Intel’s big turnaround plan includes spinning off its chipmaking business

Intel is spinning off its chipmaking business as part of its plans to reverse billions in losses and a tumbling stock price. In an announcement on Monday, Intel CEO Pat Gelsinger said the Intel Foundry will become an independent subsidiary with “clearer separation and independence” from Intel.

With the change, the Intel Foundry will have its own operating board and report its financial earnings separately from Intel. Intel will also stop work on the factories it’s building in Poland and Germany for two years “based on anticipated market demand.” The company is still moving forward with its plants in Arizona, Oregon, New Mexico, and Ohio, however.

Additionally, Intel plans on selling part of its stake in Altera, the programmable chip company it acquired in 2015. It will also cut around two-thirds of its global real estate footprint. As part of this announcement, Intel revealed that the Biden administration awarded the company up to $3 billion in funding to make chips for the US military.

These changes will likely be crucial in getting Intel back on track as a leading chipmaker. On top of widespread issues affecting 13th and 14th Gen CPUs, the company reported $1.6 billion in the first quarter of 2024, with its chipmaking business alone racking up $7 billion in operating losses in 2023. In August, Intel announced layoffs affecting 15,000 workers, and now it says it is “more than halfway” to this goal.

“As I’ve said before, this is the most significant transformation of Intel in over four decades. Not since the memory to microprocessor transition have we attempted something so essential,” Gelsinger says. “We succeeded then — and we will meet this moment and build a stronger Intel for decades to come.”

Even though Intel is betting that its new 18A chipmaking process will help stem some of its losses, a recent report from Reuters suggests that early tests have failed when creating Broadcom’s silicon wafers. Starting next year, Intel is planning to produce chips with the 18A process for partners like Microsoft — and now Amazon.