Intel considers breaking up the company and exiting its chip manufacturing business

What impact would a division of Intel have?

The decision to divide Intel would be key in the future of the company, since until now the manufacturing vertical has not had the best performance, despite being the main bet that Gelsinger had during his time as CEO.

According to Citi’s US semiconductor research leader, Christopher Danely, at this stage with a new CEO at Intel, the company should abandon its efforts in the Foundry division.

“The problem is this insistence on the foundry business. We think there is very little chance that Intel will succeed. Most people we talk to in the semiconductor industry know this, they realize that Intel has been at this for a long time. That’s why we think they should get out of the foundry business,” the analyst said.

If it took this path, Intel would become a chip design company, like many of its direct competitors, thus abandoning its efforts to become a leading semiconductor manufacturing company, a field dominated by TSMC.

In fact, at the beginning of this year Intel had to outsource the manufacturing of its Lunar Lake chips to TSMC itself, which was problematic for the company, as it made it dependent on one of its direct rivals in the industry.

Likewise, Gelsinger’s resignation has already generated reactions in the industry. Morris Chang, founder of TSMC, recently spoke about the case and criticized Gelsinger’s desire to establish itself as a third-party chipmaker.

“I don’t know why Pat resigned (…) I don’t know if his strategy was bad or if he didn’t execute it well. “It seemed to want to focus more on becoming an integrated circuit factory than on designing chips for Artificial Intelligence,” he commented.

On the other hand, spinning off the manufacturing business would not be so easy for Intel, since the company has already contracted obligations with the United States government, under the CHIPS Act, which provided 7.86 billion dollars from the Department of Trade, as well as another $3.5 billion from the Department of Defense for chips with military applications.

Manufacturing industry grows as Intel watches

In Silicon Valley, Intel’s offices are practically across the street from AMD’s. Therefore, this direct competition is seen firsthand and despite the efforts that Intel has made to recover business, AMD has demonstrated greater ability.

An example of this occurred in 2009, when AMD managed to spin off its chip manufacturing business, a move that ended in the birth of its integrated circuit production subsidiary, GlobalFoundries.

Another more recent case is that of TSMC, which finished building its new chip factory in Arizona, which had an investment of 20,000 million dollars and although the start of production was delayed until 2025, Apple has committed to being the facility’s largest customer.