According to Reuters reports, Intel's CEO Pat Gelsinger and other key executives are to present their plan to trim Intel's fat and course-correct the company. The meeting will focus on removing assets and reducing costs, with items of discussion apparently including Intel's upcoming Magdeburg, Germany fab and its ownership of Altera.
Intel announced a $1.6 billion loss in its now-infamous August 1 earnings call, which also carried the news that Intel had laid off 15% of its workforce and aims to reduce spending by $10 billion by 2025. The loss came thanks to Intel's falling behind in the AI arms race and its 13th/14th-generation widespread CPU failures. Intel stock had its worst day in 50 years immediately following the call, and the company has continued to suffer in the month since. Chip industry legend Lip-Bu Tan resigned from the board of executives, resulting in a 6% drop in Intel stock and a significant lack of industry experience.
Significant changes to Intel were always likely to reverse this major downturn, but recent reports reveal that Gelsinger's plans may include seriously drastic measures. Construction on Intel's upcoming Magdeburg chip fab is expected to be paused or canceled, leaving the $32 billion project unfinished. Magdeburg's local government has already begun drafting plans in case Intel withdraws its commitment to the project.
Intel is also likely to sell off its ownership of Altera, its programmable chip business, which is currently a fully spun-off company owned solely by Intel. Altera has been an industry fixture for decades, with Intel investing heavily in reviving Altera after acquiring the company in 2015. Altera has been a part of Intel's broad market strategy for ten years but is likely to be entirely sold off to another interested chip manufacturer in the coming months.
Unsurprisingly, Intel is not expected to entertain discussion about spinning off or selling its Intel Foundry wing. Intel's contract foundry business, one of Intel's most significant expenses, has been kept distinct from the rest of Intel's business since Q1 2024 and is considered a tentpole part of Intel's future. Two separate sources have confirmed that Intel will not propose any plans to sell its foundry wing to TSMC or another similar buyer, keeping it around for the day it is hopefully as profitable as Gelsinger believes it can be.
Intel's sharp decline can be attributed to several factors. Lip-Bu Tan reportedly blamed his exit from Intel on a bloated workforce, and Gelsinger blamed expenditures across the board as a major problem. Intel is still mired in issues related to the instability and failure rate of 13th and 14th Generation CPUs, which could lead to permanent chip damage. Tech media heavily reported Intel's lethargic response to a disastrous product failure, leading to increased public distrust of Intel's brand. While selling off companies will help quell Intel's bleeding out; the company has a long road ahead to stability.
Leave a Reply