Intel's Strategic Reassessment: Can the Chipmaker Regain Foundry Leadership?

The semiconductor industry is at a pivotal juncture, with global demand for advanced chips surging and foundry services becoming a battleground for tech giants. Intel, once a dominant force in chip manufacturing, has embarked on a high-stakes journey to reestablish itself as a competitive foundry. Under CEO Pat Gelsinger's tenure, the company pursued an aggressive "No More Blank Checks" strategy, aiming to transform its manufacturing capabilities and secure a place in the AI-driven future. However, the transition has been fraught with financial strain, operational delays, and strategic recalibrations under new CEO Lip-Bu Tan. This article evaluates Intel's foundry ambitions through the lens of Gelsinger's directives and Tan's pragmatic pivot, offering insights into whether the chipmaker can regain its footing in the foundry market.

The Gelsinger Era: Ambitious Vision, Heavy Costs

When Pat Gelsinger took the helm in 2021, he inherited a company grappling with manufacturing delays and a foundry business lagging behind TSMC. His "IDM 2.0" strategy focused on three pillars: revitalizing Intel's internal manufacturing, expanding as a third-party foundry, and leveraging its x86 architecture to build an integrated systems business. Central to this vision was the 18A manufacturing node, a gate-all-around (GAA) technology with EUV lithography, positioned as a cornerstone for attracting external customers.

Gelsinger's 2024 roadmap emphasized capital efficiency and customer-centricity, but the execution revealed cracks. The AWS partnership, announced in September 2024, was hailed as a breakthrough, with Intel Foundry producing an AI fabric chip on the 18A node. Yet, by mid-2025, the company's Q2 earnings report revealed a $3.17 billion operating loss for the foundry business, despite $4.4 billion in revenue. Much of this income came from internal production, not external contracts, raising questions about the unit's long-term viability.

The financial strain was compounded by a $2.9 billion GAAP loss in Q2 2025, driven by restructuring charges and asset impairments. Gelsinger's push to build a standalone Intel Foundry subsidiary, while intended to enhance transparency and autonomy, also highlighted the risks of overreliance on speculative investments. By mid-2025, it became clear that the 18A node—once a symbol of Intel's comeback—was not delivering the anticipated returns.

Tan's Pragmatic Pivot: The 14A Node and Fiscal Discipline

Lip-Bu Tan's appointment in mid-2025 marked a sharp departure from Gelsinger's approach. His "no more blank checks" mantra signaled a shift toward demand-driven investments and cost discipline. In a letter to employees, Tan criticized the prior strategy for "investing too much, too soon without adequate demand," leading to a fragmented and underutilized factory footprint.

Key to Tan's strategy is a conditional approach to the 14A node, which is now contingent on securing major external customers. Unlike Gelsinger's all-in bet on 18A, Tan is prioritizing fiscal prudence, with the 14A node reserved for partners willing to commit upfront. This strategy reduces risk but also delays timelines for profitability. The CEO has also halted or scrapped projects in Germany, Poland, and parts of Asia, while scaling back the Ohio fab to align with confirmed demand.

Financially, the restructuring is already evident. Intel plans to reduce its workforce by 22% by late 2025, cutting headcount from 96,400 to 75,000. The company is also exiting two-thirds of its global real estate footprint and exploring asset sales, including its remaining stake in Altera. These moves aim to free up liquidity and reduce overhead, but they also signal a retreat from the aggressive capital expenditures that defined Gelsinger's era.

The Path to Profitability: Risks and Opportunities

Intel's foundry ambitions now hinge on three critical factors: securing external customers for the 14A node, improving manufacturing yield rates, and navigating the competitive landscape dominated by TSMC. The 14A node, while more cost-effective than 18A, still faces challenges in matching TSMC's 3nm process in performance and power efficiency. Meanwhile, the AWS partnership remains a key test case—if Intel can deliver high-performance chips at competitive costs, it may attract other partners.

The U.S. government's $3 billion CHIPS Act funding for the Secure Enclave program offers a lifeline, but this is a niche market and not a substitute for broader commercial success. Intel's ability to scale its advanced packaging capabilities (e.g., Foveros) could also differentiate it, as packaging is increasingly critical for AI and HPC applications.

Investment Considerations: Caution Amid Uncertainty

For investors, Intel's foundry pivot presents a mix of risks and opportunities. On one hand, the company's cost-cutting measures and focus on profitability could stabilize its balance sheet. On the other, the delay in 18A adoption and the conditional nature of the 14A node create execution risks. The stock's recent volatility () reflects these uncertainties.

A key metric to watch is Intel Foundry's operating margin trajectory. While Gelsinger aimed for breakeven by 2027, Tan's restructuring may push this timeline further out. Investors should also monitor customer acquisition progress, particularly in the AI and data center sectors, where demand is surging.

In the short term, Intel's stock may remain range-bound as it navigates restructuring costs and market skepticism. However, if the company can secure high-margin contracts and demonstrate operational efficiency, the long-term potential for growth in the foundry market remains intact.

Conclusion: A Calculated Bet on the Future

Intel's strategic reassessment under Tan reflects a necessary recalibration after years of aggressive spending under Gelsinger. While the path to foundry leadership is uncertain, the company's focus on fiscal discipline, customer alignment, and advanced packaging innovations positions it as a potential long-term contender. For investors willing to tolerate near-term volatility, Intel's foundry business could offer compelling upside if it successfully executes its pivot. However, patience and a close watch on execution risks are essential in this high-stakes bet.