Intel chief Pat Gelsinger has acknowledged the chip giant's financial woes and said he is working to address investor concerns amid talk that the company is considering spinning off its foundry business and delaying expansion of its fabrication plants.

The Santa Clara megacorp has been having a rough ride this year. It reported a loss in both its Q2 and Q1 results for this year, suffered technical issues with its Raptor Lake processors, legal action from investors, and plans to lay off more than 16,000 staff or about 15 percent of the workforce, all of which has seen its stock price fall by 59 percent.

Speaking at Deutsche Bank's 2024 technology conference in California, Gelsinger said Intel is focused on the steps it needs to take to address the issues outlined during its last earnings call, but that it also needed to execute on its strategy.

Referring to the cost-cutting measures Intel has already initiated, Gelsinger said: "We realize we have to operate efficiently with nimbleness, with urgency. This is a competitive business and market, and that's part of the reason we took the actions that we did as we build it."

The chipmaker is now beginning phase two of its turnaround, he claimed, following efforts to get the company back to process and product leadership and laying out its IDM 2.0 strategy.

"I think about that as the most significant rebuilding of the company since the memory to microprocessor transition," Gelsinger said.

Phase two is about becoming more efficient and implementing cost actions, but it had to wait for the process leadership efforts to work through, he added.

"You couldn't go to the TD [technology development] and product teams and say I need you to fundamentally reduce cost and get back to leadership simultaneously," Gelsinger said.

The CEO said the firm was now getting good signals from external foundry customers, and it now has about a dozen actively engaged with it on the 18A manufacturing process.

The company is hoping that new products will help to turn around its fortunes, with eight product tape-ins expected between now and mid next year, including Panther Lake and Clearwater Forest, plus the Lunar Lake processors for AI PCs coming next week.

However, there are reports that Gelsinger is being forced to consider more drastic measures, such as a spin-off of its foundry business and delays to some new fabrication plants.

According to Bloomberg, Intel is working with investment bankers to find a way out of its financial woes, and one of the measures on the table is splitting off the foundry operation that actually manufactures the chips.

The chipmaker has already partitioned its foundry biz into a separate division within Intel from the product design teams, but this was part of Gelsinger's plans to turn it into a contract manufacturing concern for other chipmakers and bring in extra revenue for the company.

"One could speculate that the end goal of Intel's IDM 2.0 strategy was to create two separate companies - product & foundry - and it does report this way now in its financials, albeit still under the umbrella of Intel Corp," said Gartner Vice President Analyst Alan Priestley.

"But separating out manufacturing capability into a separate entity would be a very long-term activity as it is currently closely tied to the design groups."

Also on the table is scrapping or putting on hold some of Intel's expansion plans for its fabrication plants, Bloomberg said, citing unnamed people it claims are familiar with the matter.

However, the company has already postponed work on a facility in Israel, and said earlier this year that it was pushing back the completion date of its Ohio manufacturing site to late 2026, while there are said to be delays to its planned Euro fab at Magdeburg in Germany.

Other options may include financing deals, such as the one it announced earlier this year with Apollo Global Management for its Leixlip plant in Ireland and an earlier one with Brookfield Asset Management covering the Arizona fabs Intel is constructing.

All of this is said to be no more than consideration of the various alternatives at this stage, with the options set to be presented during a board meeting in September, according to Bloomberg.

Intel declined to comment.

This speculation follows the sudden resignation of a high-profile Intel board member, citing differences with Gelsinger and other directors over the company's direction.

Lip-Bu Tan, a semiconductor veteran and former CEO of Cadence Design, was appointed to Intel's board just two years ago. He is said to have resigned over frustration at the company's risk-averse and bureaucratic culture and what he saw as its bloated workforce, with too many middle managers instead of engineers, according to reports. ®

https://www.theregister.com//2024/08/30/gelsinger_discusses_intel_troubles/