After weeks of speculation and various proposed solutions to stabilize Intel’s financial decline, CEO Pat Gelsinger has finally sent an official letter to all employees, outlining the next steps the company needs to take to navigate the financial crisis.
First, Gelsinger explained that last week’s meeting with the company’s board of directors helped identify three main focus areas that should aid Intel’s recovery:
Leveraging the 18A process for its foundry business, which is nearing readiness for mass production;
Creating a more competitive cost structure and implementing the $10 billion cost-saving measures discussed in August;
Streamlining the product portfolio to focus on maximizing the value of the X86 platform in client, edge computing, and data center markets. Meanwhile, AI accelerators will be integrated into the X86 platform to provide more comprehensive solutions, enhancing Intel’s competitiveness in the AI sector.
Intel immediately announced two major new chip manufacturing deals utilizing the 18A process, including a partnership with Amazon Web Services and billions of dollars in chip design investments. Intel will produce AI architecture chips for Amazon, using 18A, 18AP, and 14A process technologies, which will support Amazon’s cloud computing services and AI applications. Intel will also build more Xeon scalable processors on the Intel 3 process technology, further strengthening its position in the data center market. Additionally, Intel will receive up to $3 billion in direct funding from the U.S. government under the CHIPS and Science Act, which will be used to expand the chip supply chain and enhance U.S. competitiveness in the global semiconductor industry.
However, a critical initiative likely to address some of Intel’s pressing financial issues is the announcement that the foundry division will be established as an independent subsidiary. Since Gelsinger became Intel’s CEO, rumors about spinning off the foundry business have persisted. Gelsinger stated that as an independent subsidiary, the foundry division will unlock significant advantages for the parent company, such as tax benefits and loss mitigation, while also allowing greater transparency with future foundry customers and suppliers.
As rumored, Intel will be forced to delay the launch of its advanced production facilities in Poland and Germany by approximately two years. Meanwhile, the Ireland factory will remain the primary European hub, and the Malaysia factory will soon be upgraded to a new advanced packaging facility. Previously announced factory expansions in Arizona, Oregon, New Mexico, and Ohio are still ongoing.
Finally, Gelsinger mentioned the layoffs of 15,000 employees by the end of this year, with over half of the target already achieved through voluntary early retirements and departures. This is expected to save the company approximately $10 billion, combined with the sale of a portion of Altera shares, aimed at improving the balance sheet and liquidity in the coming quarters.
Intel has finally adopted the survival strategy of its competitor AMD. Spinning off the foundry business not only signifies the failure of Gelsinger’s ambitious IDM 2.0 plan upon his return but also marks the end of an era. However, with TSMC’s dominance in the foundry market reaching such an extent, being split due to monopoly concerns or transforming into a “U.S.-TSMC” may be an inevitable outcome.
Original source: Intel CEO Gelsinger Unveils Plan to Stabilize Finances