Intel Weighs Foundry Split and Fab Cancellations

The future of Intel is at a crossroads as the company grapples with strategic decisions amidst financial challenges. One of the main issues on the table is the potential split of the company between its processor product business and manufacturing operations, with the latter possibly being spun off. According to a report by Bloomberg, there is also consideration of cancelling wafer fab projects due to the company's recent financial struggles.

Financial giants Morgan Stanley and Goldman Sachs Group have been brought in to provide advice on various strategic options, which could include a sell-off or merger of the manufacturing business. These options are expected to be discussed during an upcoming board meeting in September, as Intel seeks to navigate its way out of the current crisis.

On August 1, Intel reported disappointing financial results for the second quarter of 2024, posting a net loss of US$1.6 billion on revenue of US$12.8 billion. This setback has prompted the company to take drastic measures, including job cuts and reductions in capital expenditures, in an effort to streamline operations and improve profitability.

Amidst these challenges, reports emerged that Intel is working with advisors, such as Morgan Stanley, to fend off potential activist investors. The company's plans for establishing two fabs in Magdeburg, Germany, could also be in jeopardy as strategic considerations come into play. Despite the uncertainty surrounding these projects, Intel remains committed to its long-term goals, albeit with potential delays.

The news of Intel exploring its strategic options had a positive impact on the company's stock, with shares rising by 9.5 percent to $22.04 in New York. However, internal changes are also taking place within Intel, as key CPU architects have departed to form a new RISC-V startup. Additionally, board member Lip-Bu Tan recently resigned citing 'differences' with the CEO, adding another layer of complexity to Intel's current situation.