Intel CEO Pat Gelsinger is pinning his hopes of a turnaround on making the company a leader in chip manufacturing. But the latest signs are that it is still struggling to make progress against rivals such as Taiwan Semiconductor Manufacturing. Japan’s SoftBank Group was planning to work with Intel to manufacture chips rivaling those made by Nvidia, but the talks fell apart in recent months, according to the Financial Times, citing people familiar with the matter.
SoftBank blamed Intel for the collapse of the talks due to its inability to meet demands for volume and speed, and has now held talks with Taiwan Semiconductor Manufacturing , according to the FT.
An Intel spokesperson said the company doesn’t comment on conversations it may or may not have with clients. SoftBank didn’t immediately respond to a request for comment early on Thursday.
If the report is confirmed and talks aren’t revived, Intel might have missed out on securing a client with major ambitions in the semiconductor space. SoftBank recently bought British AI chip company Graphcore and owns about 90% of chip-design firm Arm Holdings , which listed its shares in the U.S. last year and had a market value of $137 billion as of Wednesday’s close
The report will likely raise more doubts about Intel CEO Pat Gelsinger’s costly plan to restore the company’s leading position in chip manufacturing.
Intel is spending heavily on the strategy but the stock has been hammered. The company offered more bad news in its second-quarter earnings report on Aug. 1, eliminating its dividend as earnings fell short of expectations. Management also forecast less revenue for the current quarter than analysts had expected.
Intel shares were up 3.6% at $20.64 in afternoon trading on Thursday, having fallen more than 60% this year so far as of Wednesday’s close.
Gelsinger, who became Intel’s chief executive in 2021, is under pressure to deliver a turnaround with the stock trading near its tangible book value. He has prioritized the Intel Foundry, an operation making chips for other companies, as the key component of his plan. The goal is to provide an alternative to TSMC.
Intel is widely regarded as the only viable U.S. alternative with the ability and scale to make chip manufacturing work at large volumes. In March, Intel and the Biden administration announced the Commerce Department has proposed up to $8.5 billion in direct funding to the chip maker from the Chips and Science Act. Intel said the funds will support factory projects in Arizona, New Mexico, Ohio, and Oregon. Congress passed the Chips Act in 2022, setting aside tens of billions to boost U.S. chip manufacturing.
“[Intel faces] multiple challenges as it juggles server-PC share loss, lacking AI traction, while transitioning to a foundry model all pressuring execution/profitability through 2025,” Mizuho Securities analyst Vijay Rakesh in a research note. Still, he said, increasing geopolitical risks have improved Intel’s competitive position as a domestic American chip manufacturer, though Samsung and Taiwan Semi are also moving some production to the U.S.
Rakesh has a Neutral rating and a $22 target price on Intel stock.
https://www.barrons.com/articles/intel-stock-price-ai-chips-6eabcac7