Daniel Loeb, CEO of hedge fund Third Point LLC, wrote a letter to Intel chairman Omar Ishrak on Tuesday, calling on the chipmaker to hire an investment advisor to explore “ strategic alternatives ” aimed at regaining market share from competitors , especially Taiwan Semiconductor Manufacturing Company and Samsung.
The suggestions in the letter –including calls to the company to more seriously consider whether it will continue to make all of its chips in-house and get rid of “failed acquisitions” – could lead to major changes if Intel acts on them.
Intel said in a statement Tuesday that it welcomes input from investors. “In that spirit, we look forward to engaging with Third Point LLC to discuss their ideas for that purpose,” he said.
Intel has long been known for its chip design and manufacturingat home. But that approach has been questioned as Intel has fallen behind TSMC and Samsung in producing the most advanced microprocessors.
Intel has struggled to move from a 14-nanometer to a 10-nanometer chip in recent years, saying in July that its 7-nanometer chips (some of whichof his rivals though) would also be delayed.Meanwhile, Intel’s competitors continue to move forward developing even smaller, more powerful processors.
Intel CEO Bob Swan began suggesting this year that the company could outsource some of its chip production, although analysts had mixed opinions on what exactly such a move would look like. Intel’s challenges were a big boost for TSMC.
“The loss of manufacturing leadership and other missteps have enabled several semiconductor competitors to leverage TSMCs and Samsung’s process technology and gain significant market share at the expense of Intel,” Loeb wrote in the letter, which was publicly shared.
Third Point has a nearly $ 1 billion stake in Intel, a hedge fund spokesperson said. It is not currently among the top ten owners of Intel stock, according to data from CNN Business, but Loeb said in the letter that the fund is seeking approval from the Federal Trade Commission to acquire additional stock and maintain the ability to to submitnominees at Intel’s annual meeting in 2021 “we should feel reluctance to work together.”
Intel’s share ended close to 5% on Tuesday after news of Loeb’s letter. The chipmaker’s shares have fallennearly 19% this year, thoughthe PC market was boosted by the shift to working from home during the pandemic.
Meanwhile, Intel competitors have had a solid year. AMD, which is eating away Intel’s share of the PC and data center market, is up 85% since early 2020 (last year, the stock price also rose 150%). Nvidia, a leading manufacturer of graphics chips for the growing gaming market, is up 116% this year. And TSMC and Samsung stock prices are up 76% and 42% respectively.
Intel also took a hit recently when Appleannounced it will use its own processors, rather than Intel’s, in its new line of Macs.
“You need to be able to provide new, independent solutions to keep those customers instead of sending their production away,” Loeb said in his Tuesday letter. He added that if Intel falls too far behind semiconductor manufacturers in Asia, it could pose a threat to US national security (some US officials have expressed similar concerns about national security concerns if America falls too far behind in semiconductor manufacturing).
He also urged Intel to address the “human capital management problem”, saying that many talented chip designers and leaders have left the company and the remaining “are being demoralized by the status quo.”
Loeb did not comment on which of Intel’s acquisitions he considered “failed” bets. Among the recent purchases from chip makers: In 2015, the programmable chip firm bought Altera for $ 16.7 billion; In 2017, the self-driving car company bought Mobileye for $ 15 billion in 2017 and in May, the digital mobility company acquired Moovit for $ 900 million. The last two deals were to bolster the company’s efforts in self-driving technology.
