Investment Adviser Third Point Urges Intel to Consider Outsourcing Chip Manufacturing

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Image: Intel

Third Point, a major hedge fund and investment adviser based in New York, has penned a letter to Intel’s chairman in an attempt to convince the company to consider giving up on chip manufacturing and outsourcing production to rivals such as Samsung and TSMC. Third Point Chief Executive Daniel Loeb, whose company has a nearly $1 billion stake in Intel, pointed out various shortcomings in his letter to Intel Chairman Omar Ishrak, such as the fact that many of its best chip designers have already left after being “demoralized by the status quo.”

“Without immediate change at Intel, we fear that America’s access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more,” Loeb warned in a letter obtained by Reuters.

“Intel welcomes input from all investors regarding enhanced shareholder value,” the Santa Clara, California-based company said in a short statement. “In that spirit, we look forward to engaging with Third Point LLC on their ideas towards that goal.”

Over the summer, Intel CEO Bob Swan admitted that he was open to outsourcing chip manufacturing to other companies, but the process of selling its factories might be a struggle. As Reuters points out at the end of its report, these factories are finely tuned to Intel’s own design process. Additionally, a sell-off to overseas rivals could pose a national security concern in the eyes of regulators.

“We will continue to invest in our future process technology roadmap, but we will be pragmatic and objective in deploying the process technology that delivers the most predictability and performance for our customers, whether that be our process, external foundry process or a combination of both,” Swan wrote in a prepared statement for investors in July.

Tsing Mui
News poster at The FPS Review.

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