Intel CEO lays out new steps to cut costs and bolster chip-making division
Summary
Company will make manufacturing operations an independent subsidiary and pause construction on plants in Europe and Asia.
Intel said it would further separate its chip-manufacturing and design operations as part of a new raft of measures to weather one of the most significant crises in its five-decade history.
Intel also is pausing factory projects in Germany and Poland for two years, and putting a manufacturing project in Malaysia on hold until demand picks back up, Chief Executive Pat Gelsinger said in an interview. The company also will slash the number of office locations, he said.
Gelsinger has been gradually separating Intel’s manufacturing and chip design operations, after making the company’s factories available to outside circuit designers shortly after taking the role more than three years ago. The manufacturing operations started to report separate financial results this year, but they will now be an independent subsidiary under Intel rather than an integral part of it.
The plan stops short of splitting off the manufacturing operations, which many analysts and investors have encouraged Intel to consider. It could pave the way for such a move later, although Gelsinger said the company was better as one.
Increasing the separation between the two operations will allow the manufacturing arm to get financing independently, allay customer concerns about its independence and bring it more culturally in line with a contract chip maker, Gelsinger said.
“We’re better together as well as increasingly distinct to meet those other opportunities and requirements," he said.
Intel also said Monday that it reached a multibillion-dollar agreement for Amazon.com’s cloud-computing arm to manufacture chips at Intel factories using an advanced chip-making technology expected to go into production next year. Intel will also make custom versions of its server chips for Amazon, it said.
Write to Asa Fitch at asa.fitch@wsj.com
