Intel is considering certain structural changes, including the split of its chip design and production operations, as the semiconductor giant grapples with increasing losses, severe investor pressure and increased scrutiny from politicians. The move marks one of the most significant strategic moves in the company's 56-year history.
Intel's financial difficulties have reached a critical stage, as evidenced by a net loss of USD 1.61 billion in the second quarter of 2024 and a 26 per cent plunge in its stock price following the earnings report, the worst single-day performance in more than five decades. In response, the corporation is considering separating its foundry division, which manufactures chips for external customers, from its product design operations. This probable move would represent a reversal from CEO Pat Gelsinger's initial plan, which emphasised the foundry sector as critical to recovering Intel's industry reputation.
The company is now collaborating with Morgan Stanley and Goldman Sachs to assess various strategic alternatives, including potential mergers and acquisitions. This evaluation comes on the heels of Intel's disclosure of a significant cost-cutting program involving nearly 15,000 layoffs, or roughly 15 per cent of the staff. These job layoffs are part of a larger goal to reduce spending by USD 10 billion each year by 2025. Intel has also suspended its long-standing dividend for the first time in history.
US politicians have expressed alarm about the proposed restructure, notably the over USD 20 billion in grants and loans that Intel is expected to get for chip production enhancements. Senator Rick Scott has asked explanation on how these funds will be used to safeguard taxpayers and create jobs. Despite these hurdles, Gelsinger is optimistic about future product innovations, identifying ‘Lunar Lake’ as a promising step forward in AI PC technology. The Intel board will meet in September to explore these strategic choices, but no definitive steps are planned in the near future.
