Intel, once a symbol of American technological prowess, has lost its luster, falling behind Asian rivals like TSMC and Samsung. With a market capitalization of just over 90 billion USD this year, far below AMD (270 billion USD) and Nvidia (4,230 billion USD), Intel is facing an unprecedented crisis.

Intel's stock (INTC.O) plummeted 8% on 25/7 after the company warned it would pull out of chip manufacturing if it couldn't secure major clients. This move could be a drastic measure by new CEO Lip-Bu Tan to cut spending and revive the struggling American icon, according to Reuters.

Mr. Lip-Bu Tan stated he would continue to downsize Intel's workforce, halt operations at two European plants, and slow down operations at another in Ohio, abandoning his predecessor's strategy, which relied on building expensive facilities to restore a manufacturing edge.

A visitor examines a chip at the Intel booth at an innovation event in Hanoi, 10/2024. Photo: Luu Quy

The plan to implement such extreme measures comes after an unexpected adjusted loss in Quarter II and a forecast of a larger-than-expected loss in Quarter III. The weak financial situation suggests Intel is in deeper trouble after years of mismanagement that eroded its PC and data center market share and left it with almost no presence in the AI market.

For decades, Intel was the backbone and symbol of Silicon Valley, with its central processing units (CPUs) dominating the PC and server markets. But since the mid-2010s, delays in developing the 10nm process, while TSMC rapidly deployed 7nm and 5nm nodes, have caused Intel to lose its competitive edge. According to Reuters, Intel has been overtaken by AMD in the PC and server chip segment and is almost absent from the AI chip market, where Nvidia dominates.

Former CEO Pat Gelsinger's "IDM 2.0" plan, aimed at transforming Intel into a chip foundry to compete with TSMC, consumed tens of billions of dollars, but Intel Foundry's 2024 revenue reached only 17.5 billion USD, down 7% year-on-year, while TSMC holds nearly 60% of the global chip foundry market. Reliance on TSMC, with 30% of Intel's chips outsourced to them in 2024, not only weakens Intel but also threatens US national security.

Former CEO Craig Barrett, in an exclusive interview with Fortune, proposed a bold 40 billion USD plan to revive Intel and solidify America's leadership in advanced chip manufacturing. This plan is not just an escape route for Intel but also a strategy for the US to regain its position in the global technology race amid fragile supply chains and rising geopolitical tensions.

According to Fudzilla, Craig Barrett, who led Intel through the dot-com bubble crisis, believes Intel is the only US company capable of producing advanced chips, playing a vital role in America's technological security and industrial independence. However, to compete with TSMC and Samsung, Intel needs a massive 40 billion USD investment to build giga-fabs and develop technologies like the 14A process.

Mr. Barrett proposed creating a groundbreaking public-private partnership (PPP), calling on leading US tech giants such as Nvidia, Apple, Google, Amazon, Meta, Qualcomm, AMD, and Microsoft to contribute capital. If each company invests 5 billion USD, Intel will have sufficient resources to rebuild its production capacity and innovate technologically.

"These companies are not just investing financially but also protecting their own strategic interests," Mr. Barrett emphasized, referring to the risks from dependence on TSMC, especially in the context of potential conflict in the Taiwan Strait. Jensen Huang, CEO of Nvidia, warned at a 2024 conference: "The US needs a domestic solution to ensure supply chain security".

Barrett's plan doesn't stop at raising capital. He stressed that Intel must lead in technology instead of chasing competitors. The company has made significant strides with high NA EUV lithography and backside power delivery, enough to compete with TSMC at the 2nm process. However, Barrett criticized the current leadership, under CEO Lip-Bu Tan, for hesitating to invest in the 14A process until securing customer commitments. "In the semiconductor industry, the best technology wins," he asserted, urging Intel to boost research and development (R&D) immediately.

Mark Liu, Chairman of TSMC, noted that the cost of building an advanced chip factory exceeds 20 billion USD, and only large-scale companies can maintain their leading position. This warning underscores the urgency of the 40 billion USD investment proposed by Barrett.

To incentivize domestic investment, he also suggested imposing significant tariffs on imported high-end chips, similar to how the US government protected the steel and aluminum industries. According to him, this policy would encourage tech companies to invest in Intel and prompt TSMC and Samsung to accelerate the construction of factories in the US.

According to Finance.yahoo, TSMC has committed to investing over 165 billion USD in the US, but most of it is focused on non-leading-edge processes, leaving the US still reliant on Taiwan for 3nm and 2nm chips.

The CHIPS Act, with 52.7 billion USD allocated in 2022, is an important foundation, but Mr. Barrett emphasized that the 10 billion USD subsidy Intel is negotiating is only a small fraction of the actual need. Gina Raimondo, US Secretary of Commerce, stated in 2024: "The CHIPS Act is a first step, but close coordination between the government and the private sector is needed to regain leadership".

A controversial point in Mr. Barrett's plan is his opposition to splitting Intel into two separate companies: chip design and manufacturing. He called this "the dumbest idea," according to Fortune, arguing that only Intel, TSMC, and Samsung have enough revenue to invest in the necessary R&D. If separated, Intel's manufacturing arm risks repeating the fate of GlobalFoundries, which fell behind after splitting from AMD in 2008.

Mr. Barrett emphasized that the split would undermine the goal of US semiconductor technology leadership. Stacy Rasgon, an analyst at Bernstein, agreed: "A split might bring short-term benefits but would make Intel less competitive in the long run." Mr. Barrett also criticized the current board of directors, calling them "inexperienced academics," and suggested reinstating Pat Gelsinger, who made progress with 18A technology before being fired in 2024.

Experts believe that Barrett's vision is not only to save Intel but also to build a "TSMC of America" - a globally competitive domestic chip manufacturer. TSMC currently controls over 90% of the advanced chip market, creating a strategic weakness for the US. A strong Intel would help reduce dependence on Taiwan, strengthening national and economic security.

Willy Shih, a professor at Harvard Business School, stated: "Intel is America's only chance to build a chip manufacturing hub. Barrett's plan is a wake-up call about the urgency.".

The 40 billion USD plan proposed by Mr. Barrett is also a call to action to rescue Intel and shape the future of American technology. However, success depends on swift coordination between the government, tech companies, and Intel itself.

Phong Lam (according to Reuters, Fudzilla, Fortune)