- Intel shares rose more than 3% in early trading on Friday as the company works with investment bankers and considers its options.
- Expanding its chip manufacturing base is central to Intel’s transformation efforts, which are focused on becoming a contract manufacturer for other chip companies.
OUR TAKE
Intel’s disappointing quarterly report in early August, coupled with the company suspending its dividend and announcing layoffs that affected 15% of its workforce, exacerbated the stock’s decline. Intel shares are down about 60% year to date, while AMD shares are down less than 2% year to date. Nvidia shares have more than doubled this year.
–Zora Lin, BTW reporter
What happened
Intel shares rose more than 3% in early trading on Friday after a report that the struggling chipmaker was exploring options that could include a merger or break-up sparked enthusiasm among some investors after one of its worst slumps in decades.
The company is working with investment bankers and considering various options such as separating its flagship product business from its money-losing manufacturing unit, Bloomberg News reported on Thursday.
Building and expanding chip production bases is central to Intel’s transformation efforts, which focus on becoming a contract manufacturer for other chip companies – a capital-intensive effort that has strained the company’s finances.
Intel’s market value fell below $100 billion in early August for the first time in three decades. On Friday, the company’s market value is expected to increase by more than $4 billion.
Also read: Intel CEO to present divestiture and cost-cutting strategies to board
Also read: US senator questions Intel’s job cuts despite $20B grants
Why it’s important
As a world-renowned chip manufacturer, the fluctuation of Intel’s stock price and the adjustment of the company’s strategy often have a profound impact on the entire semiconductor industry. Exploring merger or spin-off options indicates that the company may be seeking a new business model and market positioning.
Intel is considering separating its flagship product business from manufacturing, which could mean the company will focus more on design research and development, while reducing capital investment in manufacturing, which could be an adaptation to current market trends.
This move by Intel may be a response to the rapid progress of competitors such as Nvidia and AMD in artificial intelligence and high-performance computing, suggesting that Intel is looking to make breakthroughs in these areas as well.
The news also reflects the changes the entire semiconductor industry is undergoing, including a reevaluation of capital-intensive businesses and an emphasis on emerging technologies such as artificial intelligence.
