- Intel is facing another lawsuit from shareholders regarding its struggling foundry business, targeting top executives and board members.
- The complaint alleges violations of securities law and seeks restitution for significant operating losses.
What happened: Intel Faces Shareholder Lawsuit Over Foundry
Intel, the beleaguered chipmaker, is facing another lawsuit from shareholders regarding its struggling foundry business. This derivative lawsuit targets former CEO Pat Gelsinger, interim co-CEO/CFO David Zinsner, and several board members. Filed in federal court in San Jose, California, the complaint alleges violations of securities law, fiduciary duties, and unjust enrichment. It seeks restitution and punitive damages that would ultimately benefit Intel itself. The lawsuit highlights the significant compensation received by the defendants, totalling over $207 million for Gelsinger from 2021 to 2023. Intel’s foundry business has been underperforming, with reported operating losses of $7 billion in 2023 and further losses in 2024. The complaint argues that Intel’s executives failed to adequately disclose risks and misled shareholders about the company’s financial health.
Also read: Intel names chip industry veterans to board amid CEO search
Also read: Intel faces credit downgrade from S&P Global due to struggles
Why it is important
This lawsuit underscores the mounting pressures facing Intel as it attempts to reinvent its foundry business in a highly competitive market. The shift towards an internal foundry model, initiated by Gelsinger in late 2022, aimed to diversify revenue by serving both internal needs and external customers. However, the substantial losses reported by Intel Foundry Services (IFS) raise serious concerns about the viability of this strategy. With the foundry sector experiencing fierce competition from companies like TSMC and Samsung, Intel’s struggles could hinder its ability to regain market leadership.
Moreover, this situation reflects broader industry challenges, such as supply chain disruptions and fluctuating demand for semiconductors. The lawsuit also highlights a growing trend where shareholders are increasingly willing to hold executives accountable for corporate governance failures, particularly in technology firms. As investors become more vigilant, the outcome of this case could set significant precedents for executive accountability and transparency in the tech industry. For readers, this situation serves as a reminder of the risks associated with investing in companies that face operational and strategic upheavals, particularly in sectors as volatile as semiconductors.
