Intel Corporation, once the undisputed leader in semiconductor manufacturing, is once again in the spotlight as it prepares to release its second quarter earnings after markets close today. But beyond the top and bottom line figures, investors and analysts are increasingly focused on a more strategic and controversial element of the company’s transformation: its evolving chip manufacturing model.
At the heart of the conversation is Intel’s ambitious multiyear plan to shift from being a vertically integrated chipmaker to a hybrid model one that both designs and produces chips for itself and external clients, while also outsourcing more of its own production to third party foundries such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung.
The strategy represents a significant philosophical and operational shift for a company that long prided itself on controlling every stage of its chipmaking process. Now, with fierce competition from fabless chip designers like AMD and Nvidia, and with manufacturing giants like TSMC extending their technological lead, Intel is betting that increased flexibility and external partnerships can help it regain lost ground.
Investor Anxiety Grows Over Strategic Gamble
Intel’s so called “foundry first” approach, led by CEO Pat Gelsinger since his return in 2021, involves splitting the company into two distinct business units: one focused on designing chips and another (Intel Foundry Services, or IFS) aimed at becoming a world class contract chip manufacturer, serving clients including the U.S. Department of Defense, Amazon, and potentially even rivals.
But the path forward is far from certain.
“Intel is trying to play two hands at once compete with TSMC on foundry services, while simultaneously relying on TSMC for some of its most advanced chips,” said Stacy Rasgon, senior semiconductor analyst at Bernstein Research. “That creates inherent tension. The market wants to know: can they really excel at both?”
The dual track model has already drawn skepticism on Wall Street, where questions persist over whether Intel is spreading itself too thin. Building out a competitive foundry operation is a capital intensive, multibillion dollar endeavor that requires not just cutting edge technology but also deep customer relationships areas where Intel lags.
In the meantime, Intel has quietly ramped up its outsourcing. Key components of its latest consumer processor line, Meteor Lake, are already being fabricated by TSMC. This marks a dramatic departure from Intel’s historical practice of in house production and has raised concerns about strategic dependence on overseas suppliers, especially amid growing geopolitical tensions between the U.S. and China.
Eyes on Foundry Progress and Node Roadmaps
For this earnings cycle, analysts are paying close attention to any updates on Intel’s 18A and 20A process nodes two key milestones in the company’s manufacturing roadmap that are critical to its comeback narrative. While Intel has pledged to regain process leadership by 2025, delays or underwhelming performance in these nodes could seriously undermine confidence in that timeline.
Intel claims that its 18A process, expected to be ready for high volume manufacturing later this year, will leapfrog TSMC’s 3nm offerings in terms of power efficiency and transistor performance. But so far, few independent customers have publicly committed to using Intel’s new nodes, raising doubts about IFS’s competitiveness.
“IFS needs big wins not just government contracts or internal Intel volume, but marquee commercial clients who trust Intel to deliver advanced chips on time,” said Dan Nystedt, an independent semiconductor analyst based in Taipei. “Without that, it’s hard to see IFS achieving scale or profitability anytime soon.”
Broader Market Challenges: AI, PCs, and Data Centers
Beyond manufacturing, Intel faces a shifting market landscape. The ongoing boom in artificial intelligence, driven by demand for powerful GPUs and custom AI accelerators, has largely benefited Nvidia and AMD, whose chips dominate in training and inference workloads.
Intel is working to catch up, investing in its Gaudi AI accelerators and positioning its x86 CPUs as complementary solutions for AI heavy environments. But without access to the most advanced nodes or broader ecosystem adoption, Intel remains on the defensive in this space.
In the PC market, recent signs of stabilization have emerged following several quarters of inventory correction and weak demand. However, any recovery remains tentative. Analysts will be looking for signs of traction in Intel’s next generation client products, including Lunar Lake, which is designed to compete with ARM based offerings from Qualcomm and Apple.
Meanwhile, in the data center segment, Intel continues to battle AMD for market share. AMD’s EPYC chips, built on TSMC’s advanced nodes, have outperformed Intel’s Xeon line in both performance and power efficiency a critical factor for cloud providers and enterprises alike.
The Numbers Behind the Strategy
According to consensus estimates from Refinitiv, Intel is expected to post adjusted earnings of $0.12 per share on revenue of $13.1 billion for the second quarter. Those numbers would represent a modest sequential improvement, but a sharp drop compared to pre 2022 levels.
The bigger question remains whether Intel’s transformation strategy is gaining traction and if it can deliver long term shareholder value.
“Intel’s future hinges not just on beating short term expectations, but on restoring its reputation as a technological leader,” said Angelo Zino, senior equity analyst at CFRA Research. “If they can show progress on manufacturing and gain trust as a foundry partner, the market may finally start to buy into the turnaround story.”
Intel’s earnings call is scheduled for 5:00 p.m. Eastern. Investors will be listening closely for guidance on capital expenditures, foundry milestones, and customer wins, as well as any surprises that might shift the narrative heading into the second half of the year.
source: reuters.com