Intel struggles with fallout from security scandal

The emergence last week of two disastrous microchip flaws sent much of the technology world scrambling. The “Meltdown” and “Spectre” bugs are unique in their universality: at least one of them affects almost every computing device and piece of software on the planet, whoever makes it. But one company has become the face of the scandal.

Shares in Intel, the world’s biggest maker of the computer processing units affected, fell by as much as 5 per cent last week. The company is facing multiple lawsuits over the potential damage to consumers, both from the risk of hacking and the slowdowns in performance that patching over a bug requires.

It also emerged that Brian Krzanich, Intel’s chief executive, sold millions of dollars of shares in November before the public knew about the bug. He now holds the minimum possible while remaining chief executive.

There was even a mention of a total recall of Intel chips, something that would be catastrophic for the company. Little surprise, then, that the company attempted to downplay the incident when it first emerged.

Crisis management advice might be to lie low and focus on technical fixes, but unfortunately for Krzanich, that is not an option: the Consumer Electronics Show, the world’s biggest tech show, takes place this week. Krzanich is due to deliver the keynote speech tonight. Talk about bad timing.

Things would be bad enough if all Intel had to worry about was a massive global security scare, but it is not. The crisis comes as what was once the biggest player in microchip land is seeing its dominance slip away. Last year it was overtaken as the largest semiconductor company by Samsung, the first time Intel has not held the top spot for 25 years.

It did not have to be this way. Had things worked out differently, we might be talking about Intel in the same breath as the five tech giants — Apple, Amazon, Facebook, Google and Microsoft.

The company, as one of Silicon Valley’s founding fathers (the name comes from the silicon transistors in the chips Intel makes), has a longer history than any of these five. Its name is synonymous with the great semiconductor advances that have allowed us to squeeze ever greater computing power out of our machines.

Moore’s Law, the pattern of a microchip’s processing power effectively doubling every two years, was coined by Gordon Moore, the company’s co-founder, in the 1960s. The law has, remarkably, remained true for most of the five decades since.

The personal computer boom of the 90s, which began the internet age, can be attributed as much to Intel as to its other half, Microsoft. Intel helped to make processor power affordable enough for it to go into the home.

“Intel inside”, the company’s genius marketing campaign, became a trusted symbol for PC buyers. Moore’s Law was made possible because we were able to shrink the size of the transistors on our microchips. But we are now approaching the scientific limits of how far this process can stretch.

The end of Moore’s Law was inevitable, but Intel’s decline need not have been. While it is still the dominant microchip company when it comes to PCs, its recent history is one of a string of misses.

Like Microsoft, Intel failed to see the rise of the smartphone. Instead, the market is dominated by chips designed by Britain’s ARM Holdings. Intel’s repeated attempts to gain a foothold have failed.

Missing out on the mobile market is Intel’s great millstone, but there have been other missed opportunities. Companies working on some of the most promising new technologies, such as artificial intelligence (AI) and blockchain, are increasingly doing their number crunching not on computer processing units (CPUs), which Intel is known for, but graphics chips (GPUs) made by companies such as Nvidia.

And there are more processors dedicated to particular tasks. Huawei’s latest phone, for example, has a dedicated AI chip. Cloud computing companies, another booming industry, are exploring specialist processors. Where once all these tasks would have been done with an Intel CPU, computing has fragmented.

Intel has largely focused on bolstering its CPUs in a bid to make them compete. But last week’s debacle, a result of chipmakers sacrificing security to speed up their CPUs, will only shift the balance further away from Intel.

The company is not exactly in crisis. It still leads the market in chips for PCs, and demand for CPUs is still strong, even if others are growing faster. In the past five years, its shares have doubled. It has branched out, now calling itself a “data company”, and has spent billions on acquisitions to chase new markets, such as US$15 billion ($20.9b) on Israel’s Mobileye, which makes vision systems for driverless cars.

But what might have been? In the same period shares in Nvidia have increased 18-fold. The danger for Intel is that while it was once the future, it increasingly looks like the past. — Telegraph Group Ltd

Brian Krzanich, Intel’s chief executive, sold millions of dollars of shares in November before the public knew about the bug.