Major shareholders asked Intel to split chip design and production to deal with AMD and Apple

According to Reuters, hedge fund Third Point LLC is urging chip giant Intel to make a drastic change in response to threats from a series of companies, including Microsoft, Amazon, Apple, AMD, TSMC and Samsung.

In recent years, Intel’s in-house chip manufacturing capabilities have struggled to deliver the chips its customers need, with many products lagging behind rivals in speed and energy consumption. . While 2020 still delivers positive business results for Intel thanks to soaring laptop sales, the company is failing to keep up with the needs of the entire semiconductor industry and is facing a loss of customers, like Apple. The company has switched to using self-designed chips to replace Intel.

In a letter to Intel president, Omar Ishrak, the Third Point Foundation called for “urgent action” to restructure and seek alternative business strategies. First, Third Point asked Intel to immediately solve the ” problem of human resource management ” of the company. Many of Intel’s talented chip designers are said to have left the company because they were ” discouraged by the current state “, which was holding back their creativity.

The letter clearly emphasizes that Intel has lost its lead in microprocessor manufacturing to TSMC and Samsung, as well as losing important market shares in the PC and data center markets. materials into AMD’s hands. The company has also been criticized for its absence in emerging markets such as artificial intelligence. The letter said, ” Without immediate changes at Intel, we fear that America’s access to the top supply of semiconductors will corrode. ”

Johny Srouji, the head of Apple’s chip design division, was once with Intel.

Third Point encourages Intel to consider separating chip design and manufacturing, and looking to outside manufacturers for outsourcing – this is helping AMD ahead of Intel in architecture and manufacturing processes. chip. The company is also advised to eliminate failed mergers, such as the $ 16.7 billion acquisition of Altera in 2015.

Not only Apple, many of Intel’s major customers, including Microsoft and Amazon, are now starting to use self-designed chips to replace Intel chips. Third Point expressed concern that these self-designed chips would then be produced by chip outsourcing companies in Asia. As a result, Intel will have to come up with new solutions to retain its large customers, if it does not want them to look to other manufacturers.

Splitting chip design and manufacturing could help Intel address some of the threats it is facing. Reaching outside chipmakers to build their most advanced processors – a step Intel executives have strongly opposed – can help lower production costs and access advancements. new technology. Furthermore, opening up Intel’s chip manufacturing facility to outside partners could allow them to manufacture the custom processors their customers need.

However, Intel is often seen as being slow to respond to investor concerns. Therefore, the Third Point letter also emphasized that if the shareholder feels ” a reluctance to cooperate to resolve concerns “, they will nominate the candidate to the Intel board at the stock meeting. next year. Third Point is currently said to hold about $ 1 billion in Intel shares, a position where they can make these changes if needed.

Refer to MacRumors