Intel is considering something it previously didn’t want to consider and that’s spinning off its fab business. Because that’s totally a good business decision.
Dec 12 (Reuters) – The two executives leading Intel (INTC.O), opens new tab after the ouster of its chief executive conceded on Thursday that the company may be forced to sell its manufacturing operations if a new chipmaking technology slated for next year does not succeed.
Intel both designs and manufactures chips, making it unique in the industry. The company has shed more than $100 billion in value as it struggles to regain its lost lead in manufacturing and missed out on the AI boom dominated by Nvidia (NVDA.O), opens new tab.Intel shares rose about 2.3% following the executives’ comments.
Speaking at a Barclays investment banking conference in San Francisco on Thursday, Michelle Johnston Holthaus and David Zinsner – who were tapped as co-CEOs after the ouster of former CEO Pat Gelsinger last week – were asked if the company’s continued combination of manufacturing and design was tied to the success of a new chipmaking technology called 18A due next year.https://www.reuters.com/technology/intel-executives-say-manufacturing-spinoff-is-possible-2024-12-12
Of course what Intel can do with its fab business is restricted by the acceptance of benefits from the CHIPS Act. Intel apparently cannot give anyone else actual control over the fabs business and thank god for that. The very last thing this country needs is private equity in control of its fabs.
Fabs are a strategic asset of the United States and not just an asset of the business that owns them. So when it comes to ownership, everyone has to be evaluated. The United States cannot tolerate irresponsible businesses and leaders as well as dangerously profit obsessed private equity in controlling ownership positions. The Biden Administration seems to have understood at least part of those facts by instituting ownership restrictions for the fab business.
At this point with very few customers spinning off the fab business wouldn’t achieve really anything. It’d just be a shell of company that is still dependent on Intel. If Intel is going to do anything it’s going to have a fire sale for shares in the fabs business that adds up to significantly less than a controlling stake. So we are talking about pushing fabs towards separation… but not going all the way that Intel potentially could. That’s something I definitely can see happening.
Regardless of what Intel does with its fabs business in future… I can guess it won’t be the only surprise decision. I believe that the co CEOs are going to take advantage of the fact that they’re interim CEOs to do some unpopular moves to clear the deck for the new CEO. I fully expect to see Intel fire even more people and cut back even further on capital expenditures. In other words Intel is going to retreat even more from the world. There’s nothing else for them to do. They’ve spent too much money too fast while at the same time losing revenue.
It would take a new CEO with radically and dramatically different business views to keep all the current employees around. The CEO would have to actually have vision beyond the next few years and actually imagine Intel as a business in 40 years time. Strategic planning would have to become a bigger thing for Intel. And not the “oh well we’ll build fabs and in 20 years they’ll be cranking out chips and everything will be fine”. Intel needs a new plan with new executables driven by a new grander vision.
But I suppose we’re not going to get a dramatically new CEO with vision. I’m guessing we’ll get more of the same. Cuts to employees, cute to expenditures, cuts to products, cuts to everything.
To sum up Intel is in a ridiculous position with potential firings, more capital expenditure cuts, and the sale of fab business shares all coming up. I mean it’s all speculation on my part but you and I both know it’s easy to see it all happening.
I genuinely hope all of Intel’s employees have a good Christmas because next year is going to be hell.