Intel plunges as it weighs exit from manufacturing chips


Intel Corp. Chief Executive Officer Bob Swan spent almost an hour on Thursday discussing an idea that would once have been unthinkable for the world’s largest semiconductor company: Not manufacturing its own chips. Intel’s shares tumbled as much as 18% Friday morning. Outsourcing is the norm in the $400 billion industry nowadays, but for 50 years Intel has combined chip design with in-house production. And until recently, Intel was even planning to churn out processors for others.

“To the extent that we need to use somebody else’s process technology and we call those contingency plans, we will be prepared to do that,” Swan told analysts on a conference call, after the company warned of another delayed production process. “That gives us much more optionality and flexibility. So in the event there is a process slip, we can try something rather than make it all ourselves.”

As the article says, outsourcing is the norm so, in the long run, this is unlikely to hurt Intel significantly. It will be their delays in production that hurt them.