As Bloomberg reported last week, Intel has recently considered spinning off its manufacturing business to sell to outside investors. CEO Patrick Gelsinger’s comments suggest he still believes his business plan is viable, although he admits it has hit some unexpected roadblocks.
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Based on Gelsinger’s remarks at a Deutsche Bank conference last week, he is confident that the contract business will help turn around the corporation’s financial position, bring it to profitability targets, and provide it with $15 billion in customer orders by the end of the decade. .
So far, Gelsinger admits, he has faced two major miscalculations regarding Intel’s strategy to become one of the world’s largest contract chip makers. First, he underestimated the amount of work it takes to attract customers, in addition to producing quality silicon components themselves. An important condition for attracting customers is the creation of an effective infrastructure for the implementation of products developed by third-party companies in production. Customers need to be guided through this stage by tailoring its own services to their needs, and this requires more effort than the Intel CEO previously thought.
Secondly, Gelsinger is surprised by the ease with which customers have forgotten the difficulties of the Covid period caused by the high concentration of chip production in Asia. If three years ago everyone was talking about the need to create alternative supply chains, now many customers literally say the following: “We are satisfied with our Asian suppliers.” Such a change in customer sentiment, according to the head of Intel, is very disappointing.
Overall, as the CEO summarized, Intel has made good progress in achieving its previously set goals. Of course, all these reforms will affect the company’s financial statements several years later than expected, but Gelsinger does not intend to abandon his plans.