Intel’s shares surged 10% this afternoon following reports that the struggling chipmaker is exploring options that could involve splitting the company in two.
The company is working with investment bankers to consider various strategies, including separating its flagship product business from its unprofitable manufacturing unit, according to Bloomberg. Additionally, Intel is evaluating the possibility of canceling some factory projects.
Expanding and building new chip production sites are central to Intel’s turnaround strategy, aimed at becoming a key contract manufacturer for other chip firms. However, this capital-intensive effort has strained the company’s finances.
Such a strategic shift would represent a dramatic departure for CEO Pat Gelsinger, who has long seen manufacturing as a crucial competitive advantage for Intel.
Intel has been a major beneficiary of subsidies from the Biden administration’s Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act, designed to boost US chipmaking. In March, the US government announced up to $8.5 billion in funding for Intel to support manufacturing expansions in Arizona, New Mexico, Ohio, and Oregon. US Secretary of Commerce Gina Raimondo described the agreement as a catalyst for over $100 billion in Intel investments, which is expected to create over 30,000 jobs and drive innovation.
However, Scott Lincicome, a trade economist at the Cato Institute, cautioned this month that it remains uncertain whether Intel can manufacture leading-edge chips in commercially viable quantities and at competitive prices.
While Intel remains a dominant player in processors for traditional PCs, it has struggled to make significant inroads in the mobile phone processor market, where chips designed by Britain’s Arm Holdings have a strong foothold. Arm, which does not manufacture chips itself, relies on licensing its technology.
