Intel CEO Robert Swan speaks at the Rakuten Optimism event in Yokohama, Japan, on July 31, 2019.
Tomohiro Ohsumi | Getty Images
Third Point, the hedge fund led by Dan Loeb, is asking Intel’s board of directors to hire an investment advisor to explore “strategic alternatives” after the chip maker lost market share to TSMC, Samsung and AMD.
Among the considerations should be the divestment of “failed acquisitions,” Loeb wrote in a letter to Intel’s board on Tuesday. CNBC saw a copy of the letter. Third Point, known for its activism, recently acquired a significant stake in Intel worth $ 1 billion, according to Reuters.
Intel’s shares rose about 5% after reports of the letter emerged on Tuesday. Even with Tuesday’s high, Intel fell 18% in 2020, while AMD, Intel’s main rival in the United States, almost doubled in value and the S&P 500 rose 15%.
“The loss of manufacturing leadership and other errors has allowed a number of semiconductor competitors to leverage the process technology prowess of TSMC and Samsung and gain significant market share at the expense of Intel,” wrote Loeb. Meanwhile, AMD has consumed Intel’s share of its “PC core CPU and data center markets,” he added.
In a statement, Intel said it would work with Third Point on its ideas to increase shareholder value.
“Intel Corporation appreciates the contributions of all investors in terms of enhanced shareholder value. In that spirit, we look forward to engaging with Third Point LLC in their ideas for this purpose,” said the Intel statement.
Intel’s financial results were hurt in the last quarter by delays in the 7 nanometer chips, allowing AMD to gain a dramatic advantage with its competitive chips. Processors are essential to provide better computing performance and meet the demands for faster speeds.
AMD has contracts with TSMC, based in Taiwan, the largest contract foundry in the world and a company that also makes chips for Apple and Nvidia. Intel CEO Bob Swan Intel said in July that the company was open to outsource its manufacturing to keep pace with the current generation of chips.
Loeb indicated that the loss of Intel’s manufacturing prowess raises national security issues.
“Without an immediate change at Intel, we fear that America’s access to the supply of cutting-edge semiconductors will erode, forcing the US to rely more heavily on geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and much more. more “, he wrote.
Loeb added that Intel needs to be able to make products that serve large companies like Amazon, Apple and Microsoft, which are developing their own chip designs and manufacturing them abroad.
He said the company has more recommendations that it would like to make to Intel in particular. Third Point also filed a lawsuit with the Federal Trade Commission to acquire incremental shares and preserve the option to recommend board members in 2021 “if we are reluctant to work together to address the concerns we raised in this letter.”
– Leslie Picker from CNBC contributed to this report.
TO WATCH: The nation has to act as a team