Can Intel Get its Groove Back?

Intel, which has lost some of its once near-universal allure to investors, may be getting a facelift. 

While the beleaguered chip firm has struggled in the booming AI chip market, incoming CEO Lip-Bu Tan is considering big changes to its manufacturing and AI strategies, Reuters reported earlier this week. 

The plans reportedly include cutting staff from the middle management layer of the business; improving its manufacturing arm, Intel Foundry, by garnering new customers including Microsoft and Amazon; and producing AI server chips as well as boosting AI units like software, robotics and models, according to Reuters. 

Building up its foundry business will likely be a major growth driver for Intel, said Dinakar Munagala, CEO and co-founder of AI chip company Blaize.  “With the economics of foundries … you have to keep it 98% busy in order to cover the investment, and AI is going to be one of the largest growth drivers for the foundry business,” said Munagala. 

• Gaining more customers and building up these foundries’ AI chip production could be key in “competing against TSMC in a meaningful way,” he added. 
• Munagala said that edge AI in particular, or the deployment of AI in the physical world, could be a big area of opportunity for the firm: “Smart cities, defense, education, healthcare — purpose-built silicon for the edge — I think can be a massive growth driver for Intel.” 

But making a comeback isn’t an overnight process, said Munagala. Intel has spent $50 billion on its foundry business in the last several years, and announced plans to spin out the unit last year. Because of the massive capital investments that go into foundries, it takes a long time to see the payoff, he said. 

“It’s a three, four, five years-plus kind of time horizon before you start seeing any results,” said Munagala. “It’s a slow-moving train.”