Intel's 18A Plans in Jeopardy as Pressure Mounts from TSMC and Execution Risks Loom

Intel is considering a pivot from its 18A foundry node to the 14A process, potentially shelving external 18A volumes and accelerating 14A ramp-up to attract customers like Nvidia. This move may trigger asset impairments and billions of dollars in capex write-downs. The decision will test CEO Lip-Bu Tan's strategy to revive Intel's competitiveness amidst pressure from Taiwan Semiconductor's N2 process.

Intel (NASDAQ:INTC) is contemplating a significant shift in its foundry strategy, potentially shelving external volumes of its 18A process and accelerating the ramp-up of its 14A node. This move, led by CEO Lip-Bu Tan, aims to attract major clients like Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL), currently relying on Taiwan Semiconductor (NYSE:TSM) for chip manufacturing. The decision could lead to billions of dollars in capex write-downs and asset impairments, as Intel depreciates foundry assets on an eight-year straight-line schedule [1].

Intel has acknowledged small deployments of 18A with Amazon and Microsoft, but broader adoption has lagged. The shift to 14A is part of Intel's broader strategy to listen closely to client needs and build trust, signaling a move toward a more software-driven, customer-centric model. However, the decision carries execution and financial risks, and the timing adds urgency as TSMC plans to ramp its N2 process later this year with early partners AMD (AMD) and Apple (NASDAQ:AAPL) [1].

The potential decision to halt further development of the 18A process could result in asset impairments ranging from several hundred million to several billion dollars. Morgan Stanley maintains a "hold" rating on Intel's stock, noting that the short-term impact of this move is minimal, and the write-down is minimal [3]. However, Intel's management has emphasized that achieving profitability in the foundry business relies minimally on external clients.

Intel's stock has seen mixed reactions to this strategic shift. While some analysts believe it might decrease by 7% pegging the target price at $21.20, others such as GuruFocus estimate a 4.4% potential to go up, with a target price of $23.86 [2]. The board will review Tan's proposal later this month, with a final decision expected in fall.

Intel's potential pivot away from marketing 18A externally marks a high-stakes moment for its foundry business. With pressure mounting to secure next-generation clients and compete with TSMC, CEO Lip-Bu Tan appears ready to make tough, strategic calls. Whether the gamble pays off will depend on execution — and how quickly 14A can scale to meet elite global demand [4].

References:
[1] https://finance.yahoo.com/news/intel-risks-billions-18a-plans-151305998.html
[2] https://www.techi.com/intel-stock-foundry-shift-14a-apple-nvidia-contracts/
[3] https://www.ainvest.com/news/intel-considers-skipping-18a-process-14a-compete-tsmc-2507/
[4] https://site.financialmodelingprep.com/market-news/intel-reconsiders-a-strategy-as-ceo-lipbu-tan-resets-foundry-ambitions