Analyst Warning for Intel: Nvidia, AMD and other customers don't want to use Intel's manufacturing services because…
Intel CEO Lip-Bu Tan delivers a speech during the Computex 2025 exhibition in Taipei, Taiwan, Monday, May 19, 2025. (AP Photo/Chiang Ying-ying)
Major chip companies including Nvidia and AMD are reluctant to use
Intel
's manufacturing services because they compete directly with Intel's chip-design business, creating a fundamental conflict of interest that threatens the struggling chipmaker's turnaround efforts.
Gus Richard, a Northland Capital Markets analyst quoted by the Wall Street Journal, said Intel "can create a design environment that works for Intel, but it's hard if not impossible for anybody else to use." The warning highlights how Intel's unified structure prevents its factories from competing effectively with contract manufacturers like Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung.
Intel's manufacturing operation also lacks the customer-service culture that has made TSMC successful with contract clients, according to the WSJ analysis. The company has struggled to adapt its factories, originally built exclusively for Intel chips, to serve external customers' diverse needs.
Breakup pressure mounts as losses spiral
The customer acquisition problems have contributed to massive financial losses at Intel's chip factories, which posted a $2.32 billion operating loss in Q1 2025 following $13.4 billion in losses last year. CEO Lip-Bu Tan faces mounting pressure to break up the company as its unified structure appears increasingly unsustainable.
Separating Intel's chip-design operations from its manufacturing facilities could solve the critical business problems that have plagued turnaround efforts under former CEO Pat Gelsinger, who was ousted in December after three unsuccessful years, the WSJ reported.
Intel's stock has plummeted 65% over five years while rivals AMD more than doubled and Nvidia surged 16 times in value, reflecting investor frustration with the 56-year-old semiconductor giant's struggles.
Federal support provides limited relief
Intel began preparing for potential separation in September by establishing its factories as a separate subsidiary with independent directors.
CFO David Zinsner
told the WSJ in January that the company was exploring strategic investments from financial partners and customers.
Despite maintaining nearly $9 billion in cash, manufacturing assets valued at over $100 billion, and receiving $7.865 billion in federal
CHIPS Act funding
, reaching the billions in new revenue needed to make the manufacturing arm profitable remains uncertain.
Intel hopes the unit will break even by 2027, having secured customers including Microsoft and Amazon's cloud division, though these represent smaller clients compared to major chip designers.
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