Chipmaker Intel said to explore options to cope with historic slump

NEW YORK – Intel is working with investment bankers to help navigate the most difficult period in its 56-year history, according to people familiar with the matter.

The company is discussing various scenarios, including a split of its product-design and manufacturing businesses, as well as which factory projects might potentially be scrapped, said the people.

Morgan Stanley and Goldman Sachs Group, Intel’s longtime bankers, have been providing advice on the possibilities, which could also include potential mergers and acquisitions, the people said. The discussions have only grown more urgent since the company delivered a grim earnings report, which sent the shares plunging to their lowest level since 2013.

The various options are expected to be presented during a board meeting in September, the people said.

No major move is imminent and discussions are still in early stages, the people cautioned.

A potential separation or sale of Intel’s foundry division, which is aimed at manufacturing chips for outside customers, would be an about-face for chief executive officer Pat Gelsinger. Gelsinger has viewed the business as key to restoring Intel’s standing among chipmakers and had hoped it would eventually compete with the likes of Taiwan Semiconductor Manufacturing Co. (TSMC), which pioneered the foundry industry.

But it’s more likely that Intel takes a less dramatic step before it reaches that point, such as holding off on some of its expansion plans, the people said. The company has already done project financing deals with Brookfield Infrastructure Partners and Apollo Global Management.

Intel’s Mr Gelsinger is running out of time to pull off a much-needed turnaround. He’s been attempting to expand the chipmaker’s factory network at the same time that sales are shrinking – a money-losing proposition. The company suffered a net loss of US$1.61 billion (S$2.1 billion) last quarter, and analysts are predicting more red ink for the next year.

Mr Gelsinger, an Intel veteran who left the company for more than a decade, took the helm in 2021 and promised to restore the company’s technological edge. Under previous CEOs, the chip pioneer had lost market share and its long-vaunted reputation for innovation.

But his comeback plan proved overly ambitious, and the company has had to scale back. When it reported earnings earlier this month, Intel announced plans to cut about 15,000 jobs and slash capital spending. The company even suspended its long-prized dividend.

“It’s been a difficult few weeks,” Mr Gelsinger told investors at the Deutsche Bank Technology Conference on Aug 29. The company tried to lay out a “clear view” of its next steps during its earnings report, he said. “Obviously the market didn’t respond positively. We understand that.”

Adding to the upheaval, director Tan Lip-Bu Tan abruptly stepped down from the board last week. The semiconductor veteran, who was brought in two years ago to help with the comeback effort, cited scheduling commitments. But his departure removed one of the few directors with industry knowledge and experience.