Intel Co-CEOs Stay Silent on Full Division of Manufacturing Operations

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Following the departure of Intel’s former CEO Patrick Gelsinger, the company’s co-CEOs have elaborated on the ongoing efforts to delineate its chip manufacturing from its design functions. Unlike competitors in the x86 chip market, Intel uniquely operates as an integrated firm, managing both the design and manufacture of its processors. However, challenges such as a decline in the PC sector and difficulties in production are compelling Intel to rapidly regain its standing in process technology, with the anticipated launch of the 18A manufacturing process set for next year.

Insights from Intel’s Leadership on Business Structure

During a recent Barclays conference, Intel’s co-CEOs conveyed that while the product and foundry segments are already functioning independently in several key aspects, the prospect of a complete separation remains uncertain.

Intel’s co-CEO, Michelle Johnston Holthaus, emphasized that despite operating independently, there is a logical necessity for some level of integration. She stated that both segments make their respective decisions, which leads to a divergence in operations. Holthaus underscored the long-term goal of delivering “great products with the great process technology”that Intel’s design teams can leverage.

Regarding the pivotal 18A process, Holthaus articulated the company’s primary objective: to reclaim its leadership in chip manufacturing technology and restore its foundry capabilities to their historic performance levels.

Operational Developments in Intel’s Foundry Division

Co-CEO David Zinsner reinforced the idea of operational separation within the company. He noted that Intel is actively progressing toward establishing a subsidiary for its foundry division, which includes forming a distinct operational board. This new structure is Aiming to enhance clarity and efficiency, the foundry division is also implementing its own ERP system and related operational changes. However, Zinsner mentioned that the question of complete separation remains an “open question,”pending future evaluations.

In response to the news from the two executives, Intel’s stock saw an increase of over 2%. This positive movement in the stock price followed Gelsinger’s exit, as investors are keen on seeing the company minimize its operating expenses to enhance its business efficiency. Distinct separation of its operations could dramatically reshape Intel’s business model, aligning it more closely with that of NVIDIA and AMD, both of which outsource their manufacturing.

AMD’s journey illustrates this transformation; the company retained its manufacturing capabilities until 2008, at which point it spun off its manufacturing division, creating GlobalFoundries. This strategic move allowed AMD to refocus its efforts on chip design and generate liquidity. The semiconductor manufacturing realm is highly capital-intensive, with manufacturers reliant on maintaining high utilization rates to offset significant costs associated with equipment and production.

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