Intel is going through the radical treatment – is the split coming?

Chip company in crisis
Intel is going through the radical treatment – is the split coming?

The hype about AI catches Intel off guard. The company has nothing competitive to offer to meet the processor performance requirements. The US company slips deep into the red and begins to make massive savings. Even a structural change is no longer taboo.

The ailing semiconductor giant Intel is apparently no longer afraid of taking drastic steps in its search for an end to the downward trend. According to a media report, the US company is examining steps such as a split or the abandonment of factory projects. The various options will be presented to the board of directors in the next few months, reports Bloomberg, citing insiders. However, the considerations are still at an early stage and no steps are imminent, it said. However, the banks Morgan Stanley and Goldman Sachs were mandated.

One possibility would therefore be for Intel to separate itself from chip production, which had already been spun off into an independent area. However, it is more likely that the group will put the brakes on some expansion projects. Intel boss Pat Gelsinger's current plan is to also earn money as a contract manufacturer for other chip developers. Intel declined to comment on the information. The alleged plans were well received on the stock market – investors snapped up the stock, which had recently crashed massively, and pushed it into positive territory. Intel shares have lost more than 59 percent of their value since the beginning of the year.

Job cuts, sales, no dividend

The former industry giant is under pressure. Intel is struggling with weaker demand for traditional data center chips and the trend toward AI processors, where the company lags behind competitors like Nvidia. So far, Intel lacks a competitive AI chip.

In the last quarter alone, the group made a billion-dollar loss – and analysts are expecting further red numbers. For the current quarter, the group forecast revenue that will be a good $1 billion below expectations.

Gelsinger is taking countermeasures and wants to cut 15,000 jobs – almost 15 percent of the workforce. Overall, he wants to save more than ten billion dollars next year. The group recently acquired its stake in the British chip company Arm Holdings – but that probably brought in just under $150 million at best. The dividend has already been canceled. Investments are being cut. The focus is temporarily on the balance sheet and reducing debt, Gelsinger said at the beginning of the month.

The focus is now on the new plant planned in Germany, which Intel wants to build in Magdeburg for around 30 billion euros. However, the group is still waiting for approvals for, among other things, the billion-dollar subsidies. The groundbreaking has so far been targeted by the end of the year – with production starting in 2027. Intel has already brought financial companies on board as investors in two expensive factories in the USA and Ireland.

Gelsinger sounded quite dramatic in an email to employees back in August. Intel's cost structure is “not competitive,” he wrote, among other things. “Our costs are too high, our margins are too low.” Investment plans have also been adapted to the expected market development, it was said without further details. At the same time it became known that Intel was putting investments in France and Italy on hold.