Third Point LLC, an activist hedge fund, is asking Intel to take action in the face of threats from Apple, TSMC, Samsung, and others. Intel has been losing its dominance in the chip industry rapidly as it faces competition from other companies that are either providing better performance or ahead when it comes to fabrication technology.
As per Reuters, Third Point’s Chief Executive Daniel Loeb wrote a letter to Intel Chairman Omar Ishrak, asking for action to help improve Intel’s position as a chipmaker. Third Point has $1 billion worth of stakes in Intel, which makes them an important stakeholder.
“Without immediate change at Intel, we fear that America’s access to leading-edge semiconductor supply will erode”
Intel has had a rough time recently, with its biggest competitor AMD catching up, and even exceeding its offerings when it comes to performance and efficiency. It has also lost ground to competitors like TSMC and Samsung Electronics when it comes to chip fabrication. The company has been unable to move to advanced manufacturing processes, that are already being used by its competitors. Apple has also stepped in as a competitor by announcing that it will be moving all its Macs to its own Arm-based chips, which are much faster and more efficient than Intel’s x86 processors.
Seeing these concerns, Third Point’s letter asks for immediate change at Intel to ensure that America’s edge at semiconductor creation does not erode away. Daniel Loeb wrote in the letter:
“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,”
The letter also asked Intel to retain an investment adviser to find strategic alternatives and figure out whether it should continue doing what it has been doing before, or if it should separate from its failed acquisitions. It also brings up the idea that Intel should separate its chip design efforts from its semiconductor fabrication business. Intel’s largest customers including Apple,
Microsoft is working on its own ARM chips following Apple’s footsteps, and Amazon is already designing its in-house solutions and outsourcing manufacturing to other fabrication plants, which is a business that Intel loses.
The letter also says that Third Point is open to submitting nominees for Intel’s board at its next annual meeting.
The market reacted positively to the news, and Intel’s shares had climbed after this news. Whether Intel will make any definitive changes that improve its position in the market is yet to be seen. However, it is obvious that Intel needs to make some changes to stay abreast of the competition.
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