Intel Spins Off AI-Focused Foundry Business Into Independent Subsidiary

According to Cointelegraph, Intel is spinning off its AI-focused foundry business into an independent subsidiary, a move aimed at reversing the company's recent financial struggles. The firm has reported multibillion-dollar losses and seen its stock price drop nearly 45% over the past year. In a memo to employees dated September 16, Intel CEO Patrick Gelsinger announced that Intel Foundry will become an independent subsidiary with its own board of directors and the ability to raise external capital. Intel, one of the world's largest producers of semiconductors and computer processing units, is intensifying its competition with Nvidia, which has seen significant profits from creating chips and cards tailored to AI systems. The newly independent foundry business will start producing chips using Intel's new 18A chipmaking process for partners such as Microsoft and Amazon beginning next year. Gelsinger stated that the spin-off would enable Intel to drive greater efficiency, improve profitability, and enhance market competitiveness. He described the move as the most significant transformation of Intel in over four decades, comparing it to the company's transition from memory to microprocessor production. Following the announcement, Intel shares closed up 6.4%, rising from $19.86 at market open to as high as $23.30 in after-hours trading, according to TradingView data. Despite the optimism, challenges remain for Intel. A Reuters report from September 4 indicated that early tests of the 18A chipmaking process had encountered significant setbacks. Launched in February, Intel Foundry focuses on manufacturing chips for AI processes in-house rather than outsourcing production to third-party manufacturers. Additionally, Intel plans to sell part of its stake in programmable chip manufacturer Altera, which it acquired in 2015. Gelsinger also revealed that Intel would reduce its global real estate footprint by around two-thirds and noted that the Biden administration had awarded the company up to $3 billion in funding to produce chips for the US military. On August 1, Intel reported operating losses of $7 billion for its chipmaking arm, falling short of investor expectations in its quarterly earnings report. This led to a more than 30% drop in stock value over the following two days, marking the sharpest two-day decline in the company's history. As part of a broader cost-reduction effort, Intel plans to lay off around 15% of its workforce, aiming to reduce its employee count to 15,000 by the end of the year. The changes come as Intel continues to lag behind rival chipmakers, including Nvidia and Advanced Micro Devices (AMD). Intel had launched a series of Bitcoin-mining chips in 2022 but discontinued them in April after just one year of production.