This is a dismal return for any company, but for one in the business of advanced semiconductors, it is catastrophic. Microchips have become the lifeblood of the modern economy and industry revenues have doubled in a decade.

Just look at today’s hottest company to see what might have been. Four years ago, Intel and Nvidia were worth the same – today Nvidia is worth 30 times more. AMD, Intel’s traditional rival, is now more than twice as valuable. Arm, Britain’s most valuable tech company, has also overtaken the company.

Gelsinger passing the blame to his predecessors is somewhat fair. Intel, which launched the first commercial microchip in 1971 and became a household name through popularising the personal computer in the 1990s, has conspired to miss every large trend in the industry since then.

Once run by giants of Silicon Valley such as Gordon Moore and Andy Grove, this century the company has flipped through a series of leaders who prioritised short-term profit over industry leadership.

It gave up the chance to supply Steve Jobs with chips for the first iPhone, ceding the ground to Arm, which went on to dominate the smartphone industry. It helped develop a new process of chipmaking known as extreme ultraviolet lithography with Dutch equipment maker ASML, but declined to put the technology into use because it was too expensive.

The system, which involves impossibly accurate mirrors and lasers, turned out to be the only way to miniaturise transistors to today’s levels. The Taiwanese chipmaker TSMC snapped up the machines, leaving Intel in the dust. Now even ASML, which makes the machines that make chips, is worth more than Intel.

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Intel also managed to miss out on the artificial intelligence revolution, allowing Nvidia’s own microchip technology to dominate the market. Companies such as Microsoft and Meta are now buying Nvidia chips by the barrel.

This all makes the task of turning Intel around a gargantuan – perhaps impossible – effort. Gelsinger has made a credible effort to try, vowing to invest heavily in cutting-edge factories and rapid development of high-end microchips.

But questions should be asked of the Biden administration, which has made Intel the centrepiece of its plans to turn around America’s chip industry.

The US share of global semiconductor manufacturing has declined from 37 per cent in 1990 to 10 per cent today, with the shifting almost to China and Taiwan. Given the chance of a war with the former over the latter, the US is desperate to reverse that trend and bring back home an industry it invented.

In March, Intel was granted almost $US20 billion in grants and loans to finance factories in Ohio, Arizona and New Mexico, making it the single-largest beneficiary of Biden’s Chips Act. Gelsinger and the US president shared a stage on which Biden promised the deal would “transform the country”.

Gelsinger has spent years lobbying for Western subsidies. He has said Brexit torpedoed any chance of Intel building a plant in Britain, because it meant the facility would not receive EU financing. In Germany, where the project ended up, the company has raised its demands for state support.

His successful pleas mean Intel now has spades in the ground on major US chipmaking facilities. But whether Biden has picked the right horse is another question.

Friday’s share price collapse suggests investors have real questions about whether Intel can remain a serious force in semiconductors, even with billions in subsidies.

Plans to cut 15,000 jobs will not be welcomed in Washington, where the White House has made unionised employment a plank of its industrial policy. The cuts announced last week are greater than the 10,000 company jobs that Biden’s billions in subsidies were supposed to create.

On Thursday, Gelsinger said he was confident that the company would still qualify for funding. But it is unclear what the US taxpayer is buying.

While Intel is still ahead in its crucial personal computer market, designs from Arm are catching up. Arm’s boss Rene Haas predicts that the company will have 50 per cent of the market in five years. In the fast-growing data centre space powering the AI revolution, the company is losing ground.

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It is breaking with tradition by offering to manufacture chips designed by other companies, but the company must catch up with Taiwan’s scarily efficient TSMC, which continues to invest heavily, and many of its traditional rivals may be reluctant to trust the company.

The administration is hedging its bets. It is also granting huge subsidies to Intel’s two manufacturing rivals, TSMC and Samsung. But Biden’s biggest bet is looking shakier by the day.

The Telegraph, London

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