Intel CEO Pat Gelsinger holds a wafer sample during a keynote speech at the Computex conference in Taipei on June 4, 2024.
I-hwa Cheng | AFP Getty Images
Intel Shares jumped 8% in full trading on Friday after the company said it plans to turn its foundry business into an independent unit with its own board and the potential to raise external capital.
As part of CEO Pat Gelsinger’s efforts to revive the struggling chipmaker, Intel said in a memo to employees that it would also sell a portion of its stock in Altera.
Gelsinger said the restructuring will allow the foundry business to “assess its sources of funding,” and came days after Intel’s board met to assess the direction and future of the company. The foundry business, which Intel plans to use to make chips for other customers, has been a big drag on the bottom line, with the company spending about $25 billion in each of the past two years.
Beyond simply considering outside funding, Intel is considering whether to spin off the foundry business, possibly as a separate publicly traded company, according to people familiar with the matter who declined to be named to discuss confidential information.
With independent “offices” and a cleaner corporate structure, the separation mechanism becomes easier than trying to turn an integrated unit into a separate company.
Before the post market pop, Intel has lost nearly 60% of its value this year. The company has given up market share in the core PC and data center business and is looking at it Nvidia run with the market for chips that power artificial intelligence workloads. In August, Intel reported disappointing quarterly results, prompting its biggest selloff in 50 years, and said it would cut more than 15% of its workforce as part of a $10 billion cost-cutting plan. Gelsinger said the company has about half of the layoffs.
Intel will also pause its manufacturing efforts in Poland and Germany “for approximately two years based on anticipated market demand,” Gelsinger said, and pulled back plans for a Malaysian factory. U.S. manufacturing projects will remain unaffected, the company said.
Earlier Monday, Intel was awarded up to $3 billion from the Biden administration and the CHIPS and Science Act, an effort to bring chipmaking to the US. of Defense.
The US government is stepping up investment in semiconductor production due to growing geopolitical risks surrounding Taiwan, home to the world’s largest contract chip maker, Taiwan Semiconductor Manufacturing. US Commerce Secretary Gina Raimondo recently met with Gelsinger, who expressed frustration over the domestic chipmaker’s heavy reliance on Taiwan Semiconductor.
Develop a deal with Amazon
In addition to the announcement of the foundry, Intel said it entered into a deal with Amazon Web Services to produce custom chips for AI, extending a long-standing partnership between the two companies. Amazon is a big customer of Intel chips to supply AWS servers, and will also buy custom Xeon processors from Intel, Intel said.
The move will give Intel a new foothold in the growing industry for AI server chips. While Intel has several products that work for AI, including Gaudi 3, Nvidia has largely controlled the market.
Amazon has been developing its own AI chips, including one called Trainium, for more than five years. Microsoft and Google has also invested heavily in custom chips to open AI, aiming to offer less expensive processors than Nvidia’s general-purpose graphics processing unit.
Intel says it will do its most advanced manufacturing, including AI chips for AWS, at a factory in Ohio that is currently under construction.
“All eyes will be on us,” Gelsinger said. “We have to fight for every inch and do it better than before. Because that’s the only way to silence the critics and deliver the results we know we can achieve.”
WATCH: Intel was awarded up to $3 billion under the CHIPS Act
