Intel’s Crisis Deepens: Can the Chip Giant Recover?
The world’s largest homegrown chip builder, Intel, is facing an unprecedented crisis. The sudden departure of CEO Pat Gelsinger has sent shockwaves through the industry, and its stock price has plummeted over 50% this year. The company’s ambitious plan to become a US-based version of Taiwan’s TSMC, building chips for its rivals, is now shrouded in uncertainty.
A Grand Plan Gone Awry
Gelsinger’s vision, dubbed IDM 2.0, aimed to transform Intel into a world-class foundry business. However, the company’s lack of investment and missed opportunities over the years meant it failed to catch the mobile wave and fell behind TSMC in design capabilities. Building a global manufacturing footprint is a costly endeavor, which Intel’s board seemed unwilling to support.
The CHIPS Act Conundrum
Intel received $7.8 billion in CHIPS Act funding, but the foundry business has been hemorrhaging money, with Intel itself being the biggest customer. While the company has secured deals with Microsoft and others, calls to kill the third-party foundry plan persist. Analysts suggest that Intel could separate its design and manufacturing businesses, but doing so would be a complex and costly process.
A Difficult Path Forward
Intel’s CHIPS Act funding comes with strings attached. The company cannot sell more than a controlling share of its manufacturing footprint, meaning it must maintain manufacturing control of its capacity. This limits Intel’s options, making it difficult to abandon its foundry business without sacrificing the CHIPS Act funds.
Tough Decisions Ahead
Intel faces a critical decision: carry on with Gelsinger’s plan, focus on its own chip building capabilities, or give up the business entirely. Each option comes with significant risks and challenges. The company must weigh the benefits of pursuing its foundry ambitions against the potential losses and reputational damage.
A New Era for Intel?
As Intel searches for a new permanent CEO, it must also navigate the complexities of its foundry business. Will the company continue to pursue its ambitious plans, or will it reassess its priorities and focus on its core competencies? One thing is certain: the road ahead will be fraught with challenges, and Intel’s future hangs in the balance.
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