CEO Pat Gelsinger reveals plan to stabilize Intel's financials

After weeks of rumors presenting varied solutions that could stabilize Intel’s declining financial figures, CEO Pat Gelsinger finally sent an official note to all employees outlining the next steps the company needs to make in order to weather the financial storm.

First, Gelsinger explains that last week’s meeting with the company’s Board members helped identify three primary focus points that should contribute to Intel’s recovery: 

• Capitalize on the foundry business with its 18A nodes that are almost ready for mass production
• Create a more competitive cost structure and implement the $10 billion savings discussed in August
• Streamline the product portfolio that should maximize value for the X86 platform across client, edge and data center markets. The AI accelerator side is set to complement the x86 platform.
  

Right out the gate, Intel announced two new major chip manufacturing deals that will put the 18A nodes to good use. An Amazon Web Services collaboration and multi-billion-dollar investment in chip designs that sees Intel producing AI fabric chips for Amazon on 18A, 18AP and 14A, along with more Xeon Scalable processors built on Intel 3, as well as access to up to $3 billion in direct funding under the CHIPS and Science act for the U.S. government Secure Enclave that should expand the domestic chip supply chain.

However, the more important move that is more likely to solve some of Intel’s pressing financial issues is the announcement that the foundry division would be established as an independent subsidiary. Ever since Gelsinger took on Intel’s CEO mantle, there have been rumors about a foundry spin-off and it looks like we are now essentially seeing this unfold due to the harsh financial situation. Gelsinger states that this is part of the governance structure initiated when Team Blue separated the profit & loss and financial reporting for the foundry division and Intel Products side earlier this year. As an independent subsidiary, the foundry division will unlock important benefits for the parent company like tax advantages and loss limits, but also allows it to be more transparent for future foundry customers and suppliers.

Gelsinger notes that the independent foundry division would have the same current leaders that report directly to the CEO. Nevertheless, just like the parent company, the independent Intel Foundry would get a separate board of directors.

As expected with the circulating rumors, Intel will be forced to postpone the launch of the Polish and German cutting-edge production plants by around two years. In the meantime, the Irish fab will remain the main European hub, while the Malaysian site will soon be upgraded with a new advanced packaging factory. Previously announced factory expansions in Arizona, Oregon, New Mexico and Ohio are still on track.

Last but not least, Gelsinger mentions the workforce reduction of 15,000 that should save the company around $10 billion, which, together with the partial Altera stake sale is meant to improve the balance sheet and liquidity for the upcoming quarters.