Chip stock Intel (INTC) is likely to pull back from fabrication efforts going forward. That might be a good play for Intel, but it is not a great look for the United States, noted a report released by several former members of Intel’s board of directors. But what could be done about this? The report made some suggestions, and Intel investors were glad to hear them. Ultimately, investors sent shares up fractionally in Wednesday afternoon’s trading.
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The report noted that Intel is increasingly pulling back from fabrication, as we have seen in recent weeks. And this is a problem; Intel is basically America’s chipmaker. The other major figures in the field, Taiwan Semiconductor Manufacturing Corporation (TSM) and Samsung (SSNLF), are both the product of other countries. Both of which have announced plans to build heavily in the United States, but these are not United States firms.
To that end, the report calls on the government to go after the plan that worked so well during COVID-19, a kind of “Operation Warp Speed II.” In this case, the government would once again establish public-private partnerships and help drive development toward making the United States a major chip force once more. Already, some framework has been laid for such a plan; President Trump, back in late March, created the United States Investment Accelerator at the Department of Commerce to help drive investment. Trump’s plans for a sovereign wealth fund might help here too.
“Intel Can’t Stop Cutting”
In the shorter term, however, Intel’s plans to cut costs have been proceeding apace with little in the way of relenting. Not only is Intel making obvious cuts, like letting people go and attempting to sell entire divisions, it is also making less obvious cuts like paring back operations that do not actually exist yet. Planned projects in Poland and Germany have been halted. The Ohio plant has been pushed back.
But Intel is likely to continue cutting back. With the 18A process set to remain completely internal, and the 14A process still in the development stage, it will likely be quite some time until Intel can get back to full-bore profitability. Thus, some are projecting that it will be at least 2026 before we see how well the 18A process works, and possibly 2029 until we see full profitability from Intel’s foundry operations. All this, of course, can change at any time.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 25 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 6.32% rally in its share price over the past year, the average INTC price target of $22.18 per share implies 8.7% upside potential.
