Intel, a semiconductor giant, is reportedly contemplating a significant restructuring that could see its chip design and manufacturing businesses split apart. This news comes amidst a period of unprecedented challenges for the company, marking its most difficult time in 56 years. The potential split is a direct response to Intel’s declining performance and ongoing financial losses.
According to a recent Bloomberg report, Intel is exploring the possibility of separating its chip product business from its foundry operations, which involve chip manufacturing. This move is fueled by the company’s desire to navigate its current difficulties and regain its footing in the competitive semiconductor market. The news of this potential split caused a surge in Intel’s stock price, with shares climbing 9.5% on Friday – the largest single-day gain since October 2022.
Intel is scheduled to present its various options to the board of directors this month, including the potential split. However, while discussions are underway, major moves are not expected in the immediate future, as negotiations are still in the early stages.
Intel CEO Pat Gelsinger has been instrumental in pushing forward Intel Foundry, viewing it as a key factor in the company’s return to its former glory and beyond. Gelsinger’s vision was to compete head-to-head with industry leader TSMC, which manufactures chips for companies like AMD, Apple, and NVIDIA. However, if Intel ultimately sells its chip-making business, this ambition would be abandoned.
Intel has faced significant challenges in recent years, with its performance declining considerably in recent months. The company has reported significant losses, including a staggering $1.61 billion loss in the most recent quarter. These mounting losses have put immense pressure on Gelsinger to deliver a turnaround strategy.
Gelsinger, who took over as CEO in 2021, aimed to transform Intel by splitting the company into two distinct groups: one dedicated to chip design and another focused on manufacturing. The production arm, known as Intel Foundry, was intended to attract business from other companies. However, despite this ambition, Intel Foundry has struggled financially, reporting operating losses of $2.8 billion in the most recent quarter. These losses are expected to worsen in the coming year, exceeding previous projections.
To alleviate its financial burden, Intel is considering scrapping multiple projects in addition to exploring the potential sale of its foundry business. The future of Intel remains uncertain as the company navigates this challenging period, with the outcome of the proposed restructuring and the fate of its foundry business still in the balance.
