Splitting Intel Product and Foundry: Unlocking Value for Investors

Intel Corporation (INTC) has been grappling with a series of challenges in recent years, including a decline in market share and significant losses in its foundry operations. As the company seeks to turn around its fortunes, one potential solution has emerged: separating its Product and Foundry businesses. This strategic move could unlock significant value for investors, as outlined in a recent report by RJ. Let's delve into the potential benefits and implications of this split.



Improved Focus and Accountability

By separating the Product and Foundry businesses, Intel can enhance the focus and accountability of each segment. The Product division can concentrate on designing and developing cutting-edge products, while the Foundry division can optimize its manufacturing processes and attract more external customers. This separation can lead to increased innovation, improved capital efficiency, and better collaboration between the two divisions (Gelsinger, 2024).

Attracting External Foundry Customers

A separated Foundry division can offer clearer separation and independence from Intel's Product division, making it more appealing to external customers. This could help Intel compete more effectively with other foundries like TSMC and Samsung. Intel has already secured a multi-year, multi-billion-dollar framework with Amazon Web Services (AWS) for custom chip designs, demonstrating the potential for attracting more foundry customers (Gelsinger, 2024).

Potential Market Share Gains

While the separation could lead to improved innovation and capital efficiency, there is also a risk of market share losses in the short term. However, by focusing on its core competencies and attracting more foundry customers, Intel could potentially regain market share in both its Product and Foundry businesses. For instance, Intel's Datacenter segment has been losing market share, but a well-executed separation could help reverse this trend (Intel Foundry Investor Update 2023).

Strategic Partnerships and Acquisitions

After the separation, Intel could pursue strategic partnerships or acquisitions to strengthen its Product or Foundry businesses. For example, Intel could form a "take-or-pay" wafer pre-purchase model with hyperscalers like AWS, Google, Microsoft, Apple, Meta, and Nvidia to sustain its new American-based foundry. Additionally, Intel could acquire a leading EDA (Electronic Design Automation) company like Cadence Design Systems or Synopsys to improve its design capabilities and attract more external customers (Patel & Xie, 2023).

Conclusion

Splitting Intel's Product and Foundry businesses could unlock significant value for investors by improving focus, accountability, and innovation. By attracting more external foundry customers and potentially regaining market share, Intel could strengthen its competitive position in the market. Furthermore, strategic partnerships and acquisitions could further bolster Intel's growth prospects. While there are risks associated with the separation, the potential benefits make this a compelling strategy for Intel to consider. As an investor, it's essential to monitor Intel's progress and evaluate the potential impact of this separation on the company's long-term growth prospects.



Important note: Investors are reminded to do their due diligence and not rely on the information provided as financial advice. Consider this article as supplementing your required research. Please always apply independent thinking.