Intel Corporation, once the undisputed leader in the semiconductor industry, is now grappling with a historic crisis that threatens its very existence. The company has turned to investment bankers from Morgan Stanley and Goldman Sachs for guidance as it faces a range of daunting challenges, including a disappointing earnings report that sent its shares plummeting to an 11-year low. As Intel’s leadership considers drastic measures, such as splitting its product-design and manufacturing businesses, industry observers and insiders are weighing in on what could be the most pivotal moment in the company’s history.

The Scale of the Crisis

The magnitude of Intel’s current predicament cannot be overstated. The company, which was once synonymous with innovation in the semiconductor industry, has seen its market value plunge by 60% this year, a stark contrast to the 20% gain experienced by the Philadelphia Semiconductor Index. “It’s been a difficult few weeks,” said Pat Gelsinger, Intel’s CEO, during a recent appearance at the Deutsche Bank Technology Conference. Gelsinger’s words are a stark understatement of the challenges the company faces, as it struggles to regain its footing in an industry that has moved on without it.

According to reports from Bloomberg, Intel is exploring several scenarios to stem its losses, including the potential separation of its product-design and manufacturing businesses—a move that would mark a significant shift in strategy. Woz Ahmed, a senior executive and advisor in the semiconductor industry, highlights the gravity of this potential move: “There is an argument for a firm to focus on doing one thing really, really well, so a split will have its proponents, and with some justification.” However, he also warns that splitting off the foundry division, which has been a cornerstone of Gelsinger’s strategy to restore Intel’s standing, could expose the company to even greater risks.

The Foundry Gamble: A Double-Edged Sword

One of the most controversial aspects of Intel’s recent strategy has been its push into the foundry business—manufacturing chips for outside customers, a domain long dominated by Taiwan Semiconductor Manufacturing Co. (TSMC). This move, aimed at turning Intel into a major player in the global foundry market, was supposed to be a key part of the company’s comeback. But as Dr. Rimoon Agaiby, VP of Samsung Semiconductor Foundry EMEA, points out, the foundry business is “one of the most complex businesses in the world,” requiring massive upfront capital investments without guaranteed market demand.

Intel’s foundry division has yet to secure a significant number of external customers, and it continues to be heavily reliant on Intel itself as its primary client. The division reported operating losses of $2.8 billion in the most recent quarter, raising questions about the viability of the business. “If IFS [Intel Foundry Services] is split, what currently hidden things in the rest of the business would now be exposed?” Ahmed asks, highlighting the potential pitfalls of such a move.

A Diminished Giant: Intel’s Shrinking Market Presence

The contrast between Intel’s current position and its past dominance is stark. As recently as 2021, Intel’s revenue was three times that of Nvidia, a company that now threatens to overshadow it entirely. Nvidia’s dominance in the GPU market, particularly in AI applications, has propelled it to a market position that Intel can no longer match. “Intel’s model is effectively broken. It’s fighting fires on too many fronts,” says Amir Anvarzadeh, a market strategist at Asymmetric Advisors.

Intel’s financial woes are compounded by the fact that it has fallen out of the top 10 largest chipmakers in the world by market value, a humiliating fall from grace for a company that once set the standard for the industry. The company’s second-quarter earnings report, which revealed a net loss of $1.61 billion, was a stark reminder of how far Intel has fallen. Even more concerning is the fact that analysts predict further losses in the coming year.

Strategic Options: A Path Forward?

As Intel’s board prepares to meet in September, the company’s leadership is reportedly considering a range of strategic options to address its flagging business. These options could include scrapping certain factory projects, pursuing mergers and acquisitions, or even splitting the company’s product-design and manufacturing businesses. While no major move is imminent, the discussions underscore the urgency of the situation.

Pranjit Kalita, Founder and CIO at Birkoa, suggests that Intel should abandon its foundry ambitions and focus instead on strengthening its GPU and data center businesses. “Starting a foundry business was silly. Intel should use the cash to hire talent within the GPU and data center business. Then they have some hope,” Kalita argues. His comments reflect a broader sentiment among industry experts that Intel’s current strategy is unsustainable.

Yet, the path forward is fraught with uncertainty. The company’s ambitious plans, such as the development of its Lunar Lake processor, may not be enough to restore investor confidence. Intel’s efforts to secure government subsidies, such as the $20 billion U.S. chip subsidy aimed at creating thousands of jobs, have also come under scrutiny in light of its recent downsizing plans.

The Human Cost: Job Cuts and Morale

One of the most immediate consequences of Intel’s crisis has been the decision to slash approximately 15,000 jobs, a move that has done little to reassure investors. The job cuts are part of a broader $10 billion cost-reduction plan, but they also reflect the deep challenges the company faces in remaining competitive. The layoffs have also raised concerns about morale within the company, as well as its ability to retain top talent during a time of upheaval.

Adding to the internal turmoil, Intel recently lost director Lip-Bu Tan, a semiconductor veteran who was brought in two years ago to help with the company’s turnaround. Tan’s abrupt departure has left a significant void in Intel’s leadership at a time when industry knowledge and experience are desperately needed.

A Company at a Crossroads

Intel’s current crisis represents the culmination of years of missteps, missed opportunities, and shifting market dynamics. As the company weighs its options and prepares to present its strategic plan to the board, the stakes could not be higher. The decisions made in the coming months will determine whether Intel can regain its footing and return to its former glory, or whether it will continue to decline, potentially becoming a cautionary tale in the history of the tech industry.

As Pat Gelsinger himself admitted, “We realize we have to operate efficiently with nimbleness, with urgency.” Whether Intel can rise to the challenge remains to be seen, but one thing is clear: the company is fighting for its life.