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, urges 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.
Shares of Intel rose about 5% after charter reports appeared on Tuesday. Even with the concentration on Tuesday, Intel fell 18% in 2020, while AMD, Intel’s main US rival, has almost doubled in value and the S&P 500 has risen 15%.
“The loss of manufacturing leadership and other missteps have allowed several semiconductor competitors to leverage the process technology capability of TSMC and Samsung and gain significant market share at the expense of Intel,” Loeb wrote. Meanwhile, AMD has exhausted Intel’s share of its “core CPU and data center market,” he added.
In a statement, Intel said it would work with Third Point on its ideas to increase shareholder value.
“Intel Corporation welcomes the contribution of all investors in terms of enhanced shareholder value. In that spirit, we look forward to interacting with Third Point LLC on its ideas to achieve this goal,” Intel said in a statement.
Intel’s financial results have been hit in the last quarter by delays in 7-nanometer chips, which has allowed AMD to gain a dramatic advantage with its competitive chips. Processors are key to providing improved computing performance and meeting the demands of faster speeds.
AMD contracts with Taiwan-based TSMC, the world’s largest contract foundry and a company that also manufactures chips for Apple and Nvidia. Intel CEO Bob Swan Intel said in July that the company was open to outsourcing its manufacturing to keep pace with the current generation of chips.
Loeb indicated that the loss of Intel’s manufacturing capacity creates national security problems.
“Without immediate changes to Intel, we fear that America’s access to cutting-edge semiconductor supply will erode, forcing the United States to rely more on geopolitically unstable East Asia to power everything from PCs to to data centers to critical infrastructure and more, ”he wrote. .
Loeb added that Intel must be able to manufacture products that serve massive companies like Amazon, Apple and Microsoft, which develop their own chip designs and manufacture them overseas.
He said the company has more recommendations it would like to make to Intel in private. Third Point has also been presented to the Federal Trade Commission to take incremental action and preserve the option of recommending board members in 2021 “if we feel reluctant to work together to address the concerns we have raised in this letter.”
– CNBC’s Leslie Picker contributed to this report.
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