Intel Corp. is weighing a sale of its foundry business in a bid to shore up its financial performance, multiple publications reported today.
CNBC cited sources as saying that such a deal is one of several options the chipmaker is considering to address the headwinds facing its business. Bloomberg, meanwhile, reported that Intel may also weigh the possibility of scrapping some fab construction projects.
The development comes a few weeks after the company posted quarterly results that fell short of the market’s expectations. Intel’s sales in the three months ended June 29 fell 1%, to $12.8 billion, slightly less than the $12.9 billion that analysts had projected. The company’s adjusted earnings of two cents per share fell well below the 10 cents that investors were looking for.
In response to the disappointing results, Intel announced a broad restructuring initiative designed to improve its profitability. The effort will see the company lay off about 15% of its workforce. Intel has set a goal of cutting its annual expenses by $10 billion next year.
A sale of Intel’s foundry business, which uses the company’s fabs to make chips for other organizations, could potentially help further cut its operating costs. The unit posted a $1.8 billion loss last quarter. Analysts cited by Bloomberg expect the business to continue operating in the red for the foreseeable future.
Intel wouldn’t be the first major chipmaker to scale back its manufacturing operations. In 2008, rival Advanced Micro Devices Inc. spun off its fab network into an independent company. That move led to the creation of contract chip manufacturer GlobalFoundries Inc., which went public on the Nasdaq three years ago.
According to Bloomberg, it’s likely that Intel will take a “less dramatic” step before selling off parts of its business or scrapping fab expansion projects. It’s believed that this step could see the company delay the construction of some chip plants. Recent reports suggest that the company has already pushed back the launch date of several planned fabs.
The reports that Intel could scale back its manufacturing operations come amid a high-profile effort by the company to upgrade its chip production technology. The chipmaker is currently in the process of deploying a new manufacturing node dubbed Intel 20A.
It’s the first from the company to implement gate-all-around, or GAA, transistor technology. GAA is a new approach to designing circuits that promises to improve processor performance and power-efficiency. The company’s first Intel 20A server chip series is expected to debut later this year.
Intel 18A, the successor to the Intel 20A node, is set to come online in 2025. The company recently disclosed that the former technology reached a key technical milestone: Intel engineers successfully powered on a number of prototype chips made using Intel 18A hardware.
Intel’s leadership team is expected to consider the potential fab sale and the other options available for the company during a September board meeting. Morgan Stanley and Goldman Sachs Group are reportedly advising the chipmaker on the initiative. In parallel, it’s believed Intel is working with the two banks to fend off pressure from activist investors.