Intel’s recent internal discussions about potentially spinning off its manufacturing business have sparked industry speculation, especially after Bloomberg’s report last week. But despite the challenges, CEO Patrick Gelsinger is holding firm to his ambitious plan to transform Intel into a leading contract chipmaker, a move he believes is crucial to revitalizing the company’s financial health.
Speaking at the Deutsche Bank conference, Gelsinger reiterated his confidence in the contract manufacturing strategy, aiming to secure $15 billion in customer orders by the end of the decade. However, he candidly acknowledged that the path to achieving these goals has been more complex than initially anticipated.
The first major hurdle, according to Gelsinger, has been the underestimation of the effort required to attract and retain customers. Intel’s strategy involves more than just producing high-quality silicon components; it requires a robust infrastructure that can seamlessly integrate third-party designs into Intel’s manufacturing process. This means offering tailored services to support customers throughout the development and production stages, a task that has proven to be more resource-intensive than Intel initially calculated.
The second unexpected challenge has been the shifting attitudes of customers toward supply chain diversification. During the height of the COVID-19 pandemic, there was widespread concern about the concentration of chip manufacturing in Asia, leading to calls for more geographically diverse supply chains. However, as the global situation stabilized, many customers have reverted to their previous reliance on Asian suppliers, much to Gelsinger’s frustration. The ease with which clients have moved past the pandemic-induced supply chain disruptions has been a surprising setback for Intel’s efforts to position itself as a viable alternative to Asian manufacturers.
Despite these obstacles, Gelsinger remains committed to Intel’s transformation. He emphasized that the company is making significant progress, although the financial benefits of these efforts may materialize later than originally expected. While the road ahead may be challenging, Gelsinger is determined to see Intel’s vision through, confident that the company’s long-term goals are still within reach.