Intel drops 9% as chipmaker's foundry business axes projects, struggles to find customers

Core Viewpoint - Intel's stock fell 9% following the announcement of significant cuts to foundry costs, overshadowing a better-than-expected earnings report, raising concerns about the future of its chip manufacturing business [1][4]. Financial Performance - Intel reported adjusted earnings of 10 cents per share, exceeding the average analyst estimate of 1 cent, and provided a sales forecast for Q3 that also surpassed expectations [1]. - The company's net loss widened to $2.9 billion, or 67 cents per share, compared to a loss of $1.61 billion, or 38 cents per share in the same period last year [6]. Strategic Decisions - CEO Lip-Bu Tan indicated that the upcoming chip manufacturing process, 14A, will be developed based on confirmed customer commitments, stating there will be "no more blank checks" [2]. - Intel may "pause or discontinue" its foundry business if it fails to secure a customer for its next technology cycle [2][3]. - The company is halting chip facility projects in Germany and Poland and is slowing production at its Ohio plant, indicating a strategic shift in operations [4]. Market Position and Challenges - Intel's stock has lost 60% of its value in 2024, marking its worst year on record, largely due to its struggles in the artificial intelligence market, which is currently dominated by Nvidia [4]. - Analysts expressed concerns about the uncertainty surrounding Intel's product roadmaps and customer adoption due to the lack of external foundry commitments [5]. Workforce and Operational Changes - The company has implemented layoffs that will reduce its workforce by 15%, resulting in approximately 75,000 employees by the end of the year [6]. - CEO Tan acknowledged that previous investments were made without adequate demand, leading to a fragmented and underutilized factory footprint [6].