Intel Corporation (INTC.US) Decline Continues: PC Slowdown Is Just the Trigger, Foundry Predicament Is the Main Story

Title context: Intel Corporation (INTC.US) Decline Continues: PC Slowdown Is Just the Trigger, Foundry Predicament Is the Main Story Text: After worsening PC market prospects sent its stock plunging by the largest single-day drop since the 1970s, Intel Corporation (INTC.US) is under growing pressure to get its struggling foundry business truly off the ground. PC Market Deterioration Sends Intel Corporation Shares to Largest Single-Day Drop Since the 1970s For Intel Corporation, the foundry business has been slow to get going. Over the past five years, the company has spent a large portion of its US$108 billion in capital expenditure trying to challenge Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US), but it has yet to win major-name customers for its most advanced chips and is still mainly making chips for its own products. Wall Street is losing patience. After the U.S. government acquired a 10% stake in Intel Corporation in August 2025, NVIDIA Corporation (NVDA.US) invested another US$5 billion, and Intel Corporation's stock began to soar, rising sixfold over 10 months and peaking in June. Intel Corporation had finally found its place in the AI boom, supplying central processing units for agentic AI, while optimism about its wafer fab vision was also heating up. But last Thursday, Intel Corporation's situation took a sharp turn for the worse. The company said revenue this quarter would be US$1 billion to US$2 billion below analyst expectations, as the PC market continues to be hit by soaring costs for memory and other components. The PC business still accounts for about half of Intel Corporation's revenue, and consumers are increasingly reluctant to upgrade their devices. Last Friday, Intel Corporation's stock plunged 29%, its worst single-day performance since the 1970s; according to FactSet data, it fell 45% cumulatively in October, the largest monthly decline on record. In Monday trading, the stock fell another 8.8%. Intel Corporation's investments in the future should be starting to pay off. CEO Lip-Bu Tan said the global server processor market could expand by as much as fivefold over the next five years, to about US$200 billion. In the third quarter, Intel Corporation's data center business grew 78% year on year to US$7.3 billion. However, Intel Corporation said it cannot produce enough chips to meet demand, citing industry-wide supply constraints in wafers, substrates and memory, many of which are also hurting PC sales. Five Years of Investment Still Lacks Major Customers; 18A Capacity Forced to Shift to Older Nodes This has forced Lip-Bu Tan to make a difficult choice. To address the capacity shortage, Intel Corporation said it is shifting some capacity at its Oregon plant from advanced 18A chip wafers to the older Intel 3 node for its data center products. Intel Corporation is counting on 18A to attract external foundry customers, so the resource shift could complicate that effort. David Yoffie, a Harvard Business School professor who served on Intel Corporation's board for nearly three decades, said the latest move is hardly welcoming to potential foundry customers. "They worry that if Intel Corporation doesn't actually have excess capacity beyond its own needs, then it's not a very credible supplier," Yoffie said. If it fails to find a large-scale foundry customer within a year, "the pressure on Intel Corporation's economics will become more evident." An Intel Corporation spokesperson said in a statement: "Customer confidence in Intel Corporation's foundry is built on execution. We are delivering on our technology roadmap, demonstrating strong 18A performance and progress on 14A. We continue to see strong customer engagement and are focused on winning business through sustained execution." Intel Corporation is best known for its industry-leading central processing units (CPUs). Graphics processing units (GPUs) from NVIDIA Corporation and AMD (AMD.US) dominated the early AI boom because they excel at handling the large workloads of model training and chat Siasun Robot&Automation inference; Intel Corporation's CPUs are essential for running the virtual machines used by agentic applications such as Meta (META.US) Muse. Jordan Klein, an analyst at Mizuho Securities, said in an interview that as one of the few companies in the world capable of manufacturing and packaging advanced chips for its own products, Intel Corporation is "more able to control its own destiny" than most chipmakers. "If you don't have enough capacity, you leave revenue and money on the table," Klein said. Former CEO Pat Gelsinger, who was ousted at the end of 2024, aggressively pursued foundry investment during his four-year tenure to catch up after delays in 7nm and 10nm technology. These advanced process nodes are designed to fit more transistors on each chip. Lip-Bu Tan has taken a more cautious approach, limiting spending until customer demand is locked in. He said last Thursday that "several customers" would be announced over the next two quarters. Intel Corporation's 18A chips for its own use are in high-volume production in Arizona, and a second plant is under construction. The first structural truss of the new Ohio facility has just been installed, but the project is nearly five years behind schedule. Both Competitor and Foundry: Customer Concerns and Spinoff Debate Yoffie said another obstacle for Intel Corporation in attracting new customers is that chipmakers such as Broadcom Inc. (AVGO.US) and Qualcomm (QCOM.US) may be reluctant to make chips at a company that is also a competitor on the product side. "The right solution is for Intel Corporation to spin off its foundry business," Yoffie said, adding that this is "not only the best option, but possibly the only option." Klein said AMD may be the only major chipmaker not interested, because the two companies compete directly in the CPU market. He called it a "competition, confidentiality and privacy issue." AMD will report third-quarter results after the close on Tuesday. Yoffie said the United States needs Intel Corporation to succeed. "Ultimately, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR can build at most only 20% to 25% of its global capacity in the United States, and that will still take years," he said. "If the United States doesn't have its own foundry, then any GEO Group Inc political problem, any supply chain problem like during COVID, would be bad for the country and bad for the U.S. semiconductor industry."