Intel to spin off chipmaking business amid financial struggles
What's the story
Intel has announced its decision to spin off its chipmaking division, a move aimed at reversing significant financial losses and a declining stock price.
The announcement was made by CEO Pat Gelsinger, who emphasized that the Intel Foundry will now operate as an independent subsidiary with "clearer separation and independence" from the parent company.
This restructuring is part of a broader strategy designed to restore Intel's position as a leading chipmaker.
New structure
Intel Foundry to operate independently
Following the restructuring, the Intel Foundry will have its own operating board and will report its financial earnings separately from the parent firm.
The company also plans to halt construction of factories in Poland and Germany for two years, due to projected market demand. However, it will continue with the plants in Arizona, Oregon, New Mexico, and Ohio.
Downsizing
Intel to sell stake in Altera
In addition to the restructuring, Intel intends to sell a portion of its share in Altera, a programmable chip firm it acquired in 2015. The tech giant also plans to significantly reduce its global real estate footprint by approximately two-third.
Funding boost
Intel receives $3 billion funding from US govt
As part of the restructuring announcement, Intel disclosed that it has received up to $3 billion in funding from the Biden administration.
This grant is intended to support the company's efforts in making chips for the US military.
The funding comes at a critical time as Intel navigates through financial challenges, and aims to regain its position as a leading chipmaker.
Financial woes
Financial struggles and layoffs
Intel has been grappling with widespread issues affecting its 13th and 14th Generation CPUs, reporting a loss of $1.6 billion in Q1 2024.
The chipmaking business alone accounted for around $7 billion in operating losses in 2023.
In August, Intel announced layoffs impacting 15,000 workers and now states it is "more than halfway" toward this target.
Despite these challenges, Gelsinger remains optimistic about the company's future prospects.