Intel has redefined its foundry business, setting it up as a separate subsidiary to attract outside investment. The reorganization seeks to address financial concerns, notably a nearly 60% decrease in stock value this year. By becoming an autonomous unit with its own board, the foundry division aims to simplify the approach to gaining external funding.
Financial Shifts
Intel officially introduced its semiconductor manufacturing division under a new name, Intel Foundry, in February. positioning itself as the pioneer systems foundry tailored for the artificial intelligence (AI) era. In a significant development, Microsoft has emerged as the inaugural client of Intel Foundry.
In the last couple of years, Intel committed around $25 billion to its foundry services, focusing on semiconductor production for various companies. There's potential for this section to become a publicly listed company, which would benefit Intel's financial bottom line. CEO Pat Gelsinger communicated to staff that part of this reorganization involves selling off portions of Intel's Altera holdings for greater financial maneuverability.
Market Impact and Collaborations
Intel shares experienced an 8% uptick in after-hours trading post-announcement. The board had recently gathered to review strategic plans, with the restructuring emerging as a key decision. Intel has also collaborated with Amazon Web Services to create bespoke AI application chips, thus bolstering its presence in the AI server chip sector. The partnership will leverage Intel's manufacturing expertise at the upcoming Ohio facility.
Carrying out the realignment fits into Intel's broader ambition to reclaim its standing in core PC and data center segments, where rivals like Nvidia have advanced. The strategy includes halting its chip production plans in Poland and Germany for the next two years to align with expected market needs, while proceeding with its U.S. manufacturing endeavors.
Under the CHIPS and Science Act, Intel received a grant of up to $3 billion for domestic semiconductor manufacturing, motivated by geopolitical issues surrounding Taiwan's industry leadership.
Intel faces certain hurdles, such as initial setbacks in utilizing its 18A process with Broadcom's silicon wafers. Nonetheless, the company plans to start providing chips using this technology for partners like Microsoft and Amazon next year.
CEO Pat Gelsinger has termed this organizational change as Intel's most substantial in four decades, drawing parallels to the firm's pivotal shift from memory production to microprocessors. Despite posting $1.6 billion in first-quarter 2024 revenue, its chipmaking sector encountered $7 billion in operating deficits in 2023.
