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Incoming Intel CEO has a plate full of problems to solve

Intel Corp. (INTC) is facing a shakeup after the unexpected exit of its CEO Brian Krzanich over non-fraternization policy violations. The chipmaker will soon come under new leadership, and changes stemming from this new authority can be expected. The leadership change comes at a challenging time for Intel as the company deals with manufacturing delays of its next-generation chips amidst tightening competition.

The repeated postponement of its next-generation chips combined with low production volumes have paved the way for competitors to up their game in this space. Although Intel posted strong first quarter results two months ago and gave an optimistic outlook for its second quarter last week, the threat of losing its dominant position looms over the industry leader.

Competitors like Nvidia (NVDA), Advanced Micro Devices (AMD), Qualcomm (QCOM) and Taiwan Semiconductor Manufacturing are expanding their capabilities by developing more powerful and energy-efficient chips and by investing and diversifying in new products and capabilities. Intel’s manufacturing delays could hurt its new products and in turn its competitive edge. If the company does not get its production back on line, it could lose market share as well as face revenue declines.

Intel expects an increase in capital expenditures of over 20% for 2018 

Intel also faces additional expenditures for rectifying its manufacturing issues as well as developing more powerful chips. The firm expects an increase in capital expenditures of over 20% for this year, similar to the increases seen over the past two years.

Intel’s new CEO has the task of fixing the manufacturing problems as well as moving into new products and markets to widen the company’s scope and abilities in order to tackle competition that is fast gaining strength. Intel has an advantage in terms of its size but it must plug its leaks within before it loses its competitive balance.

Intel is moving ahead with its own investments and developments in the key area of artificial intelligence. Intel also sold its Lustre File System business and related assets to DataDirect Networks. Terms of the deal were undisclosed. The acquisition of the Lustre business six years ago did not prove very beneficial to Intel and the offloading of this business can perhaps be considered a move in the right direction. Over the past six months, Intel’s stock has gained over 12% while competitor Nvidia has gained close to 28%.

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