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Tuesday, October 23, 2018

Intel Corp.
The “Headless Chicken” Syndrome


We have a good reason to believe that Brian Krzanich (BK) resignation from Intel Corp. was a “Roger Stone” style diversionary PR stunt, chosen by the Intel Board of Directors to protect the stock price from negative effect of vacating the top executive position. While supposedly, BK resigned his position as CEO due to ethical violation of company rules, in reality, BK was responsible for significant blunders that kept sinking the company position as a leader of the semiconductor manufacturing business.

The fact that Intel has not filled the CEO position since June 2018, indicates one or more of these points:
  1. No reasonable candidate is willing stick their head in the mess that is left behind BK’s legacy.
  2. The Board of Directors is complicit in letting BK run the company unchecked for such a long time and any well qualified candidate who interviewed with the board, figured out that they will be working against the tide and without backup.
  3. The Board of Directors is aware that CEO replacement will not solve the problems that Intel Corp. is facing, because the problems are much more profound and involve general lack of trust within the organization. Consequently, they are only focusing on damage control and can live with an interim CEO who is “absolved” of long-term responsibilities.
  4. The U.S. economy is currently running in full swing. The Board of Directors is focusing on “making hay while the Sun is shining”. A new CEO, particularly one who comes from the “outside” may come up with demands for radical changes to the internal organizations and consequently put the current stock price at risk. It is likely that the Board prefers to maintain the status quo over any "revolutionary" actions.



Brian Krazanich replaced the late Paul Otellini as Intel Corp. CEO in May 2013. Although presenting himself as an “engineer” in practice, BK had a very short engineering experience and very quickly, after being hired as a “process engineer” (a manufacturing position) at the New Mexico Fab, he shifted to a management track, where the rest of his career at Intel Corp. was spent. Most of BK career growth took place as a manager at the Technology and Manufacturing Group (TMG), which operates the silicon manufacturing lines (known as the "Fabs"). BK had no background in circuit design, electrical engineering, systems engineering, or software engineering which together, create the actual IP value of today's computer systems products.

For many decades since its foundation, Intel Corp. held itself to high standards of transparency by keeping low overhead and sharing information with all of its employees. As part of this exercise of transparency, the company annually conducted an employee feedback study known as the Organization Health Survey (OHS). The OHS presented employees with a large number of questions, asking them to grade the company performance over a wide range of issues. The OHS goal was to give managers a realistic assessment of the efficacy of management practices. The results of the OHS were published and distributed to employees, as a matter of course, followed by a public discussion of the issues exposed by the annual OHS. As the late Paul Otellini used to say "OHS goal is to keep Intel Corp. management in tune with company employees".

In 2013 (the first year in which BK was the CEO), Intel Corp. "C-Suite" issued a message to employees that the pending, annual OHS will not be conducted for that year. This was supposedly, because BK was in his position for less than a full year. This was the first time that the OHS was not run, since inception of the practice at Intel Corp.

In 2014, though the OHS questioner was distributed to employees on time, executive management refused to publish the OHS results for the first time in the history of the company. The only points that were exposed, came out of the personal blog that Richard Taylor (head of Intel HR at at the time) published on Planet Blue, the internal employee social network. The major issues mentioned on that blog included the fact that the OHS revealed significant trust issues among corporate entities, as well as lack of trust between managers and technical leaders, serving within the same business units.

Since Richard Taylor’s blog was open to all employees, his comments about the OHS received a flood of comments and questions. Like other company employees, I contributed a few of these comments at the time. My comments specifically addressed the growing lack of knowledge and many times complete ignorance of significant technical issues on the part of company managers at all levels. I also mentioned the systemic diminishing of the authority bestowed upon technical leaders and the overt effort to cut their numbers in company ranks, while staffing a growing number of manager positions. At the time, we did not know that BK and his cronies were planning to lay off a large number of employees in 2015; however, in retrospective, it becomes clear that the ground work was already set for this action to happen.

Interestingly, the 2015 mass layoffs were heavily skewed to exclude managers, compared to employees in individual contributor positions. This fact is clearly demonstrated by the OWBPA report filed by Intel Corp. in June of 2015.



2014 was the year in which during the course of my work as the systems architect of the Electrical Validation department, I had first row view of the 14nm process yield failures. Upon closer look and a thorough investigation I came to the conclusion that the systems used for engineering audit of the wafers coming out of the Fabs were ineffective for determining a cause-effect correlation. Establishing such correlation is a fundamental requirement for effective failure analysis and subsequent correction of mass manufacturing production flaws. While 20th Century methodologies were sufficient to monitor silicon defects and determine corrective actions for fixing silicon production flaws for many generations of Intel silicon products, it became apparent that these methods have reach their limit at the time that the last 22nm fabrication process (Haswell family of CPUs) was used at the Fabs.

Looking at the vast amounts of data coming out of the production monitoring systems, I was astonished to find out that no-one on the engineering side of the company, knew how to effectively use the collected data for proper analysis as well as how to apply the analysis towards fixing outstanding yield problems. Further, it was shocking to find out that most of the petabytes (millions of gigabytes) of data was never seriously examined or utilized. In fact, most of the collected data was  unfit and useless for engineering analysis. After years of inertia this revelation was the first indication of a systemic failure. A Laissez-faire approach to running a critical part of the business suddenly falling into obsolescence, mostly due to lack of scrutiny and common sense among managers.

In an effort to correct the situation I began working on an initiative to revise the procedures and the methodologies used for identification of root-causes in silicon wafer failures for the 14nm and the upcoming 10nm fabrication processes. In concerted cooperation with other engineering leaders I devised 21st Century methodology, specifically using “big data” and artificial intelligence techniques for collection, organization, and analysis of silicon wafer failure handling. The foundation for this framework became internally known as the INTELligence Initiative.

While it took a significant amount of time to educate and convince people that the methodology change is critical for success, a significant number of technical leaders within the engineering organizations at Intel Corp. became convinced that the new direction that I proposed is the right way to go. Further prototyping and application of the methodology were applied to real-life data demonstrating significant success. The only objections, came from high level managers, who had no technical background and were risk averse. The message that I received at the time was “go ahead and implement your solution, if you are successful, we will support you...”.

The INTELligence Initiative and all the process improvements that I was leading at the time, went on the chopping block after the 2015 mass layoffs. C-Suite executives enjoyed their bonuses at the end of 2015 and the orchestra continued to play while the boat was sinking.

Though my immersion in the analysis of the 14nm production problems allowed me to understand the depth of trouble that hat the company was in, I was still convinced that commonsense would prevail and the new methodology would be adopted to help the recovery process. Now, four years later, I see that the common sense never floated to the top, because the Intel Corp. organization became increasingly dysfunctional, year after year.

It is now the end of 2018, BK is no longer the CEO, many thousands of experienced Intel Corp. employees had been permanently laid off in 2015 and 2016 and most of them do not wish to ever return to employment with Intel Crop.

Let us do a reality check as of end of October 2018:
  • BK received the dubious credential of being the “First Intel Corp. CEO to Break Moore’s Law”, an attribute that he certainly worked hard to earn...
  • BK appointed more Vice Presidents during his tenure as CEO, than any one of his predecessors. The question remains open: "What does the company have to show for this generosity?"
  • Intel Corp. has trouble finding competent people who are willing to work for the company, due to its diminished reputation as a fair employer.
  • The employee trust issues that were revealed in the 2014 OHS have never been attended to and the employee scare tactics, subsequently employed by BK for more than four years, further eroded chances of repair.
  • Intel Corp. sustained tremendous production yield problems with its 14nm silicon production processes while other semiconductor manufacturers, including Global Foundries, TSMC and Samsung proceed to offer reliable 14nm, 12nm 10nm and 7nm products.
  • Intel lost its place as the number one semiconductor manufacturer in the world, more than likely, forever.
  • AMD business success due to its reliance on external Fabs is capitalizing on Intel Corp. failure to lead in manufacturing technologies and product intellectual property development.
  • While still fighting yield problems with the so called “mature” 14nm process current industry news give the impression that the 10nm silicon manufacturing process will never see the light of day, due to both technical and economical factors.
  • Apparently the pressure on the limping 14nm production process is so bad that Intel Corp. is moving the system integration “Chip-set” parts back into the older 22nm production line.
  • Intel Corp. began selling assets, to offset losses. The latest such action is apparently, the sell off of the memory business, back to Micron Technology, for $1.5 billion
My analysis is that Intel Corp. is facing a plethora of technical problems that are real. However, the overwhelming problem for the company is the existence of incompetent management at all levels, in addition to lack of trust and cooperation inside business units and lack of leadership direction. The current production yield problems are only a symptom of the underlying organizational weakness and lack of leadership resolve. I define this phenomenon as the “headless chicken syndrome”.



--Dr. Flywheel







Friday, June 22, 2018

MF Intel CEO Resignation Raises More Questions

Recent news regarding about Intel Corp. CEO Brian Krzanich informed the public that BK resigned from his position, voluntarily. In view of of the company's record while under the tenure of BK, we believe that this "surprise" resignation was due to multiple factors and was a lot more predictable than not. The "fraternization" charges seem to be a PR solution that was devised to cover up for much more material misdeeds on the part of the beleaguered CEO.The swift way in which the event was announced and executed, indicates that Intel Corp. is doing its best to put maximum distance between BK and the company, more than likely because more serious revelation are about to see the light of day, very soon.
  • So far we know that multiple law suits have been filed against Intel Corp. as consequence of the multiple security flaws, found inside Intel's advanced microprocessor architecture that have been discovered by outside security experts. These law suits will have potentially detrimental effect on the company's revenue stream.
  • We know that the Federal Government is actively investigating Intel Corp. for illegal workforce manipulation and age discrimination charges. According to our sources, this investigation has been significantly expanded in recent months. The results of this investigation, which is already more than two and a half years along the way, are bound to be significant, both in terms of company image and monetary cost.
  • BK himself is facing investigation regarding his sale of millions worth of his stock options, while having first class access to propriety information, regrading the severity of security flaws in Intel Corp. microprocessor architecture and while being able to fully assess the corresponding risks to the company stock valuation.
  • The company's announcement that its 10nm manufacturing will not bear fruit until later in 2019, serves as a clear indication that something is awfully wrong with with the way that the company operates. Industry veterans, including myself, assess that the execution problems are not purely technical in nature, but rather have lot to do with chaos within the ranks, due to absence of leadership and expertise. Intel Corp. lost many highly experienced employees due to laying off about 1200 employees in 2015 and 12,000 in 2016, besides forcing thousands of veteran employees to retire. Apparently, the payroll savings in prior years are now costing a fortune in reduced productivity and chaos within the company ranks. To be fair, Intel Corp. annual reports, published over the last few years, stated the risks that such layoffs might bring about; however, management under the leadership of BK decided to take the risk, nevertheless!


It seems like the issue of fraternization, could have been handled with finesse, should BK's functional value in the eyes of the Board of Directors, was in order. The Intel Corp. PR machine could have come with subtle declarations and very little fanfare (like announcing a transition period for the CEO). Such was the case in the past when company executives were involved in quandary of various sorts. Typically, they were put to pasture (or sent to Siberia...) for a few months before quitting their job. Switching titles between President, President Emeritus, and CEO, was also common tactic to contain such moves. However, BK, more than any other Intel CEO before him, positioned himself at the center of a large number of PR campaigns and public personal appearances, in a self-promoting campaign that could only be described as a Trumpian Parade. Apparently, seeking the lime light came home to roost, when the Board finally decided to cut their losses with BK. Undoubtedly, the resignation came as a result of the mounting public scrutiny regarding company performance and dismal growth predictions, relative to the position of Intel's industry competitors. For the Board this is a matter of facts speaking for themselves and not of a sudden puritan morality campaign.

In spite of admitting to the shortsightedness and the missed opportunities in the smart phone ("mobile") market, switching to other sources of revenue to replace the PC market derived income, the company execution remained very slow. Instead of demonstrating true leadership by example, BK elected to run the company as a dictator, eject many of his coworkers whom he viewed as competitors and laid off tens of thousands of experienced employees from the company. Through the course of this process BK demolished the internal, productivity culture that was known until then as "Intel Culture".

Generally, Intel Corp. under the leadership of BK traveled through a process of organizational collapse ever since BK became CEO in 2013. The latest revelations about production line failures and inability to deliver 10nm high volume products, is a symptom of such organizational collapse. Intel Corp. rapidly lost it position as the world's leading semiconductor manufacturer to Samsung and its fledgling merchant Fab business never took off in a substantial way.

BK demonstrated significant lack of trust in in the company's human capital, particularly veteran company employees, a fact that is proven by the following points:
  • In his first year as CEO, BK blocked the publishing of the annual Organizational Health Survey (OHS), a survey in which employees provided their feedback about declared organizational goals and related management actions. This blocking of material information from employees, raised a lot of discontent among the rank and file within the company, since such a move has never happened before and clearly demonstrates a lack of transparency. BK never provided employees with an acceptable answer for his move.
  • BK drove the company to layoff tens of thousands of veteran employees and forced additional thousands of experienced employees to retire. No attempt was done to invest in employee retraining or reassignment. At the same time that Intel Corp. laid off a massive number of employees, the company also recruited an equal number of inexperienced new employees with foreign citizenship, many of them through H1B visa sponsorship and F1 to OPT conversions. This resulted in vacuum within the ranks, due to shortage of experienced leadership and a complete decimation of the "Intel Culture", a culture of taking responsibility, effective problem solving and operating with open communication and mutual trust. Newcomers, many of them recently arriving from countries that are not compatible with "Intel Culture", had no means to learn and follow by example, because the ranks were void of the older and experienced employees.
  • Due to his perceived notion about difficulties in managing the lower ranks, BK elected to invest tens of billions of dollars, into purchasing two outside companies, Altera and MobilEye for ridiculously overpriced valuations. The jury is yet to decide if these purchases were justified in any way; however, through this approach, BK's disdain to take charge and lead his own employees became apparent.
  • In 2015, BK declared the 1200 employees who were laid off by the company as "Lowest Performers". He did this in an open forum of employees, which created an enormous uproar inside the company. No attempt was made to correct the statement or apologize to the employees. Instead, Intel Corp. banned these employees from being rehired for their lifetime.
  • While trying his best to inflate his PR image, BK painted himself as a champion of female participation in the workforce. In January 2015 he announced that the company will spend $300 million on a new “diversity in technology” initiative. He also appointed his alleged girlfriend Danielle Brown, who was once his "technical Assistant" as the company "Chief Diversity Officer", a position that did not exist until then. Suspicious graft? You decide. Interestingly enough, the 1200 employees who were laid off in July 2015, received along with their "pink slip" a message from CEO BK, declaring that their layoff was called for due to the need to save $300 million, supposedly due to forecast of flat revenue. So it seems like BK was determined to promote his PR agenda by arbitrarily laying off veteran employees, and replace them with "diversity candidates". This would have been perhaps acceptable, besides that many of the women hired were foreign citizen spouses of H1B visa holder workers who stayed in the U.S. under H4 visas. So much to serving equality in diversification. According to the Economic Time of IndiaMore than 90% of such spouses are Indians. According to a recent report of the Migration Policy Institute, the US has issued EADs to more than 71,000 spouses of H1B visa holders, as of early 2017.
Workforce manipulation shenanigans and publicity stunts for hiding self serving nefarious agenda will remain the characteristics of Brian Krzanich career at Intel Corp., as well as his unique legacy of being the first Intel CEO to break Moor's Law. Though BK PR blurbs attempt to present the person as an "engineer" who runs a large technology company, people that knew BK at the beginning of his Intel career, told me that Brian had a very short stint in chemical engineering at the Albuquerque Fab, after which he immediately became a manager. Most of his time at Intel, BK spent at promoting his career, managing people and organizations and NOT doing actual "engineering" work. This could explain, at least in part, why real engineering and organizational problems are plaguing Intel Corp. as of late, since the CEO was probably not being able to understand what was broken in the system and what was necessary to fix it, while his personality prevented him from seeking good advice from either inside or outside the company.

Tuesday, June 5, 2018

Student Loan Debt Reached All Time High of
$1,521,019,350,000
in Q1 of 2018


Student Loan Debt Reached All Time High of $1,521,019,350,000 (more than 1.5 Trillion dollars)  in Q1 of 2018. Consequently, outstanding student debt currently exceeds auto loan debt ($1.1 trillion) and credit card debt ($977 billion). Considering that 42% of people who've gone to college took out debt, this number has high significance on the future of our economy and the future welfare of young families. According to the College Board, "In 2015-16, the 60% of bachelor’s degree recipients from public and private nonprofit institutions who borrowed graduated with an average of $28,400 in debt"

A recent FRB Board of Governors (FRB-BOG) report on the Economic Well-Being of U.S. Households in 2017, published in May 2018 informs us about the student debt situation:

Over half of college attendees under age 30 took on some debt to pay for their education. Most borrowers are current on their payments or have successfully paid off their loans, although those who failed to complete a degree and those who attended for-profit institutions are more likely to have fallen behind on their payments. • Among those making payments on their student loans, the typical monthly payment is between $200 and $300 per month. • Nearly one-fourth of borrowers who went to forprofit schools are behind on their loan payments, versus less than one-tenth of borrowers who went to public or private not-for-profit institutions.


Click on image to enlarge detail
As the table below shows, many families have taken debt to finance education of their children and/or grandchildren. This creates a "spillover effect" on debt ownership that continues to burden older adults, even after their offspring have become independent adults.

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Here are some interesting anecdotes quoted from the same FRB-BOG report:
  • Nearly 25 percent of young adults under age 30, and 10 percent of all adults, receive some form of financial support from someone living outside their home.
  • Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money. This is an improvement from half of adults in 2013 being ill-prepared for such an expense
  • Over one-fifth of adults are not able to pay all of their current month’s bills in full.
  • Over one-fourth of adults skipped necessary medical care in 2017 due to being unable to afford the cost
  • Nearly half of adults age 22 and older currently live within 10 miles of where they lived in high school, but those who have moved farther from home are more likely to be satisfied with the overall quality of their neighborhood.
  • Out-of-pocket spending for health care is a common unexpected expense that can be a substantial hardship for those without a financial cushion. As with the small financial setbacks discussed above, many adults are not financially prepared for health-related costs. During 2017, over one-fifth of adults had major, unexpected medical bills to pay, with a median expense of $1,200. Among those with medical expenses, 37 percent have unpaid debt from those bills. In addition to the financial strain of additional debt, over one-quarter of adults went without some form of medical care due to an inability to pay.
  • Those with less income are more likely than others to forgo medical care due to cost. Among those with family income less than $40,000, 39 percent went without some medical treatment in 2017. This share falls to 25 percent of those with incomes between $40,000 and $100,000 and 9 percent of those making over $100,000.
  • Over the past several decades, the rate at which Americans move—both short distances within states and longer distances across the country—has steadily fallen. This reduction in geographic mobility also fits within a pattern of less job switching, more generally, or reduced labor market fluidity.
I highly recommend reading the full FRB-BOG report for those of you who are concerned about the future of our economy and the welfare of our general population.


All the best,

--Dr.Flywheel

References:

Saturday, May 26, 2018

The Federal Government is Investigating Intel Corp.
for Age Discrimination Violations

Recently published articles in the Wall Street Journal and the Oregonian web site, report that the Equal Employment Opportunity Commission (EEOC) is conducting an expanded class-level investigation regarding age discrimination complaints that have been filed with the EEOC against Intel Corp.

The Wall Street Journal (WSJ) was the first news organization to report about the ongoing investigation in an article written by Georgia Wells, entitled: Intel Faces Age-Discrimination Claims. The WSJ article mentions that multiple complaints have been filed with the EEOC in conjunction with several rounds of massive employee layoffs over the last three years. The fact that the EEOC would continue an investigation almost three years after a reported violation indicates that the reported allegations are substantial, in spite of Intel Corp. denial of the charges.

The Oregonian news organization expands the coverage on the subject matter in an article written by Mike Rogoway entitled: Intel under investigation for alleged age discrimination. Rogoway, who covered the Intel Corp. massive employee layoffs back in 2015 and 2016 also provided statistical charts showing a clear correlation between an employee age and their odds of being selected for layoff. In this recent article, Rogoway provides a copy of a previously published chart from 2016, demonstrating the very clear age discrimination factor in the 2016 layoffs. Similar charts are available for the 2015 layoffs.

Intel Corp. 2015 Layoffs (click on image to enlarge)


Intel 2016 Layoffs (click on image to enlarge)

Publicly available information also demonstrates that while Intel Corp. was laying off thousands of its current employees, the company was actually acquiring new employees by the thousands. Many of these employees came in via Intel corp. sponsorship of H1B visas, H4 spousal work visas, "Green Card" sponsorship and F1 to OPT work permits. All of these additions to the workforce involve importation of foreign workers who are at the mercy of Intel Corp. for continued stay and employment in the U.S. In other words, Intel Corp. was actively replacing older workers with imported slave labor.


Intel Corp. Number of employees from Annual Report
(click on image to enlarge detail)

As can be seen from the above information, taken from the Intel Corp. 2016 Annual Report, The number of employees reported at the end of 2015 was 107,300, or about 600 more employees then reported in the previous year. However, since about 1200 employees were laid off mid-year, in July 2015, the the end-of-year number shown in the Annual Report actually represents a gain of 1800 employees relative to the previous year. This gain of 1800 new employees acquired before 2015 year end, contradicts Intel CEO's announcement to employees that the July 2015 were necessary to save on expenses "due to forecast of flat revenue"! Throwing experienced (and older) employees off the bus in order to replace them with cheaper newcomers, is the more likely explanation.

Similarly, in 2016, Intel Corp. laid off about 12,000 employees, yet the difference between the numbers reported for the end of 2016 are 106,00, thereby reflecting an effective gain of 10,700 employees  (106,000 - (107,300 - 12,000)) = 10,700.

Where did Intel Corp. acquire the replacement employees? According to a recently published Pew Research Center report: "By the end of the 2004-2016 period,  there were a total of 1,474,000 OPT approvals and 1,473,000 initial H-1B visa approvals".

Layoffs of older U.S. citizen employees not only manifests employment costs savings due their higher salaries, but also cuts on the cost of medical insurance expenses for a self insured company like Intel Corp. It is taken for granted that medical insurance costs tend to rise with the age of older employees and their dependents. If induction into employment of almost 3 million imported slave laborers in the high tech sector is not a significant economic factor in this lucrative sector of the U.S. labor market, what is? 

Intel Corp. attitude towards lowering the cost of labor led company management to commit law violations by conspiring, along with Apple, Adobe and Google to halt competition for employee recruitment in the Bay area and by doing so curbing potential employee pay escalation. The company was engaged in this practice for over a decade since 2001. Court records show that Intel Corp. was forced to settle its ill behavior with its employees, following a court ruling in 2013 (see United States District Court of Southern California - San Jose, Case No. 11-CV-02509-LHK).

Taking the significant risk of engaging in an anti-competitive illegal activity is a clear indication of the high priority that  company executives and the board of directors gave to curbing payroll costs. Clearly, Intel Corp. never refrained from its quest to curb employee compensation and was looking for every avenue to achieve its goals. The evidence points to systemic changes in the company's HR practices, enacted by company executives to get rid of older workers and replace them with cheaper workers. The 2015 layoffs, in which about 1200 employees lost their jobs, seem to be a small scale "experiment" that was meant to serve as a learning tool for company executives before executing the "magnum opus", the massive layoffs of 2016.

While Intel Corp. is not the only company to utilize the F1 to OPT loophole to circumvent the H1B visa quotas, utilization of such loophole is certainly one of the tools that the company utilizes to recruit cheap, captive workers. Public records show that Intel Corp. was the number one company to sponsor F1 to OPT foreign worker visas, with twice as many records registered as Microsoft corp. (see chart below).

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Both the WSJ and the Oregonian articles provide new exposure to issues that we have been covering in this web site for the last two years. We encourage our readers to refer to several of our previously published articles, including:
Further recent information regarding the ill practices that high tech employers are using to substitute older workers with cheaper workforce are covered by Peter Gosselin in these ProPublica articles:

All the best.

--Dr.Flywheel