In their first public appearance together, interim Intel co-CEOs David Zinsner and Michelle Johnston Holthaus give blunt assessments of the company’s accelerator chip and server CPU efforts while noting that more rivals are set to enter the PC market next year.

Intel’s interim co-CEOs gave blunt assessments of the company’s accelerator chip and server CPU efforts in their first public appearance together while noting that more rivals are set to enter the PC market next year and leaving open the possibility of splitting the chipmaker in two.

David Zinsner, also Intel’s CFO, and Michelle Johnston Holthaus, who was also given the newly created position of CEO of Intel Products, discussed the state of the beleaguered semiconductor giant and homed in on its most strategic businesses at the Barclays 22nd Annual Global Technology Conference on Thursday.

[Related: Intel At Crossroads In Post-Gelsinger Era: CRN In Depth]

Intel’s board of directors chose Zinsner and Holthaus as the company’s interim co-CEOs, the company announced on Dec. 2, after it reportedly forced Intel CEO Pat Gelsinger to retire one day before because it had lost confidence in his leadership.

During their roughly 30-minute appearance at the Barclays conference, Zinsner and Holthaus addressed questions around Intel’s contract chip manufacturing business, Intel Foundry, including whether it would remain part of the larger company.

“Does it ever fully separate? I think that’s an open question for another day,” Zinsner said.

Meanwhile, Holthaus gave her read on how Intel has been doing across its products groups, indicating that she is more confident about the company’s current path in the PC market than its efforts with AI accelerator chips or server CPUs.

“On the data center side, we have a lot of work to do there. But on the client side, our say-do ratio for the last four years has been very good,” said Holthaus, who had led the Client Computing Group for more than two years before the recent job change.

As for Intel’s accelerator chip strategy, Holthaus said the company’s Gaudi chips do “not allow me to get to the masses” and that the successor to the recently launched Gaudi 3, code-named Falcon Shores, will not be “wonderful” but instead a “good first step.”

The comments were made after Zinsner clarified last week that while Intel’s “core strategy remains intact,” the board wants it to put an emphasis on “execution around the product side of the business to make sure that the foundry business remains successful.”

The CFO said the board has also pressed Intel’s leaders to push for more incremental returns on the massive investments it has put into its manufacturing operations.

Intel’s stock price was down by more than 2 percent on Friday.

What follows are eight big statements Zinsner and Holthaus made about the state of Intel’s business, including a claim by Holthaus that retailers are seeing a high return rate for Arm-based PCs and her desire to win back customers from AMD in the data center.

Holthaus Claims Retailers Report High Return Rate For Arm PCs

Holthaus (pictured) claimed that retailers have been seeing a high return rate of PCs powered by Arm-based processors because of software compatibility issues.

“If you look at the return rate for Arm PCs, you go talk to any retailer, their number one concern is, ‘Wow, I get a large percentage of these back,’ because you go to set them up, and the things that we just expect don’t work,’” she said, referencing software compatibility issues with the Arm instruction set architecture.

Qualcomm debuted its Arm-based Snapdragon X processors for the first batch of Copilot+ PCs from Microsoft and other OEMs in June. While many popular applications have native Arm-based versions, not all Windows software is officially supported by the processors yet. To address that gap, Microsoft and Qualcomm have developed an emulated layer, though it can’t handle all x86-based applications.

A Qualcomm spokesperson told CRN on Friday that return rates for Snapdragon X-powered PCs “are within industry norm” while noting the high acclaim such devices have received from consumers and “many consumer publications.”

“Our devices continue to have greater than 4+ stars across consumer reviews and our products have received numerous accolades across the industry including awards from Fast Company, TechRadar, and many consumer publications. Our device return rates are within industry norm,” the representative said in a statement.

The spokesperson added that Qualcomm “expects 30 percent to 50 percent of laptops to move to non-x86 platforms” in the next five years.

Holthaus made her comments after noting the “relatively stable” growth of Apple’s Mac computers, Qualcomm’s less than 1 percent of PC market share, and the efforts by companies, including Microsoft, to “make Arm ubiquitous in the PC.”

While Holthaus thinks Arm’s ubiquity in the PC market is likely a foregone conclusion, she said one of the biggest obstacles facing these efforts is software compatibility while adding that Arm’s rise in the segment will push Intel to develop better chips.

“You will never hear me say that it will not happen, because competition makes us better, and as long as you’re constantly worried about who’s knocking on your door, you’re going to constantly be innovating and making sure that you don’t have blind spots,” she said.

“But we do see that there’s still a lot of incompatibilities,” Holthaus added, which led to her claim about high return rates for Arm PCs.

After making that claim, Holthaus noted that Apple “did a lot of the heavy lift for Arm” to make its custom, Arm-based M-series processors “ubiquitous” with its operating system and “walled garden stack” of software.

Intel Took Too Long To Become ‘Performance-, Power-Oriented’ In PCs

In discussing competition with Arm-based processors for PCs, Holthaus admitted that Intel was late in developing chips that balance performance and energy efficiency in the way that Arm chips have been known for doing.

“We took too long at Intel to become performance- and power-oriented, and we made a massive leap with our Lunar Lake product last year,” she said.

Holthaus is referencing the recently launched Intel Core Ultra 200V processors, which are the company’s second generation of chips for AI PCs.

“We are as performant on performance and battery life as most Arm devices out there, and so for our customers, a lot of them are saying, ‘Okay, you’re finally in the ballpark of being focused on all these right things,’” she said.

While Intel may have been playing catch up in the performance-efficiency equation until recently, Holthaus said the “say-do ratio” for the Client Computing Group, which she led for two years before taking new CEO roles, “has been very good.”

“We met our schedules, we met our performance, so you can expect that to continue,” she said.

Intel Expects ‘More Competitors’ To Enter The PC Market In 2025

Holthaus said that the company expects its list of rivals in the PC market to expand beyond AMD and Qualcomm next year.

“Everybody is really excited about the PC market, so we have more competitors than we’ve ever had. You will see more competitors enter the marketplace in 2025, and we’re going to have to be on our toes and making sure that we’re winning,” she said.

Holthaus made the comments when a financial analyst asked how Intel is thinking about competition from Qualcomm, which made a revitalized push into the PC market this year with its Arm-based Snapdragon X processors, and from AMD.

While Holthaus didn’t elaborate on her statement about more competitors entering the PC market, multiple reports from the past few years have pointed to the possibility that chip designers beyond Qualcomm could introduce new Arm-based processors for PCs.

These reports have suggested that Nvidia and MediaTek, a Taiwanese designer of smartphone and Chromebook chips, will introduce their own PC processors or collaborate on a product that combines their technologies for the segment.

A June report from Reuters, for instance, said MediaTek plans to introduce a line of Arm-based processors for Windows PCs late next year.

More recently, in October, a report by Taiwanese publication DigiTimes said that Nvidia is expected to release in September 2025 an Arm-based PC processor that combines its own CPU and GPU designs. Nvidia has years of experience designing Arm-based CPUs, the latest of which have been the company’s Grace CPUs for AI data centers.

Other reports have pointed to the possibility of Nvidia and MediaTek collaborating on a PC processor that combines their respective GPU and CPU technologies.

Intel’s Gaudi 3 Successor Is Not ‘Wonderful’ But A ‘Good First Step’

Holthaus delivered a blunt assessment of the company’s AI accelerator chip strategy, saying that that successor to the recently launched Gaudi 3 will not be a showstopper but will help Intel establish itself and assess the strategy’s viability in the space.

When Intel launched Gaudi 3 a few months ago, it admitted that the chip would not be faster than Nvidia’s H100 GPU, which released two years ago, but said it hopes to win in the market with the chip’s “price performance advantage.” The OEMs supporting Gaudi 3 include Dell Technologies, Lenovo, Hewlett Packard Enterprise and Supermicro.

Holthaus indicated that she does not expect widespread success for Gaudi 3. This comes after Gelsinger said in the company’s November earnings call that Intel will not meet the $500 million revenue target it set for Gaudi chip sales in 2024.

“There’s some really good things about Gaudi that we’re learning, particularly from the software and the platform level, but Gaudi does not allow me to get to the masses. It’s not a GPU that’s easily deployed in systems around the globe,” she said.

While Gaudi 3 is an application-specific integrated circuit (ASIC), its successor, code-named Falcon Shores, will be a programmable GPU that integrates Gaudi technology. The company has previously said that Falcon Shores will arrive in late 2025.

But though Holthaus sees Gaudi 3 to Falcon Shores as an important transition for Intel’s accelerator chip strategy, she doesn’t think Falcon Shores will be a game-changer.

“We really need to think about how we go from Gaudi to our first generation at Falcon Shores, which is a GPU. And I’ll tell you right now, is it going to be wonderful? No, but it is a good first step in getting the platform done, learning from it, understanding how all that software is going to work, how the ecosystem is going to respond. So then we can very quickly iterate after that,” she said.

Even if Intel is unable to make accelerator chips are that are more competitive in the near term, Holthaus doesn’t think throwing out those designs and starting over again, like Intel did when it dumped its Nervana accelerator chip business to focus on the Gaudi line, which was originally developed by Habana Labs, the startup Intel acquired in 2019.

“If you just stop everything and you go back to doing, like, all new product, products take a really long time to come to market, and you’re two to three years out from having something. I’d rather have something that I can do in smaller volume, learn, iterate and get better so that we can get there,” she said.

After all, Holthaus said “AI is not going away,” and the company continues to anticipate a growing need to service the market for inferencing, where AI models are used to produce live results for commercial applications.

At the same time, Holthaus left open the possibility that Intel won’t keep making big investments into its accelerator chip business if things don’t work out.

“I’ll be very honest with you: We’ll be very pragmatic about how we do it. We’re not going to throw hundreds of millions and billions of dollars at things that don’t get traction. We need to fail quickly, learn and iterate,” she said.

Holthaus Is ‘Laser-Focused’ On Fighting AMD In The Data Center

In the data center market, Holthaus said she is going to be “laser-focused” on winning back customers who turned to AMD for server CPUs.

“We need to find a few key partners that want to win with Intel. There are a lot of advantages to the architecture that we have, and we see that. But up until now, AMD has been doing a better job of servicing those customers,” she said.

Holthaus made the comments after noting that Intel has “had some big challenges on the data center side” when it comes to market share and competition and said the company plans to “reevaluate” its current CPU road map to ensure it’s meeting customer needs.

“For me, my first couple weeks are just about listening, like, what’s working for our customers? What’s not working? What are they happy about? What are they not happy about? Then we are going to come back. We’re going to huddle. We’re going to reevaluate: What are we doing? Is it actually going to win? If it’s not, what pivots do we need to make?” she said, adding that she does not yet know the answers to those last questions.

In Holthaus’ view, the company hasn’t been “making enough investments in products,” which she seeks to change as the new leader of the Intel Products group.

“We weren’t moving fast enough,” Holthaus said. At the same time, rivals “were being more innovative, and they were more willing to disrupt themselves,” she added.

“What you’ll see for me is, I’m willing to disrupt myself. I’m willing to have a year that isn’t so great if the next year is even better. Because at the end of the day, if we build world-class products that allow our customers to win, we’ll win. And that’s, I think, where we really fell short,” Holthaus said.

With expectations that there’s not “a lot” of growth for the data center’s total addressable market in the future, Holthaus said Intel is focused on “core count growth” for CPUs with the company expecting its share in the segment to stabilize in 2025.

“We’ve been talking about that since [the second quarter] about stabilizing that market segment share loss, being really laser focused on building the right products to regain share,” she said.

Holthaus ‘Very Comfortable’ With Outsourcing More Chip Manufacturing

Holthaus said she is “very comfortable” with the idea of outsourcing more of Intel’s chip manufacturing to an external foundry if it means delivering competitive products.

While Intel has traditionally manufactured most of its products, including CPUs, the company made moves to rely on outside contract chip manufacturers such as TSMC to fabricate a growing number of products under Gelsinger.

At the same time, Intel has been working to accelerate its own advanced chip-making capabilities and build a contract chip manufacturing business with Intel Foundry.

“At the end of the day, bluntly, I can be attached to my Intel Foundry, but if I have a losing product, that doesn’t really help. I need to build world-class products that my customers are excited about and they want to buy. And if that means landing something [in] our data center roadmap on TSMC, I’ll do it,” Holthaus said.

However, Holthaus said she thinks Intel products will be manufactured by Intel Foundry in the long term because the manufacturing arm is “making positive progress.”

Fully Separating Intel Foundry Is ‘An Open Question’

Zinsner said the idea of separating the company’s manufacturing business, Intel Foundry, from its products group is still a possibility.

“Does it ever fully separate? I think that’s an open question for another day,” said Zinsner.

Holthaus, who is also CEO of Intel Products, noted that the company already runs Intel Foundry and Intel Products “fairly independently,” with the latter set to become an independent subsidiary. That was a decision announced by recently departed Intel CEO Pat Gelsinger in September.

While Holthaus said a future leader could decide to completely separate the two businesses, she saw the ownership of both as a competitive differentiator.

“Product makes their decisions, foundry makes their decisions, but for both of those businesses, I think, long term, to be very differentiated in the market—great products with a great process technology that we have first access to—is a differentiator,” she said.

“So pragmatically, do I think it makes sense that they’re completely separated and there’s no tie? I don’t think so,” Holthaus said.

Zinsner also said that Intel Foundry is getting its own operational board and enterprise resource planning system set up as part of becoming an independent subsidiary.

“That’s already in flight. That’s going to happen, and it’s just a matter of time at this point that we lock in the milestones associated with creating that separation,” he said.

Interim Co-CEOs Were Chosen By Board For Their Transparency

Zinsner (pictured) said one reason the board of directors chose him and Holthaus to lead the company is because of their emphasis on transparency when communicating progress on the comeback plan devised by Gelsinger.

“We are a little bit more on a say-do basis for we’re more likely to tell you things as we’ve accomplished big milestones that are meaningful, as opposed to early indications of success. So that’s our philosophy,” he said.

“I think that’s why the board actually chose us to run the interim role, because we are so transparent and operate in that way. And I think the investors can expect us to do that as we go through earnings calls and so forth,” Zinsner added.

Zinsner was responding to a question about whether he had any new manufacturing milestones to announce for Intel Foundry’s 18A process, which is the last advanced chip-making node in the company’s node acceleration plan that is meant to put Intel ahead of Asian foundry giants TSMC and Samsung for leading-edge capabilities.

Zinsner said Intel has a “couple of milestones” coming in the “not too distant future that we’re likely to update investors on at the end of January.”

“Early indications are things are going well there,” he added.