Intel is looking for a way out of the turbulent situation it finds itself in. A historic spin-off of the factory division could be discussed.

Intel is considering drastic measures in its search for a path to a healthy future. The company is talking to major investors and, according to Bloomberg, is even considering spinning off its factory division.

Intel is the only major chip designer that develops its own designs. Other chip designers such as AMD, Nvidia and Qualcomm work with specialized manufacturing partners such as TSMC for the actual production of microchips.

Chip design and manufacturing went hand in hand twenty years ago, but since then the two areas have become increasingly decoupled. Both design and manufacturing require enormous investments in research and development. It is very difficult for a company to stay at the forefront of development in both areas.

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AMD, for example, like Intel, built its own chips until 2009, but eventually spun off the manufacturing division into a new company: Globalfoundries. Initially, there were many synergies between the two, with AMD closely involved as the main shareholder. However, AMD and GlobalFoundries slowly grew apart. The separation allowed AMD to turn to the most advanced player in the industry for its comeback with the Zen architecture: TSMC.

It is unclear whether Intel is considering a similar move. The company could also spin off its foundry division, which focuses on making chips for third parties, but retain production capacity itself.

Bloomberg stresses that there are no concrete plans. The spin-off or retention of the factories is on the table as a topic of discussion, without a decision being made in one direction or the other in the short term. However, the fact that a split is negotiable shows how serious the situation is for Intel and CEO Pat Gelsinger.

The timing is also notable, as expanding production capacity is a key part of Gelsinger’s turnaround plan. Intel has major investments on the agenda in this regard, including a new factory in Germany.

Difficult to adapt

Intel is navigating some of the toughest waters in its 56-year history. As competition increases, sales are declining, and the company is failing to truly regain the lead in technological development. After decades at the top of the chip industry, the market leader is struggling.

The Intel ship is bulky, heavy and doesn’t turn quickly. This dynamic makes it easy to maintain the market leadership position, but also makes it difficult to correct the poor price. Gelsinger has already moved away from several smaller products to refocus Intel on CPUs, and 15,000 people were recently laid off.