Sep 02, 2024 14:00:00

Intel to cancel $4 trillion chip factory project in Germany and sell business to restructure operations and revamp capital investment

Intel, which announced a deficit of $1.61 billion (about 230 billion yen) in its financial results for the second quarter of 2024, plans to cut costs by $10 billion (about 1.46 trillion yen) in 2025, and as part of that, it has

announced that it will reduce its workforce by about 15,000 people, equivalent to more than 15% of its total workforce. It has been reported that the company will cancel its plans to develop a semiconductor manufacturing base in Germany in order to further financial reform.

Exclusive: Intel CEO to pitch board on plans to shed assets, cut costs, source says | Reuters
https://www.reuters.com/technology/intel-ceo-pitch-board-plans-shed-assets-cut-costs-source-says-2024-09-01/

Intel Exploring Options, Including Splitting Businesses, to Cope With Slump - Bloomberg

https://www.bloomberg.com/news/articles/2024-08-30/intel-is-said-to-explore-options-to-cope-with-historic-slump

Intel Allegedly Mulls Chip Foundry Split In Effort To Find Stable Financial Footing
https://hothardware.com/news/intel-mulls-chip-foundry-split

Intel mulls spinning off its manufacturing division | Tom's Hardware
https://www.tomshardware.com/pc-components/cpus/intel-mulls-spinning-off-its-manufacturing-division

On August 1, 2024, Intel reported its second quarter 2024 results , revealing a loss of $1.61 billion (approximately 230 billion yen), and as a result, Intel's stock price fell 26%, the worst since 1974.

Intel shares plummet 26% to their lowest in 10 years, the biggest drop in 50 years, after reporting a major downturn in earnings - GIGAZINE

In response to the company's poor performance, Intel is cutting staff, revamping capital expenditures and cutting unnecessary businesses, and Reuters reported that 'CEO Pat Gelsinger and key executives are scheduled to present a plan to turn around Intel's operations at a board meeting in late September 2024.'

The plan Gelsinger and others are expected to present includes pausing or canceling a $32 billion chip factory project in Germany. Intel is also taking steps to spin out chipmaker Altera, which it bought in 2015, as a wholly owned subsidiary, with plans to sell some of its stake in the company in the future.

Intel announces plans to invest more than 4 trillion yen to build new factories and research and development hubs in Germany and France - GIGAZINE

Regarding Intel's poor financial performance, Gelsinger said, 'We are working hard to address our issues. Intel takes investor feedback seriously and is focused on Phase 2 of our restructuring plan.'

Intel is seeking help from Morgan Stanley and Goldman Sachs to sort out which businesses to sell and which to keep, according to people familiar with the matter.

It has also been reported that Intel may split its product design and manufacturing businesses and sell its manufacturing division. Until now, Gelsinger has believed that the chip manufacturing division is the key to restoring Intel's position as a chipmaker, and he hoped that it would eventually grow into a position to compete with TSMC, a pioneer in the chip industry. However, Intel's chip manufacturing division, which was unable to secure large orders from external customers, posted a net loss of $1.61 billion (about 235 billion yen) in the second quarter of 2024, and analysts expect the losses to continue. Therefore, Intel is expected to revamp its capital investment by splitting its manufacturing division.

Following this report, Intel's stock price rose 9.5% to $22.04 (about 3,220 yen) at the closing price on August 30, 2024, marking its largest increase since October 2022. Intel has not commented on this report.