Activist hedge fund Third Point has taken a nearly $1 billion stake in Intel and called on the chipmaker to consider divesting its manufacturing operations, calling into question a core part of its strategy.
The $15 billion company run by Daniel Loeb made a number of demands in a letter sent Tuesday to Intel chairman Omar Ishrak and seen by the Financial Times.
In the letter, Mr. Loeb said Intel was “once the gold standard for innovative microprocessor manufacturing,” but had fallen behind manufacturing competitors in East Asia, such as TSMC and Samsung.
His intervention comes as Intel faces a crucial decision about its future as a leading semiconductor manufacturer — a position it has held for decades and the source of its dominance in the PC era.
Bob Swan, the chief executive, has indicated he will decide early next year whether Intel should outsource a significant portion of its most advanced manufacturing, or even pull out of leading manufacturing altogether, after a series of missteps.
The company revealed in July that it had hit another hurdle in trying to move to the next generation of manufacturing technology, reducing features on chips to a width of just 7 nanometers.
That sparked a series of missteps that helped cement the lead taken by TSMC, the Taiwanese chip company that manufactures semiconductors on behalf of many of the world’s largest chip designers, including Nvidia, Qualcomm and AMD.
Intel has lost about $60 billion in market value in the past year, Loeb noted, as he focused on the chipmaker’s corporate governance.
“We cannot comprehend how the boards of directors that led to Intel’s demise have allowed management to squander the company’s market leadership while lavishly rewarding them with extravagant compensation packages,” wrote Mr. Loeb.
The hedge fund said it was particularly concerned about the loss of talent at Intel, saying the company had lost many of its best chip designers, while those who remained “are increasingly demoralized.”
Mr. Loeb said Intel should hire investment advisors to determine whether the company should both design and manufacture chips and divest failed acquisitions, though the letter does not point to specific examples.
“Intel welcomes input from all investors regarding enhanced shareholder value,” the company said in a statement. “In that spirit, we look forward to engaging with Third Point about their ideas for that purpose.”
Ending its efforts to physically create the most advanced semiconductors would mark a turning point in Intel’s fortunes, while also leaving the US without a top chip maker.
Loeb called the issues a “critical concern” that could have broader implications for U.S. national security if the U.S. were forced to rely on companies in “geopolitically unstable” regions to run “everything from PCs to data centers to critical infrastructure and more.” power.”
Intel shares rose more than 5 percent on news of Mr Loeb’s letter, first reported by Reuters.