Intel rethinks Chip Strategy: Focus Shifts to 14A, 18A Commitments Honored

Intel Corporation (INTC) is at a strategic crossroads as CEO Lip-Bu Tan considers halting the marketing of its 18A chip manufacturing process to new foundry clients. Rather, the company may intensify its focus on the development of its 14A technology, aiming to better compete with industry giant Taiwan Semiconductor Manufacturing Co (TSM) and attract major clients like Apple (AAPL) and nvidia (NVDA).

Potential Shift in Chip Manufacturing Strategy

since taking the helm in March,Tan has observed that the 18A process,a project championed by former CEO Pat Gelsinger,has struggled to secure new external customers. This has prompted a re-evaluation of Intel’s approach to chip manufacturing and foundry services.

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Focus on 14A Node

The potential shift would involve accelerating the development of Intel Foundry’s 14A node. Intel believes this technology can more effectively rival TSMC, the world’s leading semiconductor manufacturer, and attract high-profile clients seeking advanced chip solutions.

Financial Implications and Board Decision

Shelving external sales of 18A and its 18A?P variant could lead to a one-time write-off for Intel, potentially ranging from several hundred million to over a billion dollars. The Intel board is expected to make a final decision on the matter during its fall meeting, highlighting the complexity and significant financial stakes involved.

Pro Tip: Investors should monitor Intel’s Q3 and Q4 earnings calls for updates on the board’s decision and any financial impacts related to the potential shift in strategy.

commitments Honored

despite the potential shift, Intel has affirmed its commitment to honoring existing 18A agreements with key clients such as Amazon (AMZN) and Microsoft (MSFT). Intel also remains the primary user of the 18A process, with its Panther Lake processors slated to utilize this node in 2025.

Analyst Outlook for Intel Corp

Financial analysts offer varied perspectives on Intel’s stock. The average target price for Intel Corp is $21.20, based on estimates from 32 analysts, with a high estimate of $28.30 and a low estimate of $14.00.This average target suggests a potential downside of -7.20% from the current price of $22.85.

GuruFocus estimates the GF Value for Intel Corp in one year to be $23.86, indicating a potential upside of +4.42% from the current price. the GF value is an estimate of fair value based on ancient multiples, business growth, and future performance estimates.