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Summary
- Over the years, Intel has lost its designation of a leading semiconductor company to Asian rivals. Back at home, it is losing market share to AMD, and Qualcomm.
- Third Point LLC has recommended Intel to consider a strategic review to evaluate its options.
Intel Corporation shares closed 4.93% on Tuesday in the US after the company acknowledged to improve ‘shareholder value’ and work with Third Point LLC towards the goal of enhancing shareholder value.
Source: MegapixlTM
Third Point LLC is a hedge fund based in New York, USA. Founded in 1995, the firm is headed by Founder and Chief Executive Daniel S. Loeb. It is focused on value-oriented and event-driven investments.
Intel shares have significantly underperformed their peers, including QUALCOMM, Inc., NVIDIA Corporation, Taiwan Semiconductor Manufacturing Company (TSMC), Samsung, and Advanced Micro Devices, Inc.
Intel Vs Peers (Source: Thomson Reuters)
Daniel S. Loeb wrote a letter to Intel Chief Executive Dr Omar Ishrak urging the firm to take ‘concrete step’ in response to challenges. He pointed out that Intel is still languishing with a 14-nanometer nod since 2013, while TSMC and Samsung have moved to 5-nanometer.
Intel has also lost its position of an innovative microprocessor manufacturer to TSMC and Samsung and is targeting 7-nanometer node in late 2022 or early 2023, which would put place the firm years behind its Asian peers.
Source: MegapixlTM
At home, the company has been losing market share to AMD and NVIDIA, which have been outsourcing manufacturing to other countries. Mr Loeb also said outsourced manufacturing increases the country’s reliance on geopolitically unstable East Asian region.
Third Point LLC has recommended Intel to hire an investment advisor for strategic alternatives. The hedge fund asked whether the chipmaker should remain an integrated device manufacturer with design and manufacturing capability.
Mr Loeb also pointed out that Intel could consider divesting failed acquisitions. He also noted additional challenges that are emerging for the chipmaker as Apple, Microsoft and Amazon have embarked on designing their in-house chips and outsource designs for manufacturing.
He further suggested that Intel should be able to retain these customers with independent manufacturing solutions. Third Point LLC intends to engage in a private discussion with Intel Corporation and may seek a Board nomination at 2021 Annual General Meeting.
