Report: Intel is Considering Splitting Itself Up to Survive

According to a report in Bloomberg, ailing microprocessor giant Intel is considering every option to turn itself around. And that includes a possible breakup of the company in which it separates its chip design and foundry businesses.

According to the multiple sources cited by the publication, no change is imminent. But Intel’s financial problems are apparently serious enough that CEO Pat Gelsinger and his executive staff have consulted with Intel’s bankers and will present “various options” to the company’s board of directors in September.

As you may know, Gelsinger was tasked with fixing Intel in early 2021 when he was hired as CEO. His plan is to return Intel to its roots by modernizing its chip-making capabilities via new and improved foundries in the U.S. and elsewhere, providing partners with an American alternative to Taiwanese foundry giant TSMC. But the issues are obvious: This plan requires enormous investments of time and money, and Intel’s transformation can’t happen quickly enough. Unfortunately, the expenses have caught up with it, and Intel has suffered through a series of bad news cycles in 2024, culminating in much worse-than-expected financials, layoffs, and cost reductions. And then a historic devaluation when investors sent Intel’s stock price plummeting over 25 percent in a single day. Overall, Intel’s stock is down 60 percent in 2024, a year in which its peers are seeing a 20 percent gain overall.

If Intel does sell off its expensive but potentially lucrative foundry business, that will probably mark the end of Gelsinger’s time leading the company. And the Intel that emerges on the other side will be much smaller and face an uncertain future in which the only market it dominates–that for PC chips–is small and never going to experience massive growth. That version of Intel would also be forced to utilize other foundries to build the chips it designs, which is the model its competitors all use.

In the near term, it’s more likely that Intel will make more conservative changes, Bloomberg’s sources say. It will almost certainly continue the cost-cutting, though that could hinder innovation at a time when its competitors, companies like AMD and Qualcomm, are making technical inroads that could undermine Intel’s PC business. It could drop less viable product lines, lay off more employees, and cut costs in other ways as well. But unless something changes, and soon, that’s how a corporate death spiral starts. And that means that splitting off the foundry business is perhaps inevitable.