Intel’s Chief Engineering Officer is leaving

Intel Corp. ousted Chief Engineering Officer Murthy Renduchintala, the executive in charge of the company’s vast chip-design and manufacturing organization, less than a week after saying it has fallen further behind rivals in production technology.

The executive will leave Aug. 3, and his organization will be split up and led by other leaders. Intel said it was making the changes “to accelerate product leadership and improve focus and accountability in process technology execution,” according to a company statement on Monday.

Renduchintala’s departure marks an escalation of the pressure on Intel’s leadership following a disastrous announcement last week that knocked more than $40 billion off Intel’s market value and caused multiple analysts to question the future of its manufacturing organization, which has been a cornerstone of the company’s semiconductor dominance for decades. The Santa Clara, California-based chipmaker on July 23 said its plants had failed to keep up with the most advanced chip-production technology, signaling that the man tasked with fixing persistent production issues had failed.

When then-Chief Executive Officer Brian Krzanich hired Renduchintala from rival Qualcomm Inc. in 2015, he was lauded as someone with the experience needed to upgrade Intel’s design efforts. But the two leaders’ extensive recruitment of outsiders led to an exodus of longtime Intel senior executives during Krzanich’s tenure. That became a hindrance when Krzanich was subsequently dismissed for an illicit workplace relationship, leaving an absence of internal candidates ready and qualified to replace him.

After a seven-month search, Chief Financial Officer Bob Swan reluctantly took the CEO role, placing the company in the hands of another outside recruit. Renduchintala was one of those passed over the for top job.

Executive reshuffles and maneuvering for higher positions are part of corporate life. But throughout Intel’s more than 50-year history, the company has seldom looked outside its own ranks for leaders and has maintained an approach of developing its own executives. Another pillar of the chipmaker’s success has been to manufacture its own products, bucking the industry trend of outsourcing. Intel has argued that manufacturing and chip design should be done together, shunning rivals’ approach of focusing just on design and letting third parties do the building. The company’s message was always clear: Intel has the most advanced plants, and that goes a long way toward making the best processors.

Maintaining that innovative advantage became Renduchintala’s job when Swan promoted him to the chief engineering role, but any sense of progress regaining its edge was destroyed last week when the company said the latest technique for building the most advanced semiconductors was a year behind schedule. That gives rivals the opportunity to appeal to computer makers with their own versions of the pitch that’s been so successful for Intel in the past: Their products are made with technology that’s years ahead of the competition. The latest setback followed a multiyear delay in Intel’s efforts on the previous manufacturing process. The company’s stock slumped 16% on Friday and fell 2% more on Monday.

In public appearances and interviews, Renduchintala is garrulous and exudes confidence, unafraid to dominate the conversation. He wasn’t on last week’s earnings conference call, where Swan was forced to defend Intel’s position and earnings amid constant questions from analysts about the manufacturing delays and Intel’s plans to mitigate them. Swan offered contingency plans that would involve Intel outsourcing the production of its best products.

Such a suggestion was unthinkable under all of Swan’s predecessors, many of whom had argued that Intel’s plants were so valuable they could be offered to use for outsourcing by its rivals.

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Intel’s Chief Engineering Officer is leaving