Intel Considers Selling Altera, Splitting Fab Business

A turnaround plan to be presented by Intel chief executive Pat Gelsinger and key executives to the firm’s board of directors in mid-September is to include options for selling off businesses and reworking its capital spending plans, Reuters reported.

A report last week said the executives were preparing a turnaround plan and that the company had retained Morgan Stanley and other bankers to advise on options at the September board meeting.

One unit the company may consider selling is Altera, a programmable chip business Intel acquired in 2015 for $16.7 billion (£12.7bn), the Reuters report said, citing unnamed sources.

Intel has already moved to spin Altera out as a separate but wholly owned subsidiary and said it would hold an IPO to sell a portion of its stake.

Altera sale

Altera could now potentially be sold entirely to another chipmaker, with infrastructure chipmaker Marvell a potential buyer.

At the board meeting Intel will consider a potential split of its product design and contract chip manufacturing business, Bloomberg reported.

The executives’ plan does not yet include a proposal to sell off the contract manufacturing business to a rival such as Taiwan Semiconductor Manufacturing Co. (TSMC), the Reuters report said.

Intel has been reporting the financial results of the foundry business separately from the design division since the first calendar quarter of this year.

In August Intel said it would reduce capital spending to $21.5bn next year, down 17 percent from this year, and Gelsinger’s plan is reportedly likely to include plans for further spending cuts on factory expansion.

This may include plans to pause or halt construction of an already delayed $32bn factory in Germany, the report said.

Exploring options

Intel has retained Morgan Stanley and Goldman Sachs to advise on which business units can be sold and which should be retained, the report said.

The company has not yet asked for bids on business units, but is likely to do so once the board endorses a plan, Reuters’ sources said.

Intel reported a disastrous second quarter in August, halting its dividend payments and cutting 15 percent of staff in order to try and save $10bn.

“It’s been a difficult few weeks. And we’ve been working hard to address the issues,” Gelsinger said at a Deutsche Bank conference.

He said the company was “taking seriously” what investors have said.

Gelsinger last week faced questions from US senator Rick Scott over the thousands of jobs losses at the chip giant, coming soon after it was awarded nearly $20bn in federal grants and loans to boost domestic chip production.

Massive subsidies

Earlier this year Intel has said it would spend $100bn across four US states to build and expand chip factories in America, boosted by the financial commitment from the Biden administration.

In a letter to Gelsinger, Scott questioned if the Commerce Department’s planned awards had failed “to include real metrics that would protect taxpayer dollars from going to companies that could not meet high standards for US manufacturing and job creation”.

Scott asked Intel to detail how many American employees will lose their jobs and whether the cuts would impact Intel’s planned semiconductor manufacturing investments.

“What is Intel trying to achieve with these job cuts, and why have billions of US taxpayer dollars in investments not been sufficient support to avert the need for lay-offs?” asked in the letter.