Intel has also secured a $3.5 billion government grant to manufacture chips for the U.S. military, another avenue for continued government support to bolster U.S. semiconductor manufacturing capabilities.
The biggest news, however, is the rumor that Qualcomm might launch a takeover of Intel. This would make strategic sense, giving Qualcomm a foothold in both the mobile and desktop computing markets. Even so, I believe the foundry business should still be spun off eventually. Separately, Apollo Global Management has expressed interest to invest $5 billion into Intel in exchange for a stake.
Intel’s CEO, Pat Gelsinger, is crafting a plan to rescue the company. Intel has announced layoffs of 15% of its workforce and plans to reduce capital expenditures to $21.5 billion by 2025, a 17% decrease from this year. This plan includes selling Altera, the programmable chip unit it acquired for $16.7 billion in 2015.
This is a significant shift, and the writing has been on the wall for years. It may present an opportunity as a “cigar butt” play—though not by strict definition—offering a chance for some upside. Potential value-unlocking events could include a white knight rescue, a spin-off of the foundry business, or an acquisition by Qualcomm. However, holding Intel long-term with the expectation of a full recovery is highly uncertain and a risky move.
Intel, like most chip companies in the 1980s, was vertically integrated, designing and manufacturing its own chips. Morris Chang, the founder of TSMC, recognized that while many companies were emerging as chip designers, they lacked access to high-quality manufacturing. Chang founded TSMC in 1987, focusing solely on manufacturing. This specialization allowed TSMC to advance faster, and today it is the world’s most advanced semiconductor foundry. If you want to produce the world’s leading chips, you turn to TSMC, which is why Apple and NVIDIA rely on them.
Intel’s x64 architecture, based on CISC (Complex Instruction Set Computing), is designed to handle complex instructions. In contrast, ARM uses RISC (Reduced Instruction Set Computing), which is less ‘powerful’ in theory but faster and more efficient in practice.
finally the rise of mobile computing, especially after the introduction of Apple’s iPhone, validated the ARM architecture. The first iPhone, released in 2007, used ARM11 architecture because Intel chips consumed too much power and generated excessive heat. Imagine an iPhone powered by an Intel chip: it would last only a few hours and might even burn your hand during a call. ARM’s efficiency won the day.
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