Intel is in a critical phase of its 56-year history: The chipmaker is reconsidering ongoing fab projects and evaluating various strategic options, including possibly splitting the company into a product and production company, Bloomberg reports. It is not the first time rumors of a spinoff of Intel's manufacturing arm have arisen — but with the company facing significant financial strains, such chatter looks dramatic.
Among the options on the table is the potential separation or sale of Intel's foundry business, which has bled billions of dollars in recent quarters. For example, in the second quarter, the Intel Foundry unit reported a loss of $2.8 billion. Consequently, Intel reported anet loss of $1.61 billion last quarter, and analysts forecast continued losses over the next year.
The Intel Foundry unit, which makes chips for Intel itself and external customers, is a vital part of Pat Gelsinger's strategy to reinvent Intel and make it a strong competitor for fabless chip companies like AMD and Nvidia and contract semiconductor makers like TSMC and Samsung Foundry. However, Intel Foundry has failed to land substantial orders from outside customers. Therefore, it remains heavily reliant on Intel as its primary client, raising concerns about its sustainability.
Intel reportedly seeks guidance from investment banks Morgan Stanley and Goldman Sachs as it faces significant financial and operational challenges. The urgency for these discussions intensified following a disappointing earnings report that led to Intel's stock dropping to its lowest level in over a decade. The company's shares have plummeted by 60% this year, sharply contrasting with a 20% gain in the Philadelphia semiconductor index.
After reporting a massive $1.6 billion, Intel has had to make tough financial and operational decisions. The company began slashing jobs with plans toeliminate around 15,000 positions. Also, the company recently suspended its dividend. Some analysts expect Intel to cut its capital expenditures substantially over the next year. Those capital expenditures are generally investments into new production capacities.
Because Intel's manufacturing unit is the only division of Intel that makes substantial losses primarily due to heavy investments, it is hard to imagine that the company could IPO this unit any time soon. This does not mean it cannot spin it off AMD 2008-style when the company partly sold its manufacturing arm to a sovereign fund to establish GlobalFoundries. Another question is whether private equity or sovereign funds will be interested in buying a money-bleeding unit with uncertain perspectives on the foundry front.
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Anton Shilov
Contributing Writer
Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.
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Marlin1975 More wow from intel. AMD did this as they were so far behind and needed cash bad, like near bankrupt bad.
How bad are things really at intel if this is on the board as an option?Reply
ezst036 Intel is in deep trouble.
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Notton Marlin1975 said:
More wow from intel. AMD did this as they were so far behind and needed cash bad, like near bankrupt bad.
How bad are things really at intel if this is on the board as an option?Yeah, AMD had a bad architecture in 2008, and their foundries were also garbage.
The spun-off side, Garbage Flounderies still remains, but it's pretty clear they are way behind and still produce hot running chips to this day.Reply
A Stoner I was an Intel fan for a long time. I think I owned Intel exclusively from around 1990 to last year. I have a AMD 7950X3D as my latest computer. I always wanted to switch to AMD, but they were always behind the bell curve by enough that I just was not willing to take the leap until the X3D processors came along.
While I am glad AMD and Intel are currently trading blows at the top end, it almost seems like Intel is on the way towards being second tier and we will eventually lose the competitive nature of the fight. I hope both companies can keep things humming along and keep the competition fierce so that growth is as fast as possible.
Maybe having Intel stick to just designing by getting rid of their fab will help. I guess time will tell. I think the thing that finally got me to step out of the Intel ecosystem was the thermals of their products. My computer room was just running way too hot.
The thing that attracts me most about AMD is the longevity of their platforms. My current motherboard and RAM should be valuable for several more years, whereas I would already be forced to upgrade at least the motherboard if I wanted to upgrade an intel processor.
gah lots of edits. 7950X3D not the unreleased 9950X3D LOL!
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MacZ24 Marlin1975 said:
More wow from intel. AMD did this as they were so far behind and needed cash bad, like near bankrupt bad.
How bad are things really at intel if this is on the board as an option?Maybe it's just that Intel foundries don't have enough clients because the prospective clients are weary of Intel having a look at their designs ? Going fabless would put a wall between design and production ? Just a theory.
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tracker1 From my understanding of Intel's approach to CPU design, I'm not sure that this will help at all. They're to used to the mfg side hand holding them through the process. Will have to see how tsmc mfg chips works out for Intel.
Also if concern is the mfg itself. How well positioned are they to deliver say arm and other processors. They just literally offloaded their arm holdings which was a bad move in this light IMO.
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2Be_or_Not2Be If China takes over Taiwan, does the US really want Intel to be a design-only, no-manufacturing company? The risk you take with spinning off the manufacturing side is that they may choose to move some/all manufacturing to Malaysia/Vietnam/etc. to get back into the black (well, expand with those they're already in). The U.S. likely needs to preserve as much manufacturing in-house/in-country as possible, so perhaps the gov't might need to investigate a "sovereign" fund to put some financial stakes into Intel's manufacturing.
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DS426 If Intel completely fails, as in bankruptcy proceedings (and this would be because they don't let go of IFS), I'm going to assume that nVidia will acquire them to fill in the rest of the vacuum beyond the additional market share that AMD gains. It's no secret that nVidia wants more action in the CPU market, and although ARM ISAs or more broadly RISC appears to be their teenage crush, x86 isn't going to be dead anytime soon.
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thestryker Intel has gotten slammed by "investors" who don't have a clue for years now. The problem right now is that they've taken real financial hits as Gelsinger has tried to repair the damage done by having finance people in charge of a capital intensive tech company. I highly doubt spinning off the fabs would fix anything at Intel and would likely kill off the foundry as leading edge. From what I've been able to gather there's likely internal restructuring that needs to be done and all selling off the fabs does is potentially help stock price.
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Gururu Investors right now have merely slapped Intel's wrist. Wall street is very detached from the Vmin issue and any other enthusiast complaint. The US has too much intellectual property at stake with Intel and the market knows this. If Intel loses, China wins. With upside to the current restructuring with regard to profits and good rep with its new chip line up, they will be stronger than ever next year if only because the US bails them out.
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