Risk/Reward Rating: Positive
Intel recently announced an ambitious growth plan and a recommitment to its integrated device manufacturing (IDM) business model. Under new CEO Pat Gelsinger, Intel has unveiled plans to invest $20 billion to build two new semiconductor fabs in Arizona to accelerate this new IDM 2.0 strategy. This will enable Intel to continue to build the majority of its products in Intel fabs providing a competitive advantage in an age of constrained semiconductor supply and geopolitical tensions.
The COVID crisis and resulting supply chain disruptions highlighted the strategic business value of supply chain control and flexibility going forward. The new fabs will allow Intel to offer world-class foundry services to industry participants. When combined with Intel’s in house needs, this will enable Intel to maximize utilization and efficiency of the new plants. Additionally, Intel will continue to utilize and grow the use of third-party foundries enabling diverse and agile product capabilities.
Intel has had its fair share of product roadmap missteps in recent times as evidenced by the delayed transition to 7nm technology. With new leadership and a sharpened focus on executing within the short- and long-term strategic plans, Intel has the necessary assets and resources to take a leadership role once again in the semiconductor space. The current valuation of the company embeds low expectations for success in returning the company to a leadership position and growth trajectory.
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