Intel shares slump amid possible exit from chip-manufacturing if it fails to secure major customer

Shares fell 8% on the news

The struggling company has significant operations in Ireland mainly focused on its facility in Leixlip, Co Kildare.

Intel shares sank 8% on Friday after the company warned of exiting chip manufacturing if it fails to secure a major customer, a potentially drastic move by the new chief executive to cut spending and revive the struggling American company.

Lip-Bu Tan said he would further shrink Intel's workforce, halt work on two plants in Europe and slow another in Ohio, binning his ousted predecessor’s strategy that relied on building costly facilities to restore its manufacturing edge.

The plan for such extreme measures follows a surprise second-quarter adjusted loss and a forecast for a bigger-than-expected loss in the third quarter.

The weakening financials pointed to more trouble for Intel after years of mismanagement eroded its PC and data centre market share and left it with almost no presence in the AI market.

As part of its new strategy, Intel may reserve the advanced 18A manufacturing process for its products and proceed with its next-generation 14A only if it lands a major external customer commits, Mr Tan told analysts on the post-earnings call.

The move could put $100bn (€85.3bn) in assets at risk and deepen its dependence on rival TSMC, adding strain to margins already running at about half their historical highs.

Intel was set to lose nearly $8bn in market value, if current losses hold. Its current valuation of about $100bn is less than half of Advanced Micro Devices, which is valued at more than $260bn.

The stock has lagged far behind rivals this year, rising 12.8% compared with AI darling Nvidia'’s 30% gain and AMD's 34%.

Since taking the helm in March, Tan has divested businesses, laid off employees and redirected resources as part of his strategic reset to revive the embattled chipmaker.

"There are no more blank checks," he wrote in a memo to employees on Thursday.

The struggling company has significant operations in Ireland mainly focused on its facility in Leixlip, Co Kildare. It employs about 5,000 people in Ireland.

In June, the company notified the Department of Enterprise it planned on making redundancies. It was understood at the time 195 jobs could potentially go, but this was at the upper end and that the final number of redundancies could be lower.

Reuters