Intel CEO Pat Gelsinger speaks during the initial public offering of Mobileye Global Inc. at the Nasdaq MarketSite in New York, October 26, 2022. Mobileye Global Inc., the self-driving technology company owned by Intel Corp., is pricing one of the largest U.S. initial public offerings that year, raising $861 million in its public offering, out of its market reach.
Michael Nagel | Bloomberg | Getty Images
Intel The stock fell 6% on Wednesday after the company briefed investors on its latest plan to transform itself into a chip manufacturing company to compete with TSMC.
In an update on Wednesday, Intel CFO David Zinsner explained how the company will soon change the way it reports financial performance, providing its foundry business, known as IFS, with its own The income statement, which will reveal the company’s manufacturing margins.
Intel’s new reporting structure is also helping to rein in costs for the chipmaker, which is seeking to cut costs by as much as $10 billion over the next three years.
The update comes as investors continue to assess a turnaround plan under Intel Chief Executive Pat Gelsinger that hinges on catching up to TSMC’s manufacturing technology by 2026, dubbed ” Four years and five nodes”. Intel plans to use its own chips to fix problems in its manufacturing before opening the factory to third-party companies.
If Intel catches up to TSMC, it could compete with companies like this for contracts to build high-performance chips apple, Nvidiaand Qualcomm, they do not operate their own manufacturing and currently often choose TSMC or Samsung for manufacturing. Intel said it expects to announce major customers for its foundry business later this year.
“Manufacturing groups will now face the same market dynamics as their foundry counterparts,” Zinsner told analysts. “They need to compete on volume on performance and price, because internal customers have the option to leverage third-party foundries and attract external foundry volume, and they must.”
Wednesday’s update focused on how Intel will use its manufacturing capabilities to produce its own chips. More updates on the foundry business and third-party customers will follow later this year, it said. The company said its own chip demand will contribute $20 billion to the unit next year.
Analysts on the call were concerned about Intel’s gross margins and asked how the plan would improve them. In April, Intel said its first-quarter gross margin was 38.4%, down 51.3% year-over-year. Intel management said on Wednesday that it was targeting a profit margin of 60%.
“We think we have a good path to 60 (percent),” Zinsner said.
Additionally, Intel explain On Wednesday, the company plans to sell a 20 percent stake in Austrian subsidiary IMS Nanofabrication to private equity firm Bain Capital in a deal that values the unit at $4.3 billion.
“Given the level of valuation and the level of investment, this will be one of the best acquisitions we’ve ever made,” Zinsner said on Wednesday.
Other chip stocks also fell on Wednesday as technology stocks fell. supermicroIntel’s main rival, fell nearly 6 percent, while Qualcomm fell more than 3 percent. Shares of Nvidia, buoyed by the recent AI wave, fell 2%.