Intel CEO Pat Gelsinger is facing the heat as his ambitious turnaround strategy for the chip giant hits turbulent waters—just when the stakes couldn’t be higher.
Gelsinger’s grand vision, set in motion three and a half years ago with much fanfare, now appears to be a costly gamble. The plan, centered around revamping Intel’s foundry business to compete head-on with industry titan Taiwan Semiconductor Manufacturing Co. (TSMC), is reportedly under review.
Intel has enlisted Morgan Stanley to explore options, including a possible split of its product-design and foundry operations, or even selling the foundry business altogether.
The timing couldn’t be worse. Intel’s recent moves—slashing its global workforce by 15%, cutting dividends, and posting a net loss—have rattled investor confidence. While the semiconductor industry rides the wave of an AI boom, Intel’s core chip architectures are losing ground, reflected in its stock plummeting to levels unseen since 2000.
At the heart of the struggle is Gelsinger’s plan to transform Intel into a foundry powerhouse, manufacturing chips for other companies, including competitors. But with financial pressures mounting and technological challenges looming, it’s uncertain whether this ambitious goal is still achievable—or if Gelsinger has the time to see it through.
“The business isn’t supporting those plans,” says Stacy Rasgon, a Bernstein Research analyst. Rasgon highlights that the revenue projections underpinning Intel’s investments seem increasingly out of reach. For context, Intel’s 2021 revenue under Gelsinger hit $74.7 billion, but Wall Street forecasts just $52.7 billion for 2024.
Despite this, Intel’s foundry business, which Gelsinger bets on for a comeback, isn’t yet viable as a standalone entity. It’s bleeding over $10 billion, with profitability only expected by 2027.
Patrick Moorhead, CEO at Moor Insights & Strategy, warns that splitting the foundry business now could be disastrous, drawing parallels to AMD’s near-collapse after its split from GlobalFoundries.
Intel’s turnaround is hampered by challenges dating back nearly a decade, including delays in advancing its high-end processing technology. These setbacks have eroded Intel’s margins and market share, particularly as competitors like AMD have surged ahead.
Adding to the pressure, Lip-Bu Tan, a semiconductor industry veteran, recently resigned from Intel’s board over frustrations with the company’s bureaucratic culture, further signaling internal strife.
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