Intel in Crisis Proposes Reform Plan... "Considering Sale of Programming Chip Business"

Marvel Technology, One of the Potential Acquirers

Intel, facing its biggest crisis since its founding, is reportedly planning to downsize the company to cut costs, according to foreign media reports. Options under consideration include selling Intel's programmable chip unit or suspending operations at certain factories.

On the 1st (local time), major foreign media reported that Pat Gelsinger, Intel's CEO, along with other executives, will present a plan to the board of directors in mid-month to streamline Intel's unnecessary businesses and restructure capital expenditures.

Sources said that as part of cost-cutting measures, options being reviewed include selling several businesses, including Intel's programmable chip unit 'Altera,' and temporarily or permanently suspending operations at a $32 billion (about 42 trillion won) factory in Germany. Previously, Intel acquired Altera, a leading programmable chip company, for $16.7 billion in 2015 and has been engaged in customizing semiconductors for various uses.

In October last year, Intel announced plans to spin off this division as an independent company and pursue an initial public offering (IPO). However, as semiconductor design company Marvell Technology showed interest in acquiring Altera, Intel reportedly began considering selling the business instead of going public.

Intel is regarded as facing its greatest crisis since its founding in 1968. Once dominant in the semiconductor industry with CPU design during the desktop era, Intel now faces the risk of obsolescence after falling behind in new business areas such as artificial intelligence (AI). In the second quarter, Intel posted a net loss of $1.61 billion compared to a profit a year earlier, causing its market capitalization to fall below $100 billion. This contrasts sharply with Nvidia, whose market cap surpassed $3 trillion in 2021 despite having only about one-third of Intel's revenue at the time.

In response, CEO Gelsinger has launched a determined effort to cut costs by announcing a 15% workforce reduction and a 17% cut in annual capital expenditures, aiming to save $10 billion. Bloomberg reported that Gelsinger has hired Goldman Sachs and Morgan Stanley to seek advice on potential mergers and acquisitions (M&A) and the spin-off of the foundry (semiconductor contract manufacturing) business. However, sources said that splitting off or selling the foundry business to companies like TSMC will not be discussed at this board meeting.

Meanwhile, on the 30th of last month, Intel announced that it will launch its next-generation AI chip 'Gaudi 3' on IBM's cloud service early next year. The company plans to provide customers with additional AI infrastructure resources in the cloud environment and optimize price-performance for inference functions. On the same day, Intel's stock closed at $22.04 on the New York Stock Exchange, up 9.49% from the previous session. However, it has fallen 56% so far this year.