Intel CEO Pat Gelsinger is preparing a comprehensive cost-cutting plan to the company’s board of directors later this month.
The presentation is set to focus on slicing off non-essential businesses and revamping capital spending.
The move is part of Gelsinger’s broader strategy to revive Intel’s once-dominant position in the semiconductor industry as the company faces significant challenges in the AI era. The plan will be presented at a mid-September board meeting. It is expected to include proposals to sell off several of Intel’s business units, including its programmable chip division, Altera.
This restructuring effort comes as Intel grapples with declining profits and a sinking market capitalization. The company also needs to streamline its operations to compete with industry giants like Nvidia.
The Strategy to Revitalize Intel
Shedding Non-Core Businesses
Gelsinger’s proposal is likely to include plans to divest certain business units that Intel can no longer afford to maintain. The programmable chip unit Altera, which Intel acquired for $16.7 billion in 2015, is one division that could be on the chopping block.
Sources indicate Intel has already begun exploring the possibility of selling Altera entirely, potentially to another chipmaker like Marvell Technology.
The divestment of Altera and other non-core businesses is expected to be a central component of Intel’s strategy to reduce overall costs and increase operational efficiency. The company has also retained the services of Morgan Stanley and Goldman Sachs to advise on which businesses should be sold and which should be retained, signaling the seriousness of its restructuring efforts.
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Capital Spending Cuts and Manufacturing Revisions
Gelsinger’s plan is also likely to include significant cuts to Intel’s capital spending, particularly in its manufacturing operations.
Intel has already announced a reduction in capital spending to $21.5 billion in 2025. This is a 17 percent decrease from this year. The proposed plan could go further, with potential halts or delays in major projects. This could include the proposed $32 billion factory in Germany.
Intel has faced growing pressure to manage its capital expenditures more effectively, especially after reporting a disappointing second-quarter performance in August. The company’s struggles have been compounded by increased competition in the AI chip market. Rivals like Nvidia have surged ahead, leaving Intel to play catch-up.
Addressing Investor Concerns
Gelsinger’s plan is also aimed at addressing the concerns of investors who have been critical of Intel’s recent performance.
The company’s stock price has taken a significant hit, with its market capitalization falling below $100 billion, a stark contrast to Nvidia’s $3 trillion valuation. Intel has faced additional challenges, including the resignation of board member Lip-Bu Tan, a veteran of the semiconductor industry, and the need to pause dividend payments and implement staff cuts to save $10 billion. These moves have raised questions about the company’s future direction and its ability to navigate the increasingly competitive tech landscape.
The Future of Intel’s Manufacturing Operations
No Immediate Plans to Sell Foundry Business
Despite the extensive restructuring efforts, Gelsinger’s proposal reportedly does not include plans to split off or sell Intel’s contract manufacturing operation, or foundry. Intel has already separated its foundry business from its design division. It has been reporting its financial results separately since the beginning of the year.
The separation was intended to provide a clearer distinction between Intel’s design and manufacturing operations. This aims to ensure potential customers of its design division would not have access to the technology secrets of those using Intel’s fabs (factories) for chip manufacturing.
While the company has no immediate plans to sell the foundry business, the upcoming board meeting may involve discussions about further refining the role and structure of Intel’s manufacturing operations.
Preparing for a Crucial Board Meeting
The mid-September board meeting will be pivotal for Intel as Gelsinger and his executive team seek approval for their ambitious restructuring plan.
The decisions made during this meeting could have far-reaching implications for the company’s future. It is likely to determine which businesses will be retained and which will be sold off. As Intel continues to navigate one of the most challenging periods in its history, the success of Gelsinger’s strategy will be critical in determining whether the company can reclaim its leadership position in the semiconductor industry.
With the AI revolution in full swing, Intel’s ability to adapt and innovate will be key to its long-term survival and success.
