Intel’s shares saw a significant 8% jump in extended trading following an announcement that the company plans to transform its foundry business into an independent unit with its own board and the potential for outside capital investment. CEO Pat Gelsinger aims to revitalize the struggling chipmaker by selling off part of its stake in Altera and restructuring the foundry business, which has been a financial burden on the company in recent years. The move comes after Intel’s board met to evaluate the company’s future direction and potential opportunities for growth. Intel is also considering spinning off the foundry business into a separate publicly traded company to streamline operations and improve financial performance.
The decision to restructure the foundry business and seek external funding represents a shift in Intel’s strategy as it looks to regain market share in its core PC and data center business. The company has faced challenges from competitors like Nvidia in the rapidly evolving semiconductor industry, prompting the need for cost-cutting measures and layoffs. Intel plans to pause fabrication efforts in Poland and Germany and scale back production at its Malaysian factory while focusing on U.S.-based manufacturing projects. The recent decision to halt these international efforts is based on anticipated market demand and aims to streamline operations for greater efficiency.
Under the Biden administration’s CHIPS Act, Intel was awarded up to $3 billion for the “Secure Enclave” program, a collaboration between Intel and the Department of Defense to enhance domestic chip production. This funding reflects the growing concern over geopolitical risks associated with semiconductor manufacturing in Taiwan, a key player in the global chip industry. U.S. Commerce Secretary Gina Raimondo met with Intel CEO Gelsinger to discuss the country’s reliance on foreign chipmakers and explore opportunities for increasing domestic production and security.
In a separate development, Intel announced a partnership with Amazon Web Services to produce custom chips for AI applications, expanding their existing collaboration. Amazon is a major customer of Intel’s chips for AWS servers and will now purchase a custom Xeon processor from Intel for AI workloads. This collaboration enables Intel to enter the competitive market for AI server chips, where Nvidia has established a strong presence. The deal highlights Intel’s commitment to innovation and diversification in its product offerings to meet the evolving demands of the technology sector.
Gelsinger emphasized the need for Intel to focus on execution and outperform competitors in order to deliver strong results and regain investor confidence. The company’s strategic decisions, including the transformation of the foundry business and partnership with AWS, signal a proactive approach to addressing market challenges and positioning Intel for future growth. By prioritizing operational efficiency, technology innovation, and strategic partnerships, Intel aims to strengthen its position in the semiconductor industry and capitalize on emerging opportunities in AI and domestic chip production.
