Intel's new CEO considers foundry overhaul to win big clients

Intel's new CEO, Lip-Bu Tan, is reportedly considering a significant strategic pivot for its struggling foundry business, potentially halting the external marketing of its 18A chip technology. This move, following an $18.8 billion loss in 2024, aims to attract major clients like Apple and NVIDIA by prioritizing the development of the next-generation 14A process, deemed more competitive against TSMC. While 18A would still be used internally and for existing commitments to Amazon and Microsoft, the shift could trigger a multibillion-dollar write-down, signaling a major reset in Intel's chip manufacturing strategy.

Analysis

Intel's new leadership under CEO Lip-Bu Tan is signaling a significant strategic pivot for its foundry business, driven by a substantial $18.8 billion loss in 2024. The proposal to halt external marketing of its 18A process represents a material departure from the previous strategy and an acknowledgment that the technology may not be commercially competitive with industry leader TSMC. This move, which could trigger a multibillion-dollar write-down, aims to refocus resources on the next-generation 14A process in a long-term bid to attract high-volume clients like Apple and NVIDIA. While Intel will honor existing 18A commitments with Amazon and Microsoft and use the technology for its own products, the proposed shift introduces considerable uncertainty. The final decision, anticipated in the autumn, will be a critical determinant of Intel's ability to reset its struggling manufacturing operations and regain a competitive footing in the advanced semiconductor market.

Key Decisions for Investors

• Investors should prepare for a potential multibillion-dollar write-down related to the 18A process, which would materially impact Intel's near-term earnings and book value.
• The strategic uncertainty pending a final board decision in the autumn introduces heightened volatility risk for INTC, warranting caution before establishing or adding to long-term positions.
• This pivot reinforces TSMC's current market leadership; therefore, any long-term bullish thesis on Intel is contingent on the successful and timely execution of the 14A process and its ability to win back major foundry customers.