Archive · 7 Nov 2025
Intel Faces Existential Crisis, May Need to Spin Off Design Arm
Imagine Intel was like a famous chef who used to make the best meals by growing their own ingredients and cooking them in their own special kitchen.
For a long time, they were the best at making computer chips, which are like the brains of computers and phones.
But over the years, Intel started having trouble growing its own ingredients and cooking things just right.
Other chefs, like TSMC, got much better at cooking and started making the tastiest chips.
Even though Intel still has its own kitchen, it's not as good as it used to be.
Other big companies like Amazon and Google started making their own recipes and using other kitchens too.
Now, Intel's leader is thinking maybe it's better to let someone else use their kitchen, and Intel should just focus on creating new recipes.
This way, the kitchen could become very busy and successful again, even if it's not cooking Intel's own recipes.
This is a big decision because Intel used to be great at doing everything, but now it might have to choose to do just one thing really well to survive.
Intel, once a leader in chip design and manufacturing, is facing significant financial and market challenges, with revenue dropping and market value declining.
The company has missed key industry shifts, including the rise of smartphones and artificial intelligence, and has lost its manufacturing edge to competitors like TSMC.
There is a proposal for Intel to spin off or sell its chip design division to focus solely on its manufacturing (foundry) business, potentially raising over $100 billion.
New leadership under CEO Lip-Bu Tan is prioritizing cost-cutting, workforce reduction, and a potential shift in AI strategy, while delaying advanced manufacturing projects.
The success of a foundry-only strategy hinges on attracting external customers and improving manufacturing yields, a move that could offer a crucial alternative to TSMC for major tech companies.
- Who
- Intel, including its leadership (former CEO Pat Gelsinger, current CEO Lip-Bu Tan), competitors (TSMC, AMD, Nvidia, Samsung), tech giants (Amazon, Google, Microsoft), and government officials (President Donald Trump).
- What
- Intel is facing a severe financial and market-share crisis, leading to discussions about significant restructuring, potentially involving spinning off its design division to focus solely on its manufacturing (foundry) business, in an effort to regain competitiveness.
- When
- Recent developments include President Trump's statements in August, SoftBank's investment announcement on August 18th, and the timeframe of revenue drops between 2021-2024. Strategic plans and market share shifts are discussed within the past five years and looking towards the early 2030s for new fabs.
- Where
- Intel's operations are global, but key discussions involve its fabs in the US (e.g., Ohio), its struggles with advanced manufacturing, and the competitive landscape dominated by TSMC (based in Taiwan) and Samsung (South Korea).
- Why
- Intel has missed major industry shifts like smartphones and AI, lost its manufacturing edge to TSMC, and faces intense competition. This has led to declining revenue, market value, and market share, prompting drastic measures to survive and compete.
Focus on Foundry Business
Maintain Integrated Model
Selling the Design Division
Focus on Foundry Business
Spinning off or selling the design division could generate significant capital (over $100bn) to fund the struggling foundry business, allowing Intel to focus on regaining manufacturing prowess. This would also enable the foundry to serve external customers more effectively by providing better process design kits and gaining experience with outside clients, ultimately making it a more attractive alternative to TSMC for US tech giants.
Maintain Integrated Model
Maintaining an integrated model, where Intel designs and manufactures its own chips, was the company's historical strength and allowed for better product development. While the integrated model has faltered due to manufacturing missteps, the suggestion to sell the design arm is seen as lacking boldness and could lead to the company fading into irrelevance, as its products are no longer distinctive in a crowded field.
Strategic Focus and Market Position
Focus on Foundry Business
A foundry-only strategy would allow Intel to concentrate its resources on cutting-edge manufacturing technologies like the 18A process, which has promising features. This focus is crucial as the company has missed key industry shifts like smartphones and AI, and is now significantly behind competitors like TSMC in market share and valuation.
Maintain Integrated Model
Intel's historical greatness came from its ability to do everything, including both designing and manufacturing chips. The current leadership under Lip-Bu Tan seems to be prioritizing cost-cutting and a narrower focus on AI inference, while delaying advanced manufacturing projects. This shift risks abandoning Intel's potential to innovate across the entire chip-making process.
- Revenue Drop (2021-2024)
- From nearly $80bn to over $50bn
- Net Loss (Last Year)
- Almost $20bn
- Market Value Decrease (5 Years)
- Roughly half, to around $100bn
- TSMC Market Value
- Ten times Intel's
- PC Chip Market Share (2019 vs 2024)
- 84% to 69%
- Server Chip Market Share (2019 vs 2024)
- 94% to 62%
- Planned Workforce Reduction
- 25%