Intel executives will consider splitting and selling a business unit as part of a turnaround strategy as rival chipmakers capture a greater share of the artificial intelligence wave, according to media reports.
The Santa Clara, Calif.-based vendor has enlisted Morgan Stanley and other advisers to present options to Intel’s directors in September, according to CNBC.
The options could also include mergers and acquisitions or selling or splitting its foundry division, which makes chips for outside customers, according to Bloomberg. Intel is more likely to halt some expansion plans before ditching a business.
Intel Reportedly Explores Split
Intel’s stock price shot up more than 7 percent early Friday afternoon Eastern Time to $21.68 on news of a potential business split.
Intel’s challenges at a time when an AI gold rush has a variety of organizations hunting for chips include a plan to eliminate more than 15,000 jobs, or 15 percent of its total workforce, and reduce overall costs by more than $10 billion.
CRN has learned that the plan includes a directive to slash costs at the partner-centric Sales and Marketing Group (SMG) by more than 35 percent by the end of the year – although the vendor plans to give thousands of dollars in market development funds (MDF) and other incentives to partners who develop compelling proofs of concept for AI PCs in a new contest, the semiconductor giant unveiled the AI PC Innovation Challenge
Intel is making deep cuts across the company in response to what Intel CEO Pat Gelsinger has described as worsening financial conditions. “Our revenues have not grown as expected—and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low,” he said in a public letter to employees on Aug. 1.
The semiconductor giant has been facing intensifying competition across multiple fronts, including the data center and cloud infrastructure markets, where Intel is facing pressure from Advanced Micro Devices (AMD), companies developing Arm-based CPUs like Ampere Computing and Amazon Web Services (AWS) as well as AI chip leader Nvidia.
The PC market is heating up too, with AMD taking CPU market share and Qualcomm making a revitalized push.
At the same time, Intel has sought to expand its chip manufacturing footprint with new factories in the West and compete with Asian foundry giants Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung through a revitalized contract chip-making business called Intel Foundry. These efforts have required significant investments, including millions in subsidies from the U.S. government’s Chips for America program and money from investment firms.
