SAN FRANCISCO – Intel CEO Paul Otellini is retiring in May, giving the world’s largest maker of microprocessors six months to find a new leader as it confronts two major challenges: a shaky economy and a shift toward mobile devices that is reducing demand for its PC chips.

Although Otellini’s impending departure was announced Monday, he notified Intel Corp.’s board of his retirement plan Wednesday. The decision surprised Intel’s board of directors, which had been expecting Otellini to remain CEO until the company’s customary retirement age of 65. Otellini is 62.

“The decision was entirely Paul’s,” Intel spokesman Paul Bergevin said. “The board accepted his decision with regret.”

Otellini will be ending a nearly 40-year career with Intel, including an eight-year stint as CEO by the time he leaves.

He joined the Santa Clara, Calif., company after graduating from the nearby University of California at Berkeley and worked his way up the ranks.

“It’s time to move on and transfer Intel’s helm to a new generation of leadership,” Otellini said in a statement.

In another statement, Intel Chairman Andy Bryant praised Otellini for leading the company through “challenging times and market transitions.”

Intel’s board plans to consider candidates inside and outside the company as it searches for Otellini’s successor.

Otellini and the four other men who have been Intel’s CEO during the company’s 45-year history have all been promoted from within. The company’s board is believed to be leaning in that direction again.

Intel identified the leading internal candidates Monday by anointing three of Otellini’s current lieutenants as executive vice presidents. They are: Renee James, head of Intel’s software business; Brian Krzanich, chief operating officer and head of worldwide manufacturing; and Stacy Smith, chief financial officer and director of corporate strategy.

If recent history is any indication, Krzanich has the inside track to become Intel’s CEO. Both Barrett and Otellini served as chief operating officer before becoming CEO.