Intel Plans Internal Manufacturing For Majority Of 2023 Chips; Stock Down

Intel Corp. is planning to manufacture majority of its 2023 products internally, while it may outsource some, according to the incoming Chief Executive Officer Pat Gelsinger.

At the fourth-quarter earnings webcast, while talking about 7nm program development, Gelsinger said, “I am confident that the majority of our 2023 products will be manufactured internally. At the same time, given the breadth of our portfolio, it’s likely that we will expand our use of external foundries for certain technologies and products.”

He said the company will continue to leverage the relationships it developed over the years with external foundry partners, noting that they can play a larger role in product roadmap due to its disaggregated designs.

He said more details on its manufacturing plans for 2023 CPU products, as well as 2023 roadmap will be provided after he takes charge on February 15, in place of the current CEO Bob Swan. Gelsinger had spent over 30 years with Intel before moving to EMC and then Vmware as CEO.

According to Gelsinger, Intel, which employs over 110,000 people, is the only semiconductor company in the world that has the depth of intelligent silicon, platform vision, design and manufacturing capabilities, and scale that its customers need to fuel their next-generation innovations.

The chipmaker was the leading manufacturer once, while majority of its rivals are currently outsourcing chip production. AMD, which leads the chip industry now, outsources its production to Taiwan-based TSMC, a company that also makes chips for Apple and Nvidia.

Intel shareholder Third Point, the activist hedge fund led by Dan Loeb, had asked the chipmaker in December to explore strategic alternatives, and to consider whether to divest or outsource its manufacturing capacity.

Loeb then had said that the loss of manufacturing leadership and other missteps have allowed several semiconductor competitors to leverage TSMC’s and Samsung’s process technology prowess and gain significant market share at Intel’s expense.

Shares of Intel, which closed 6.5 percent higher on Thursday’s regular trading, declined around 5 percent in the after-hours trading. In pre-market activity on Nasdaq, the shares are currently down around 4 percent.

Loeb also had called for immediate change at Intel, without which he warned that America’s access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more.

Swan had said in July last year that the company was open to outsourcing its manufacturing. Swan now said the company highlighted a challenge with 7nm technology in July and started a process to improve it, while evaluating the best approach for 2023 product lineup.

While announcing strong fourth-quarter results, the company noted that client, data center, memory and Mobileye businesses each set all-time revenue records, and that the demand for Intel’s innovative technologies remains very strong.

Intel is reported to be investigating into the hacking of its website ahead of the earnings release.

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