Intel is contemplating the separation of its manufacturing operations, according to its interim co-CEOs. At the Barclays Technology Conference in San Francisco, Michelle Johnston Holthaus and David Zinsner revealed that the once-industry-leading chipmaker is now exploring the possibility of selling its product development and manufacturing units.
“Does it ever fully separate?” Zinsner said in answer to questions about Intel’s immediate structural future. “That’s an open question.”
Such speculation comes amid troubling times for Intel, with the chipmaker facing not only a leadership transition but also heightened government scrutiny and seemingly overwhelming competition from Nvidia and TSMC. While Zinsner acknowledged that Intel’s manufacturing and product development units already operate independently with distinct financial and operational structures, both interim co-CEOs strongly implied that the final decision on a split would be made by their permanent successor once they’re appointed.
Leadership shake-up and the question of a split
The discussion of a potential split arises amidst increasing concerns about Intel’s ability to keep pace with its competitors, particularly in the booming AI sector. The company has seen its stock price plummet by over 60% in the past year, reflecting investor doubts about its future prospects.
Intel’s challenges are compounded by its failure to capitalise on the rapid growth of AI, a sector where rival Nvidia has surged ahead. While Intel is still a major player in semiconductor manufacturing, it has struggled to innovate at the pace of its competitors. Speculation about the company’s future direction has intensified as it continues to lose market share.
At the heart of Intel’s struggle is its manufacturing model. The company is almost unique in the semiconductor industry for designing and manufacturing its chips in-house. However, the decision to maintain this structure has come under increasing scrutiny, particularly as Intel’s efforts to develop new technologies have faced delays. Intel’s 18A chipmaking technology, slated for release next year, is seen as crucial to the company’s ability to regain its competitive edge. If it fails to meet expectations, the company could face even more pressure to restructure its manufacturing operations.
The possibility of a spinoff also comes amid Intel’s recent disclosure of an agreement with the US government for $7.86bn in subsidies under the CHIPS Act. These funds are part of a broader federal initiative to bolster domestic semiconductor manufacturing and reduce reliance on foreign supply chains. However, Intel’s subsidy is contingent upon strict conditions, including a requirement that the company retains at least 50.1% ownership of its manufacturing unit if it becomes a privately held entity. Additionally, if Intel Foundry, the company’s manufacturing arm, goes public, Intel cannot sell more than 35% of the subsidiary to a single shareholder without prior approval from the US Department of Commerce.
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