[Hardware] Activist Hedge Fund Calls for Intel to Spin Off Fabs

[Sxynix]

As reported by Reuters, activist hedge fund Third Point, which reportedly owns a $1 billion stake in Intel, has penned a letter to Intel Chairman Omar Ishrak asking the company to explore "strategic alternatives," like spinning off its fabs and/or divesting itself of unsuccessful acquisitions, to address the company's recent market share losses. The hedge fund also cites an ongoing exodus of Intel's top chip designers, saying the company has a "human capital management issue" and that chip architects have been "demoralized by the status quo." 

The letter cites several of Intel's recent missteps, including losing the chip manufacturing lead to Taiwan-based TSMC and Korean chipmaker Samsung, which comes as a result of the company's delayed 10nm and 7nm process nodes. The hedge fund also notes that several of Intel's long-term customers, such as Apple, Microsoft, and Amazon, are now designing their own chips due to Intel's stagnation, eroding its customer base (particularly in the high-margin server market). The letter also cites Intel's share losses to AMD on the CPU side of the business and Nvidia's dominating position in AI workloads as signs that Intel needs to take drastic measures. 

The letter calls for Intel to retain an investment advisor to explore strategic alternatives, such as spinning off certain unsuccessful acquisitions or separating its fabs from its chip design operations. The latter would require spinning off the company's fabs into a separate business, possibly a joint venture, much like AMD did when it separated from GlobalFoundries.  
The prospect of Intel spinning off its fabs entirely seems unlikely. The company's native chip production capacity has helped it to largely avoid the shortages we've seen with other chipmakers, like AMD and Nvidia, in the wake of the global pandemic. Intel's tightly-controlled supply chains are also a strength that has helped it combat the waves of shortages that have impacted all facets of semiconductor production, such as secondary componentry like substrates and power ICs. 

In the past, Intel tried to operate as a contract chip manufacturer through its Intel Custom Foundry (ICF) initiative, which was largely a failure (in part due to 10nm delays, and also because Intel purchased Altera, it's largest ICF customer). That means Intel's most likely path to separating its chip design and fabrication efforts would come as some type of joint venture. Still, it's unclear if Third Point has made any significant suggestions to establish a framework for such a separation.