July 12, 2024 – Intel (INTC.O) shares tumbled 8% in early trading Friday after the chipmaker forecast deeper-than-expected losses and signaled a potential retreat from its foundry business, marking a stark shift from former CEO Pat Gelsinger’s ambitious turnaround strategy.
Foundry Business at Risk
New CEO Lip-Bu Tan, who took over in March, warned that Intel may exit the foundry segment unless it secures major customer commitments. The move could jeopardize $100 billion in assets and force greater reliance on TSMC (2330.TW) for chip production.
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18A Process Reserved for Intel: Tan said the advanced 18A manufacturing node may be limited to in-house products, with 14A proceeding only if a big external partner signs on.
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Fabs Scrapped: Intel halted or canceled multiple factory projects in the U.S. and Europe, citing financial discipline.
“Intel Foundry is a big story, and people are questioning 18A’s success. A failure here would be a broken story,” said Hendi Susanto, portfolio manager at Gabelli Funds.
Strategic Pivot Under Tan
Since taking charge, Tan has:
✔ Divested non-core businesses
✔ Laid off employees (targeting a 22% workforce reduction to 75,000 by year-end)
✔ Pulled back on unprofitable investments
“There are no more blank checks,” Tan wrote in a memo to staff. Analysts see the cuts as a redirection rather than a full retreat.
“I don’t think he’s scaling back—just redirecting. They should build out, but only with customer commitments,” said Ryuta Makino, Gabelli Funds analyst and Intel shareholder.
Lagging Behind Rivals
Intel’s struggles contrast sharply with rivals:
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Stock Performance YTD: Intel +12.8% vs. Nvidia (NVDA.O) +30%, AMD (AMD.O) +34%
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Valuation: Intel trades at a 42.55 forward P/E, above Nvidia’s 33.90 and AMD’s 32.12