There is a seismic shift going on under the surface at chip stock Intel (INTC), and it all has to do with the 18A chip production process. A Reuters report suggests that this process may not actually be fired up, and instead be written off as a massive loss. The news hit investors like a bus, and shares plunged over 4% in Wednesday afternoon’s trading.
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The Reuters report notes that new CEO Lip-Bu Tan is looking to scrap the 18A process altogether and push forward with the 14A process instead. That process was originally slated to follow in a few years, earlier reports suggested. Apparently, the 18A process was starting to lose interest with new customers, and thus, Intel might be making the move. The report noted that Intel itself was the biggest customer for the 18A process.
Writing off the 18A process could cost anywhere from “hundreds of millions” of dollars to, potentially, outright billions. The board of directors may not actually make a decision on this process until sometime in autumn, as they would likely prefer to take more time to consider the matter. That is little surprise given the sheer amount of money involved. Intel, for its part, declared the report a “rumor” and would not comment, the Reuters report noted.
More Job Cuts Hit
Intel will be needing cash on hand if it decides to write off an entire production process, and it may get some of that from planned job cuts. Most of the job cuts take place at Intel’s headquarters location in Santa Clara, reports note. There, 57 jobs will be lost. Another 49 jobs will be lost from Intel’s Juliette Road location, and another “handful” to go from both Laurelwood Road and Bowers Avenue operations. A total of 110 jobs will be lost as a result of this round of layoffs, reports noted.
The cuts will take effect July 15, and the layoffs are permanent. This follows an earlier round of layoffs at Intel in which it shuttered its automotive operations.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 26 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 26.83% loss in its share price over the past year, the average INTC price target of $21.30 per share implies 3.09% downside risk.
