Intel Considers Exiting Networking Business to Focus on Core CPU Market

Intel is reportedly considering an exit from its Networking and Edge (NEX) business unit, a move that could help the company focus more on its core CPU business. The NEX division generated 5.8 billion in revenue in 2024, accounting for 11% of Intel's total sales. Despite a 20% growth in the fourth quarter and a 16% operating profit margin for the year, the business is under strategic review as Intel aims to defend its leadership in PC and data center processors.

Over the past few years, Intel's CPU market share has declined from 80% in 2015 to 60% in 2024, with its main competitor, AMD, steadily gaining market share. Intel still holds a 68% share of the PC processor market and a 55% share of the data center processor market. However, Broadcom's dominance in the network chip sector, including its Tomahawk series for AI data centers and Jericho chips for telecommunications, is a significant factor in Intel's consideration to exit the NEX business.

Broadcom's network products contribute to 30% of its 12.3 billion in AI-related revenue. The company's technological advantage, combined with its ability to provide integrated hardware for switches and network interface cards, is likely pushing Intel out of this market. This strategic shift by Intel could free up resources for the company to invest in areas with greater growth potential, such as AI and data analytics. It could also lead to market consolidation as other players may seek to acquire Intel's assets in networking and edge computing.

However, Intel's potential exit from these sectors also carries risks. It could create a vacuum in the networking and edge computing markets, allowing other companies to fill the gap. This could potentially lead to increased competition and innovation but may also result in market instability and uncertainty. Overall, Intel's consideration to exit its networking and edge computing businesses, coupled with Broadcom's strengthening position in the AI chip market, represents a significant shift in the tech industry. While this move could allow Intel to focus on more strategic areas, it also carries risks and uncertainties that could reshape the competitive landscape in the semiconductor industry.