intel Shares fell 6% on Wednesday after it gave investors an update on its restructuring plan to become a chip maker competing with Taiwan Semiconductor Manufacturing Co.
In an update Wednesday, Intel chief financial officer David Zinsner said the company will soon be in financial position to provide its foundry business, known as IFS, with its own income statement revealing the company’s manufacturing margins. Explained how to change the way results are reported.
Intel’s new reporting regime could also help chipmakers control costs as they aim to cut costs by up to $10 billion over the next three years.
The update comes as investors continue to evaluate Intel’s turnaround plans under CEO Pat Gelsinger. The plan hinges on catching up with TSMC’s manufacturing technology by 2026. The company calls the plan “five nodes in four years.” Intel plans to use its own chips to solve manufacturing problems before opening factories to third-party companies.
Once Intel catches up with TSMC, it will be competing for contracts to build high-performance chips from companies such as: apple, Nvidia and Qualcomm, does not manufacture in-house and now often opts for TSMC or Samsung manufacturing. Intel said it plans to announce key customers for its foundry business later this year.
“Manufacturing groups are going to face the same market dynamics as foundries,” Jinsner told analysts. “Internal customers have the option of leveraging third-party foundries and attracting external foundry volume, so we need to compete for volume on performance and price. They must do the same.”
Wednesday’s update focused on how Intel is leveraging its chip manufacturing capabilities. Further updates on the foundry business and third-party customers are expected later this year. Intel also said demand for its chips will contribute $20 billion to the division’s revenue next year.
Analysts on the conference call were concerned about Intel’s gross margins and asked how the plan would increase them. In April, Intel reported a first-quarter gross margin of 38.4%, down 51.3% over the year. Intel management said Wednesday it is targeting a 60% profit margin.
“I think we are on a good path to 60.” [percent]said Mr. Jinsner.
Separately, Intel Said The company announced Wednesday plans to sell a 20% stake in Austrian subsidiary IMS Nanofabrication to private equity firm Bain Capital in a deal worth $4.3 billion.
“Considering that level of valuation and investment, this would be one of the best acquisitions we’ve ever made,” Jinsner said Wednesday.
Other semiconductor stocks fell as tech stocks fell on Wednesday. AMD, Intel’s biggest rival Qualcomm fell nearly 6%, while Qualcomm fell more than 3%. Nvidia, fueled by the latest wave of artificial intelligence, fell less than 2%.