Factory downsizing? Sale? Spin-off? This week, Intel faces a crucial turning point

After long-term market disfavor, Intel is now at a critical crossroads.

This week, the company's board of directors held a three-day meeting to discuss how to address the continued poor financial performance and reposition this once chip giant.

According to Bloomberg, sources revealed that the board of directors did not reach a consensus on specific future paths during this week's meeting. However, the board is considering various strategic options, including cutting billions of dollars in factory projects, selling off some subsidiaries, and possibly spinning off the core business into independent companies.

Crucial Moment for Intel's Board of Directors

According to Bloomberg, citing informed sources, the board is seeking ways to improve Intel's financial situation, even if it means giving up some ambitious plans. The board is considering multiple options, but the best solution has not yet been determined, and all options face challenges.

Regarding acquisition rumors, the board clarified that there are currently no specific offers to acquire part or all of Intel's business.

Furthermore, there are no plans at the moment to replace CEO Pat Gelsinger. Most Intel insiders believe that Gelsinger took over the company with existing problems.

Hendi Susanto, portfolio manager at Intel investor Gabelli Funds, said, "He (Gelsinger) does raise expectations that all challenges will be resolved in a shorter time frame, and it's hard to think of anyone who could do better."

An Intel spokesperson stated in an email, "We are on the verge of completing a historic process technology innovation and have re-established product leadership in key areas such as AI PC categories. The plans announced last month will solidify our progress and accelerate the next phase of our transformation as we take decisive actions to drive profit growth."

Several important projects may face cuts

Some analysts believe that one option for Intel to improve its financial situation is to sell off the divisions it acquired before Gelsinger took over, including the previously acquired Mobileye and Altera.

Both companies have not met expectations since being acquired by Intel. Mobileye, as an autonomous driving technology company, has been affected by the downturn in the automotive industry; Altera has underperformed due to reduced spending by telecom companies.

Analysts suggest that Intel may consider selling stakes in these two companies, but due to unfavorable market conditions, its divestment plans may face challenges and could result in significant losses for the company.

Another target for cuts could be Intel's semiconductor factory network. Due to the company's deteriorating financial situation, Intel has had to reassess its global factory construction plans.

Intel's factory projects in Arizona and Ohio are important components of the Biden administration's chip plan, but due to financial pressures, these projects may face risks of delays or reductions.

Additionally, Intel's factories in Germany, Poland, and Malaysia may also be forced to halt operations

The Future is Uncertain, Where is Intel Heading?

Since taking office in 2021, Pat Gelsinger predicted that Intel would not only successfully compete with chip design companies like NVIDIA, but also compete with TSMC in the foundry business. However, these plans seem to be far from realization.

Despite Gelsinger's vow to revive the company's glory, Intel's road to recovery is full of challenges. In the financial report for August, analysts described it as "the worst earnings report in history": performance fell short across the board, stock prices plummeted, plans to cut 15,000 jobs were announced, and dividends were suspended.

Stacy Rasgon, an analyst at Bernstein Crédit Agricole, said last week, "While Intel's overall strategy may have made sense at the beginning, the current business runway no longer seems to provide enough support to see it through to the end."

Intel's current predicament not only concerns the company itself, but also affects the U.S. government's plans to revitalize the domestic semiconductor industry.

The Biden administration views Intel as a core partner and has provided billions of dollars in support. If Intel were to cut back on its factory projects, it would not only hit company morale but also have a negative impact on U.S. chip manufacturing policy.

This crucial turning point not only determines Intel's future but also affects the global semiconductor industry landscape. The road ahead for Gelsinger is not smooth, but for Intel, there is no turning back at this moment