Daniel Loeb, chief executive of the hedge fund Third Point LLC, wrote a letter to Intel President Omar Ishrak on Tuesday asking the chip maker to hire an investment advisor to explore “strategic alternatives” aimed at recovering market share from competitors, especially from Taiwan Semiconductor Manufacturing Company and Samsung.
The letter’s suggestions – which include calls for the company to take more seriously if it continues to manufacture all of its chips in-house and divest itself of “failed acquisitions” – it can lead to big changes if Intel acts accordingly.
Intel said in a statement on Tuesday that it welcomed investors’ input. “In that spirit, we look forward to engaging with Third Point LLC in their ideas for this purpose,” the document said.
Intel is known for both designing and producing its chips internally. But that approach was questioned because Intel lagged behind TSMC and Samsung in producing the most advanced microprocessors.
Intel in recent years struggled to move from a 14 nanometer to a 10 nanometer chip and said in July that its 7 nanometer chips (some rivals have already done so) would also be postponed. Meanwhile, Intel’s competitors continue to advance the development of even smaller and more powerful processors.
Intel CEO Bob Swan began to suggest this year that the company could outsource part of the chip production, although analysts have differing views on exactly what the change would look like. Intel’s challenges were a major boost for TSMC.
“The loss of leadership in manufacturing and other errors allowed several semiconductor competitors to leverage the process technology prowess of TSMC and Samsung and gain significant market share at the expense of Intel,” wrote Loeb in the letter, which was shared publicly.
Third Point has a nearly $ 1 billion stake in Intel, according to a hedge fund spokesman. It is not currently among the top ten owners of Intel shares, according to data from CNN Business, but Loeb said in the letter that the fund is seeking approval from the Federal Trade Commission to acquire additional shares and preserve the option to file. appointed to the board at Intel’s 2021 annual meeting “if we feel reluctant to work together.”
Intel’s stock ended a nearly 5% high Tuesday after the news of Loeb’s letter. Chip maker shares fell almost 19% this year, although the PC market received a boost with the move to work from home during the pandemic.
Meanwhile, Intel’s competitors have had a solid year. AMD, which is consuming Intel’s share of the PC and data center markets, has increased by 85% since the beginning of 2020 (the share price also grew 150% last year). Nvidia, a leading producer of graphics chips for the growing gaming market, grew 116% this year. And TSMC and Samsung’s share prices rose 76% and 42%, respectively.
Intel also suffered recently when Apple announced that it will use its own processors instead of Intel’s in its new series of Macs.
“You should be able to offer new independent solutions to retain these customers, instead of sending them away from manufacturing,” said Loeb in his letter on Tuesday. He added that if Intel falls far behind semiconductor manufacturers in Asia, it could pose a threat to American national security (some American officials have raised similar concerns about national security issues if the United States falls far behind in semiconductor manufacturing) .
He also asked Intel to solve its “human capital management problem”, saying that many talented chip designers and leaders have left the company and those that remain are “demoralized by the status quo”.
Loeb did not elaborate on which of Intel’s acquisitions he considered “failed” bets. Among recent chipmaker purchases: in 2015, it bought programmable chip company Altera for $ 16.7 billion; In 2017, it bought the autonomous car company Mobileye for $ 15 billion in 2017, and in May, it acquired the digital mobility company Moovit for $ 900 million. The last two deals aimed to strengthen the company’s efforts in the segment of self-directed technology.
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