Intel is turning its innovation business, which produces chips for other companies, into an independent subsidiary. The company revealed its plan in a letter to employees from CEO Pat Gelsinger, published a month after Intel revealed it was cutting 15 percent of its workforce. Intel is laying off more than 15,000 people as part of its $10 billion cost-cutting plan to restore financial stability following a second-quarter net loss of $1.6 billion. Gelsinger explained in his new memo that turning the agency into a subsidiary would “unlock significant benefits,” particularly the ability to explore and take on external funding directly.
Gelsinger said that there will be no changes in the leadership of the institute, but the subsidiary company will establish its own active board with independent directors to govern it. In accordance with CNBCIntel is even considering making the inventor a separate publicly traded company. Intel is in the midst of modernizing its existing arms and building new ones for its innovation business, costing the company billions of dollars, in an effort to catch up with chipmaking rivals TSMC and Samsung. The company reportedly spent nearly $25 billion a year on innovation over the past two years, but that hasn’t translated into profits.
In April, the company revealed in a presentation to investors that the business would post $7 billion in operating losses by 2023, more than the $5.2 billion in losses it incurred the previous year. It had revenue of $18.9 billion, down 31 percent from its 2022 revenue of $27.49 billion. Gelsinger warned investors at the time that Intel expects the operating loss of its core business in 2024 to be very large and does not expect to break even until 2027. The foundry’s finances are not the only problem of the class: the process called “18A” has reportedly failed the necessary tests to prove that it is ready for use in mass production.
In addition to announcing that the innovation business would become a subsidiary, Gelsinger also revealed in the memo that Intel would sell part of its stake in Altera, another chipmaker it bought for $16.7 billion in 2015.
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