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Industry insiders believe Intel can spin off its fabs with a solid long-term plan that involves acquiring even more fabs

Intel could greatly benefit from spinning off its fabs in the long term. (Image Source: Extreme Tech)
Intel could greatly benefit from spinning off its fabs in the long term. (Image Source: Extreme Tech)
Even though certain investors continue to pressure Intel into spinning off its fabs, the new CEO is adamant that the company will continue to function as an IDM and only outsource select lineups to third-party foundries when needed. This is a good approach for a short-term plan, but Intel may look into acquiring certain external foundries and then spinning off the merged fabs if it intends to stay competitive in the long-term.

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Tirias Research principal Jim McGregor recently proposed a long-term plan to solve Intel’s manufacturing problems that lead to so many delays in the past few years. Last December, we were reporting that certain Intel investors urged Intel to adopt more drastic strategies to set things right, suggesting that the company might need to divest itself of some unsuccessful acquisitions from the past decade and maybe even consider spinning off its fabs. Intel carefully considered its options and proceeded to replace its CEO as a first measure. As the new Intel CEO, Pat Gelsinger clearly stated that Intel will remain an integrated design manufacturer (i.e retains its fabs) and possibly outsource certain lineups to external fabs (TSMC). This plan may continue to upset some Intel investors, but McGregor believes it is the right course of action for the foreseeable future. Nevertheless, if Intel intends to stay competitive and avoid any manufacturing problems, it should really consider a long-term plan for spinning off its fabs.

Instead of selling all its fabs one by one, McGregor purposes a more strategic move. Intel already invested so much in its fabs and it is building new ones as we speak, so why not expand its production capacity even further by acquiring GlobalFoundries from the Advanced Technology Investment Company (ATIC) controlled by the Abu Dhabi Government? GloFo is already the third largest foundry in the world, and, even though it currently has no sub-10 nm production nodes to compete with Samsung or TSMC, it still can offer tremendous fab capacity with its locations from Germany, Singapore and U.S. Additionally, Intel could gain an experienced management team and personnel accustomed to working with external customers. Intel should let the GloFo team handle the integration and possibly acquire even more capacity with everything that GloFo is currently building, including the new fab from Matla, New York.

At some point in the future, when Intel regains its leading position and has extra capacity, it may spin off the manufacturing group with the GloFo management. But, instead of selling the entire entity, Intel could remain its largest investor and customer, just like AMD initially did with GloFo. McGregor also adds that “Intel would still have the option of leveraging TSMC as a manufacturing partner as well as providing the company with a dual foundry capacity with what would likely be the two largest foundries in the world.”

There is one aspect that could hinder this long-term plan: the current Intel mentality and culture that disregards outsiders. Many, if not all Intel-acquired companies found it impossible to adhere to Intel’s vision, as they felt not welcomed. Now, one would hope that Pat Gelsinger, as the new CEO, could bring a change for the Intel culture and allow McGregor’s theoretical plan to unfold.

Twitter user RetiredEngineer came to a similar conclusion in August last year, suggesting that Intel could greatly benefit in the long-term if it somehow manages to buy GloFo, merge it with TMG and then spin off the new manufacturing entity while keeping it at “arm’s length, with an eye towards a future IPO.” This way, the new foundries could eventually rival TSMC.

 

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Bogdan Solca
Bogdan Solca - Senior Tech Writer - 1565 articles published on Notebookcheck since 2017
I first stepped into the wondrous IT&C world when I was around seven years old. I was instantly fascinated by computerized graphics, whether they were from games or 3D applications like 3D Max. I'm also an avid reader of science fiction, an astrophysics aficionado, and a crypto geek. I started writing PC-related articles for Softpedia and a few blogs back in 2006. I joined the Notebookcheck team in the summer of 2017 and am currently a senior tech writer mostly covering processor, GPU, and laptop news.
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> Notebook / Laptop Reviews and News > News > News Archive > Newsarchive 2021 02 > Industry insiders believe Intel can spin off its fabs with a solid long-term plan that involves acquiring even more fabs
Bogdan Solca, 2021-02- 3 (Update: 2021-02- 3)