Intel (INTC, Financial), experiencing a 40% drop in share value this year, has faced challenges including revoked export licenses to China and a reduction in Q2 revenue guidance. However, a positive development has emerged as Apollo Global Management (APO, Financial) is close to finalizing an $11 billion investment to support a new manufacturing facility in Ireland for INTC.
This investment is a significant endorsement of Intel's "IDM 2.0" strategy, aimed at regaining technology leadership and transitioning to a foundry business model. This move is crucial as Intel faces increasing competition from NVIDIA (NVDA, Financial) and Advanced Micro Devices (AMD, Financial), who are advancing their positions in the AI sector.
Comparatively, AMD's data center segment achieved a record $2.3 billion revenue in Q1, up 80% year-over-year, overshadowing Intel’s 5% growth to $3 billion in the same sector. Intel’s financial struggles are highlighted by a 26% drop in FY23 operational cash flow to $11.5 billion, complicating funding for its extensive $100 billion expansion plans in Arizona, Ohio, New Mexico, and Ireland.
Government support is also playing a role, with the White House providing up to $8.5 billion in CHIPS Act funding to INTC. Despite these efforts, Intel aims to become the world's second-largest wafer foundry by 2030, a goal that remains challenging as its foundry business recently reported a 10% decrease in revenue to $4.4 billion and a widening operating loss.
On a brighter note, Intel’s production technology, 18A, has attracted six customers, including Microsoft (MSFT, Financial), signaling potential for recovery and growth.
While Apollo's investment is a crucial step for Intel's transformation into a foundry leader, the journey is expected to encounter further challenges and milestones.
