Intel soars because it explores breakup
Intel’s shares jumped by as much as 10pc this afternoon, after a report that the struggling chipmaker is exploring options that could involve splitting the company in two.
The company is working with investment bankers and considering various options such as separating its flagship product business from its money-losing manufacturing unit, Bloomberg reported.
Intel is also discussing potentially scrapping some factory projects, the report said.
Building and expanding chip production sites is at the core of Intel’s turnaround efforts focused on becoming a contract manufacturer for other chip firms – a capital intensive undertaking that has strained the company’s finances.
A change in strategy would be a dramatic about-turn for chief executive Pat Gelsinger, who has viewed manufacturing as a key competitive advantage for Intel.
The chip giant has been the biggest winner of subsidies from the Biden administration under the Creating Helpful Incentives to Produce Semiconductors (Chips) Act, intended to help boost chipmaking in the US.
In March, the US government announced up to $8.5bn in funding to Intel to support manufacturing in Arizona, New Mexico, Ohio and Oregon.
US Secretary of Commerce Gina Raimondo at the time said: “With this agreement, we are helping to incentivise over $100bn in investments from Intel – marking one of the largest investments ever in US semiconductor manufacturing, which will create over 30,000 good-paying jobs and ignite the next generation of innovation.”
But Scott Lincicome, a trade economist at the Cato Institute in Washington DC, warned this month that it is still not clear whether Intel is capable of manufacturing leading-edge chips “at commercially viable quantities and prices”.
While Intel is still the biggest player in processors for traditional PCs, the company failed to establish itself in the market for mobile phone processors.
Chips based on designs by Britain’s Arm Holdings dominate the smartphone market, where low cost and energy use are vital. Arm was set up in 1990 with just £1.5m in investment from Apple, and intellectual property and staff from BBC Micro designer Acorn. Since it started on a shoestring, it never opened factories, relying instead on licensing its technology.
Intel declined to comment.
