly any non-fraternization policy, no-drugs policy, or no-anything else policies, they simply were not followed for over a decade that we know of. It is also not just a male executive and female subordinate issue, one high ranking female CxO was known to be having a long term and not hidden affair with their male subordinate. This went on for years until enough people are said to have complained about the subordinate’s rapid promotions. Eventually the subordinate was moved to a different command tree with no one getting so much as a slap on the wrist.
SemiAccurate can only think of one ex-Intel executive who we would be confident in saying did not take part, and it is rumored he left the company because he could not affect changes in such behaviors. There may be a few others too, but from our vantage point they were in the minority. We are not trying to cast judgment on these people or behaviors, just trying to describe how widespread and out in the open they were. As we have been saying repeatedly recently, if we knew…
In essence if these ‘minor’ dalliances over a few short decades didn’t trigger either a DEA raid or board action to clean house, what is the non-fraternization policy worth? Since past CxOs and CEOs were known to have affairs with their immediate staff, the answer is not the paper it is printed on, that’s for sure. No ill-behavior policies at the executive level seem to have ever been followed that we can see. For Intel to suddenly toe the letter of the law and fire the CEO for an offense that very likely does not warrant firing because of the alleged consensual nature, beggars belief. No, we will say it is the thinnest of thin excuses at best.
Behind Open Doors:
To make matters worse for Intel we come to the third leg of their problem, everyone knew. By everyone, SemiAccurate has heard from at least three Intel employees that all said this alleged affair has been going on for years and was no secret at all, it wasn’t even hidden. If everyone knew, it was consensual, and quite in the open, it follows that the board took swift action and fired BK for it last week, right? Again, we don’t buy that excuse for a second.
Now for the real problem, the public reasonings for the firings are quite simply a pathetic excuse, so what are they covering up? There are three things that SemiAccurate can think of which would lead to this firing, the 10nm failure being the key one. Intel has known how bad things are for quite literally years and hasn’t been telling the truth. SemiAccurate has known about the yield problems since a few months after Cannonlake silicon came back. Since then the things our sources have been telling us have been quite simply diametrically opposed to the official word from the company.
A good example of this is the claim that 10nm is shipped in 2017. Technically Intel is correct, it did ship in the last remaining seconds of 2017 in volumes you could keep in one of your pants pockets. And we can go on but we already covered this in detail back in May.
Yields of fully working chips rounds to zero. Intel’s 10nm process flat out doesn’t work and SemiAccurate’s sources are telling us about the continuing struggle for Intel. Contrast that with the Q1/2018 analyst call and you have an interesting dichotomy. Intel officially said that they knew what the problems were, had a fix, and were going to ramp in 2019. Sounds good right?
It does unless you know what is really happening. First the 2019 date for the volume ramp was internally set at Q4/2019 or about 7 quarters away from that statement. Worse yet Intel internally had almost zero confidence they would hit that date, but this was not messaged at all to the analysts. If you understand semiconductor fabrication, you know it doesn’t take 18-21 months to implement a known fix. Technically speaking the 2019 date was on the roadmaps and Intel is undoubtedly implementing things to fix the process, so we can’t say they lied. Intent is a much grayer area that you can decide on for yourself.
It is SemiAccurate’s informed technical opinion that Intel’s 10nm process will never work at a financially viable level. According to the company it is already shipping, already doing well, and volume is just around the corner, see why we say zero credibility? In and of itself this is reason to get rid of a CEO, but to come up with a flimsy excuse instead of coming clean is a bigger problem for Intel.
To Thine Own Self Be True:
Why? Because there is no fix. We will again not go out on a limb and say Intel will not have a competitive server part on the market until 2021 best case, but we are doubtful of that given what we know now. Why? Cooper Lake. And Cooper Lake. And what Cooper Lake intones. And what Intel is telling OEMs and ODMs when they asked business relevant and pertinent questions that should have an easy answer. Intel’s core business is in deep and abiding trouble and the board is doing everything possible to cover it up.
We understand why, but again credibility is easily lost and hard to regain. If an organization wants to fix it’s image, they need to come clean and do so in a credible way. The firing of CEO Brian Krzanich does neither, in fact it moves things in the wrong direction entirely. Unfortunately it also backs up the messaging malaise Intel has of late, strongly intoning there is no will to fix the problems at the level of management where change has to start. This whole ‘affair’ was not a handling of a problem, it was completely avoiding one.
That’s Not An Iceberg:
On top of this there are two things SemiAccurate is aware of that could cause Intel to fire it’s CEO. Both are being researched at the moment so we won’t comment on it. So in short the firing of Intel’s CEO Brian Krzanich ostensibly for a consensual affair that technically violates Intel’s non-fraternization policy is nothing more than a flimsy excuse so the board doesn’t have to come clean about something else. This alleged affair was widely known about by SemiAccurate sources at Intel and was no secret. It also pales in seriousness to decades of behavior by past Intel CxOs of which nothing was done, policy violations or not. The excuse holds no water. But the worst thing to come out of this firing was the clear and unambiguous message that Intel’s board does not intend to come clean about the problems at the company, and that should really worry you.S|A