US Activist Hedge Fund Says "Intel Falling Behind Samsung and TSMC... Find Alternatives"

Send a Letter to the Intel Board of Directors

[Image source=AP Yonhap News]

[Asia Economy Reporter Hyunjin Jeong] U.S. activist hedge fund Third Point urged semiconductor manufacturer Intel, which has fallen behind Samsung and TSMC, to seek strategic alternatives such as divesting failed acquisitions or separating its design and manufacturing divisions to implement major changes.

According to the Wall Street Journal (WSJ) and others on the 29th (local time), Third Point CEO Daniel Loeb pointed out in a letter sent to Intel's board, "Intel was once the standard for innovative microprocessor manufacturing, but it is no longer so."

Third Point, a hedge fund with assets of $15 billion (approximately 16.4 trillion KRW), is an activist hedge fund that buys corporate stocks to secure voting rights, then demands governance improvements, dividend increases, or intervenes in management to increase corporate value. Recently, Third Point acquired $1 billion worth of Intel shares.

CEO Loeb said, "The loss of manufacturing leadership and other missteps have allowed some semiconductor competitors to leverage TSMC and Samsung's process technology to sacrifice Intel and secure significant market share," noting that AMD, which competes with Intel in the PC processor market, has eroded Intel's market share in PC and data center CPUs.

The reason the hedge fund demanded changes at Intel is due to its recent significant performance deterioration. Intel has faced difficulties due to delays in transitioning to the 7-nanometer semiconductor manufacturing process, and longtime customers Microsoft (MS) and Apple have started developing their own chips, opting to use semiconductors they design themselves. Additionally, Apple, the iPhone manufacturer, and Nvidia, the world's largest graphics processing unit (GPU) company, have expanded their market share rapidly by dealing with TSMC, Taiwan's largest semiconductor foundry and a competitor to Intel.

CEO Loeb emphasized that Intel's loss of competitiveness could also negatively impact U.S. national security. He stated, "Without immediate changes at Intel, the U.S. access to cutting-edge semiconductor supply will weaken, potentially increasing America's geopolitical dependence on East Asia, a region that is unstable, to operate everything from PCs to data centers and critical infrastructure."

Loeb urged Intel to hire an investment advisory firm to explore strategic alternatives, mentioning that divesting some poorly made acquisitions or separating the semiconductor design and manufacturing divisions could be among these alternatives.

Intel stated in a press release that it would cooperate with the hedge fund on shareholder value enhancement plans proposed by Third Point. Intel's stock price rose more than 5% immediately after the letter was made public.