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, is urging Intel’s board of directors to hire an investment advisor to explore “strategic alternatives” after the chipmaker lost market share to TSMC, Samsung and AMD.
One of the considerations should be divesting “failed acquisitions,” Loeb wrote in a letter to Intel’s board on Tuesday. CNBC looked at a copy of the letter. Known for its activism, Third Point recently took a significant $ 1 billion stake in Intel, Reuters said.
Intel shares were up about 5% after reports of the letter surfaced Tuesday. Even with Tuesday’s rally, Intel is down 18% in 2020, while AMD, Intel’s biggest US rival, has nearly doubled in value and the S&P 500 is up 15%.
“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. Meanwhile, AMD has eaten Intel’s share of its “core PC and data center CPU markets,” he added.
In a statement, Intel said it would work with Third Point on its ideas to increase shareholder value.
“Intel Corporation welcomes input from all investors regarding increased shareholder value. In that spirit, we look forward to engaging with Third Point LLC to discuss their ideas for that purpose,” said Intel’s statement.
Intel’s financial results have been hurt over the quarter by delays in 7 nanometer chips, which allowed AMD to take a dramatic lead with its competing chips. The processors are essential for delivering improved computing performance and meeting the demand for higher speeds.
AMD contracts with Taiwanese TSMC, the largest contract foundry in the world and a company that also makes chips for Apple and Nvidia. Intel CEO Bob Swan Intel said in July that the company was open to outsourcing production to keep up with the current generation of chips.
Loeb said Intel’s loss of manufacturing skills is a matter of concern for national security.
“Without immediate change at Intel, we fear America’s access to leading semiconductor supplies will crumble, forcing the US to rely more heavily on geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more. he wrote. .
Loeb added that Intel should be able to make products for large companies such as Amazon, Apple and Microsoft, who develop their own chip designs and have them manufactured abroad.
He said the company has more recommendations it would like to make to Intel privately. Third Point has also filed with the Federal Trade Commission to acquire incremental shares and retain the option to recommend board members in 2021 “should we feel an unwillingness to work together to address the concerns we have in this letter. have voiced “.
– CNBC’s Leslie Picker contributed to this report.
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