Why Intel is considering splitting its chip design, manufacturing businesses
Intel is reportedly considering a significant strategic shift in response to its current financial challenges. The tech giant is exploring the possibility of separating its chip design and manufacturing operations, according to Bloomberg. This potential move comes as Intel grapples with substantial losses and increased pressure from investors and lawmakers.
Intel seeks guidance amid financial challenges
Intel is reportedly seeking advice from investment banks, including long-time advisors Morgan Stanley and Goldman Sachs. These banks are expected to provide guidance on potential mergers and acquisitions, as well as the possible separation of Intel's product-design operations from its manufacturing arm. The tech giant is also assessing which future factory projects might be discontinued.
Intel's financial performance intensifies need for change
Intel's recent financial performance has amplified the need for strategic changes. The company reported a net loss of $1.61 billion in Q2 2024, with analysts predicting more losses in the future. Following this report, Intel's stock price experienced a 26% drop - its worst single-day performance in over 50 years.
Intel announces cost-cutting measures and job cuts
In a bid to mitigate its financial woes, Intel has announced significant cost-cutting measures. The company will lay off approximately 15,000 employees, representing about 15% of its workforce. These layoffs are part of a broader initiative aimed at reducing costs by $10 billion annually by 2025. Additionally, the tech giant has suspended its long-standing dividend for the first time in its history.
Intel's restructuring plans draw scrutiny from lawmakers
Intel's potential restructuring and job cuts have attracted attention from lawmakers. Republican Senator Rick Scott has requested more information from Intel CEO Pat Gelsinger about these plans, especially given the nearly $20 billion in US grants and loans that Intel is set to receive for boosting chip production. Scott expressed concerns over whether adequate safeguards were in place to protect taxpayer dollars and ensure job creation.
Intel's struggles in the AI chip market
Intel is facing stiff competition in the artificial intelligence chip market, with rivals like NVIDIA making significant strides. Despite these challenges, Gelsinger remains optimistic about future products such as "Lunar Lake," which he described as "the most compelling AI PC product ever." The Intel board is set to meet in September to discuss these strategic options.
