Intel has taken the extraordinary step of appointing Lip-Bu Tan as its first non-Intel-born chief executive officer (CEO) in its 57-year history. He is also the first Asian CEO in Intel’s history. The prevailing analysis suggests that the Intel board, struggling with management difficulties, made the most strategic choice, breaking traditions such as being ‘white’ and ‘from Intel.’
Former Intel CEO Bob Swan is cited as an example of an external hire, but since he came up through the ranks after serving as chief financial officer (CFO) at Intel, he cannot strictly be considered a non-Intel executive. Intel’s bold attempt to place an outsider as CEO is underscored by the fact that Mark Liu, the former chairman of Taiwan Semiconductor Manufacturing Company (TSMC), was also mentioned as a potential candidate for the new CEO position.
Intel’s choice reflects a longstanding tradition maintained for over 50 years, which can be described as a type of ‘bureaucracy’, and it acknowledges that this has hindered Intel’s innovation. This has significant implications for Samsung Electronics, which is also considered one of the world’s largest integrated device manufacturers (IDM). Samsung Electronics has maintained a long-standing tradition of having leaders in the institutional sector, including the head of the semiconductor (DS) division, as well as leadership in the foundry (semiconductor contract manufacturing) and system LSI sectors, originating from its memory division.
◇ Why did Intel choose the head of an EDA corporation?
We need to examine how Intel, once the world’s leading semiconductor company without rivals, ended up struggling with management issues and facing discussions of a sale. While there were multiple issues, the primary reason for Intel’s decline was the manufacturing process technology it had prided itself on. The notably slow transition from the 14-nanometer process to the 10-nanometer process in the mid-2010s, compared to competitors, was a significant issue. This is often regarded as a painful mistake by the former CEO Brian Krzanich and the board, who had pursued an extremely finance-driven management style.
Amid calls for the company’s revival, Intel appointed legendary engineer Pat Gelsinger as CEO and appeared to be sailing smoothly for a while. However, this time the issue also emerged from the manufacturing process. As Taiwan’s TSMC swept up most of the world’s advanced processes, Intel made significant investments in the foundry sector by purchasing expensive equipment such as extreme ultraviolet (EUV) lithography machines. The problem was that the business strategy was not clear. While Intel Foundry Services (IFS) was ambitiously launched, it failed to attract any major clients. Given the nature of the foundry industry, where contracts are key, there are criticisms that Intel should have focused more on building a foundry ecosystem rather than advancing the process.
The appointment of Lip-Bu Tan, who led Cadence, one of the world’s two major electronic design automation (EDA) corporations, is also seen as a measure to find breakthroughs in the foundry sector. EDA refers to the software used in designing and verifying semiconductors' integrated circuits (IC). It involves simulating various circuit designs to predict outcomes before creating the chips. Given the limits of fine process technology, EDA capability has become increasingly crucial, significantly affecting design, manufacturing, and yield. In particular, EDA is widely used in the foundry sector for process optimization.
With the appointment of Lip-Bu Tan as CEO, Intel can now leverage the expertise of Cadence, which has established close partnerships in diverse semiconductor intellectual property (IP), fabless design, and foundry sectors. This lays the groundwork for creating the ecosystem necessary for success in the foundry business. This is the background behind Intel’s decision to break long-standing traditions and entrust the company’s future to an outsider.
◇ The golden age of Samsung Foundry was when TSMC was active
Intel’s case has significant implications for Samsung Electronics, which still adheres to pure-bloodism. In the case of Samsung Electronics, which has expanded its business areas from the memory semiconductor sector to system LSI and foundry, it is difficult to find instances of external personnel being placed as head of the DS division. All heads of the DS division have come from Samsung Electronics' memory division, and those who have been appointed to the relatively new foundry division have also been veterans who have taken elite courses in memory semiconductors.
There are growing voices in the industry calling for Samsung Electronics' foundry division to actively recruit external talent through bold appointments and to bring in leadership specialized in the foundry sector. A source familiar with Samsung Electronics noted, “The only time Samsung Foundry significantly threatened TSMC was in 2014 with the 14-nanometer FinFET process, and during this period, the one who led the stabilization of new technologies at Samsung Foundry was Deputy General Manager Yang Mong-song from TSMC.”
Yang Mong-song, a highly regarded engineer in the foundry sector and former deputy general manager of Samsung Electronics, led the mass production of the 14-nanometer FinFET process within two years of joining Samsung. At that time, Samsung Electronics became the first to win orders from major clients such as Apple and Qualcomm, surpassing TSMC. After holding a 4% market share in the foundry sector, Samsung Foundry later raised its share to over 15% by successively launching 11-nanometer and 10-nanometer processes based on the 14-nanometer FinFET process. However, after Yang moved to China’s SMIC, Samsung Foundry has not introduced processes that threaten TSMC.
To change the pure-bloodism and bureaucratic organizational structure, and to respond more flexibly to market demand, conditions must be created for more ‘outsiders’ to thrive not only in the foundry sector but also in memory, design, and all other areas.
Recently, Chairman Lee Jae-yong unusually criticized Samsung Electronics' memory division. He noted, “The memory division has fallen into complacency and failed to respond to the AI era,” and “The foundry division is operating at a low rate due to a lack of technical capacity.” It remains to be seen whether the chairman’s critical remarks will lead to positive changes in the bureaucratic leadership system of Samsung semiconductors.