Intel Shifts Foundry Capacity to Older Node Amid PC Market Downturn and Supply Constraints

Stock Plunge Amid PC Market Woes

Intel experienced its steepest stock drop since the 1970s, with a 45% plunge in October, following a revised revenue outlook. The company announced that its current quarter's revenue would be $1 billion to $2 billion below analysts' estimates. This downturn is largely attributed to a struggling PC market, where consumers are delaying upgrades and facing increased costs for memory and other components. The PC segment still accounts for approximately half of Intel's revenue.

Foundry Business Under Pressure

Intel's foundry business, which aims to compete with Taiwan Semiconductor Manufacturing Co., has struggled to secure marquee customers for its most advanced chips. Despite significant capital expenditures over the past five years, Intel primarily manufactures chips for its own products. The recent stock decline intensifies pressure on the company to establish its foundry operations.

Capacity Shift to Address Demand

In response to industry-wide supply constraints for wafers, substrates, and memory, Intel is reallocating manufacturing capacity. The company is shifting some of its Oregon factory capacity from producing wafers for its advanced 18A chips to making more wafers on an older node, known as Intel 3. This change is intended to meet demand for its data center products, which saw 78% growth in the third quarter.

Implications for Advanced Chip Foundry

The decision to shift resources away from 18A chips could complicate Intel's efforts to attract external foundry customers. The 18A node is central to Intel's strategy for competing in the advanced chip manufacturing market. While addressing immediate demand for data center components, this reallocation may delay progress in securing third-party clients for its leading-edge technology.