Intel announced the separation of chip production into an independent company and other steps to overcome the crisis

Intel announced strategic changes aimed at strengthening its financial position and technology capabilities, including the spin-off of its chip business and a deal with Amazon to produce AI chips. The company is aimed at reducing costs and revising investments in production, as well as increasing the efficiency of capital investments.

Intel announced a large-scale business restructuring that will affect almost all aspects of the company’s activities, from production to the product portfolio. Intel CEO Pat Gelsinger, in his address to employees on September 16, 2024, emphasized that the goal of transformation is to increase efficiency, optimize costs and increase focus on key areas such as the development of x86-compatible processors and the chip business (Intel Foundry). “We must act quickly to create a more competitive cost structure and achieve our $10 billion savings target,” Gelsinger said.

One of the key steps will be the transformation of Intel Foundry into an independent subsidiary within Intel. “This structure will provide our Foundry customers and suppliers with greater transparency and independence from the rest of Intel,” Gelsinger explained. “It will also enable Intel Foundry to increase its ability to attract external funding and optimize its capital structure to accelerate growth.”

The company is also reviewing its manufacturing investments to achieve greater capital efficiency, including suspending new plant projects in Poland and Germany for two years based on current market demand. As for the launch of the production center in Malaysia, it will be completed, but its commissioning will be synchronized with market conditions and the utilization of existing capacities. At the same time, Intel reaffirms its commitment to investing in manufacturing in the United States and continues to implement projects in Arizona, Oregon, New Mexico and Ohio. At the same time, the company intends to shift its focus from aggressively increasing production capacity to more flexible and efficient planning in line with the pace of technology development.

Image Source: Intel

At the same time, an expansion of the strategic partnership with Amazon Web Services (AWS) was announced. AWS has selected Intel Foundry to produce a new AI chip based on advanced Intel 18A technology, as well as a custom Xeon 6 processor based on Intel 3.

As part of the restructuring, Intel is also streamlining its product portfolio, seeking greater integration and focus on key areas. “Our top priority is to maximize the value of the x86 franchise in the client, edge computing and data center markets,” the CEO said. “The company will continue to invest in the development of AI technologies, including leadership in the PC category with artificial intelligence and strengthening its position in data centers.” At the same time, to increase efficiency, a number of divisions will be reorganized. Specifically, Edge and Automotive will be merged into CCG, and Integrated Photonics Solutions will move into DCAI.

Gelsinger also noted in his address that Intel will continue to cut costs to achieve its $10 billion savings target. To this end, certain actions have already been taken: more than half of the workforce (approximately 15,000) has been reduced through a voluntary dismissal program, it is planned to abandon approximately two-thirds of real estate worldwide by the end of the year, and also sell part of the stake in Altera to obtain additional funds. “We still have some difficult decisions to make,” Gelsinger admitted. “But all of these measures are aimed at turning Intel into a more flexible, simpler and more efficient system that can successfully compete in the market and ensure long-term growth.”

It is worth noting that Intel recently received about $3 billion in direct funding as part of the federal CHIPS and Science Act signed by US President Joe Biden in 2022.