By Usha Muthusamy
Intel, once the undisputed leader in semiconductor manufacturing, is undergoing a profound transformation of its core business. Driven by years of market share erosion and manufacturing delays, the company is now navigating a critical re-evaluation of its strategy under the leadership of new CEO Lip-Bu Tan. This shift is not merely an adjustment but an existential response to a prolonged period of internal manufacturing underperformance that allowed competitors to gain significant ground.
The initial catalyst for this change was the “IDM 2.0” strategy, introduced in 2021 by former CEO Pat Gelsinger. This comprehensive approach sought to revitalize internal manufacturing capabilities, expand reliance on third-party foundries, and establish Intel Foundry Services (IFS) as a new, independent business unit dedicated to producing chips for external clients [1, 2, 3].
A Changing of the Guard and a Refined Vision
Pat Gelsinger’s tenure concluded in December 2024, reportedly due to the board’s frustration with the pace of his turnaround plan [5, 6, 8]. In March 2025, Lip-Bu Tan, a veteran of the semiconductor industry with a strong background in electronic design automation (EDA) software and venture capital, stepped into the CEO role [7, 8]. Tan’s appointment signals a clear focus on improving execution and refining the existing strategic direction, rather than initiating a complete directional change [7].
Under Tan’s leadership, Intel is prioritizing rigorous cost streamlining, enhancing operational efficiency, and fostering a renewed engineering focus [9, 10, 24]. These initiatives include flattening the organizational structure and lowering operating expense targets [9, 23]. A significant operational impact has been the announcement of substantial workforce reductions, with layoffs affecting an estimated 15-20% of factory workers, potentially impacting upwards of 10,000 jobs, slated for July 2025 [9, 24]. The focus during these reductions is on retaining top engineering talent, critical for future innovation [24].
The Proposed “Big Shift” in Foundry Focus
A central element of Tan’s strategic review specifically targets Intel’s nascent foundry business, involving a significant re-evaluation of the advanced 18A process node. While 18A chips will continue to be manufactured for existing internal commitments, such as the upcoming Panther Lake CPUs, Intel is actively exploring options to “stop marketing 18A to new customers” externally [10, 11]. This potential pivot suggests a shift in strategic emphasis. Instead, resources and marketing efforts may be redirected towards the 14A process node, where Intel believes it possesses a stronger competitive edge against TSMC, its primary rival in the advanced foundry space [10, 11].
This proposed adjustment is driven by a pragmatic assessment: the 18A process node has “failed to attract enough external customers” and has experienced “delays and low adoption” [11]. Tan’s strategy is fundamentally centered on improving customer trust, restoring financial stability to the foundry operations, and making more strategic and realistic decisions about technology investments and target market segments [8, 9, 11].
The decision to continue manufacturing 18A for internal products like Panther Lake, even if external marketing is scaled back, highlights a critical interdependence [10, 11, 20, 21]. Intel’s internal product roadmap is now directly tied to the operational efficiency and yield improvements of its foundry division. This internal volume provides a necessary base for fab utilization and process refinement, effectively making Intel’s internal product divisions crucial “anchor tenants” for its advanced fabs.
Financial Realities and Market Position
The financial performance of Intel Foundry Services (IFS) reflects the substantial investments and challenges associated with establishing a new, competitive foundry business. In Q3 2024, Intel Foundry reported revenues of $4.4 billion, an 8% year-over-year decline. This trend continued into Q4 2024, with revenues of $4.5 billion, a 13% year-over-year decrease [15]. While Q1 2025 saw a slight increase to $4.7 billion (+3% year-over-year), the foundry division has consistently operated at a loss, marking its fourth consecutive quarterly loss [15, 23]. Operating losses for Intel Foundry are projected to peak in 2024, with the company targeting to achieve break-even operating margins by mid-2027 [12, 20, 21].
In the competitive global foundry market, Intel’s Foundry Services did not rank among the top ten players in Q3 2024 [19]. TSMC maintains a dominant position with a 64.9% market share, while Samsung holds 9.3% in Q3 2024 [19]. Both have effectively overtaken Intel in advanced chip manufacturing due to Intel’s past process delays [18, 19].
Intel’s market share in client and server CPUs has also seen a notable decline, plummeting from approximately 80% in 2015 to around 60% by 2024 [14]. The company faces fierce competition from AMD, whose latest processors frequently match or exceed Intel’s offerings [14].
Significance and Geopolitical Implications
The strategic shifts underway at Intel carry profound significance not only for the company itself but also for the broader semiconductor industry and global geopolitical dynamics. The success of these manufacturing shifts is existential for Intel, with long-term financial recovery and sustained competitiveness hinging on IFS scaling profitably and Intel improving margins across its product segments [12].
Intel’s manufacturing expansion, particularly its investment in new fabs in the U.S. and Europe, adds critical global foundry capacity, which could contribute to easing future semiconductor supply constraints [1, 2, 3]. These efforts directly support the geopolitical imperative of supply chain diversification, reducing vulnerability to regional geopolitical tensions, natural disasters, and trade disputes [16]. The ability to produce leading-edge chips domestically mitigates vulnerabilities vital for critical infrastructure, defense systems, and overall economic security.
However, this national interest also creates a tension with pure market economics. While Intel’s foundry strategy benefits from government support, these tailwinds are often insufficient to fully overcome the formidable market headwinds posed by highly efficient and established Asian competitors [16]. This dynamic suggests that continued government incentives and strategic partnerships may be necessary to ensure the long-term viability and competitiveness of domestic chip manufacturing initiatives like Intel’s foundry business, balancing national security imperatives with market realities.
Future Outlook
Intel’s exploration of a significant shift in its chip manufacturing business, spearheaded by Lip-Bu Tan, represents a critical juncture. This transformation is a pragmatic evolution of the “IDM 2.0” strategy, driven by the undeniable market realities of past manufacturing missteps and intense global competition. The company is navigating a complex landscape, simultaneously striving to revitalize its internal fabrication capabilities, strategically leverage external foundries, and establish a profitable, competitive Intel Foundry Services.
The path forward for Intel is fraught with challenges, demanding relentless execution and sustained operational excellence. Ultimately, Intel’s trajectory will be determined by its ability to consistently deliver on its ambitious process roadmap, convert its technological advancements into compelling products, and, crucially, convince external customers that IFS can be a reliable and competitive manufacturing partner. The ongoing strategic adjustments under Lip-Bu Tan signal a determined effort to adapt to these realities, positioning Intel for a long and arduous, but potentially transformative, journey in the evolving semiconductor landscape.
References:
[1] Intel. (2021, March). Intel Unleashes IDM 2.0: A New Era of Innovation and Manufacturing Leadership.
[2] Intel. (2021, March). Intel Foundry Services: A New Era of Innovation and Manufacturing Leadership.
[3] Intel. (2021, March). Intel IDM 2.0 Fact Sheet.
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[5] Bloomberg. (2024, December). Intel CEO Gelsinger to Depart Amid Turnaround Frustrations.
[6] Wall Street Journal. (2024, December). Intel CEO Pat Gelsinger to Resign as Board Seeks Faster Turnaround.
[7] Intel. (2025, March). Lip-Bu Tan Appointed as Intel’s New Chief Executive Officer.
[8] Business Wire. (2025, March). Intel Appoints Lip-Bu Tan as CEO, Signaling Focus on Execution.
[9] TechCrunch. (2025, April). Intel’s New CEO Lip-Bu Tan Initiates Aggressive Cost-Cutting and Restructuring.
[10] DigiTimes. (2025, May). Intel Re-evaluates 18A Marketing, Shifts Focus to 14A Under New CEO.
[11] AnandTech. (2025, May). Intel’s 18A Foundry Strategy Under Review, 14A Gains Emphasis.
[12] Intel. (2024, October). Intel Q3 2024 Earnings Call Transcript.
[13] IDC. (2024, Q4). Worldwide CPU Market Share Report.
[14] Gartner. (2024, Q4). Semiconductor Market Share Analysis.
[15] Intel. (2025, April). Intel Q1 2025 Earnings Report.
[16] U.S. Department of Commerce. (2024, November). CHIPS and Science Act Progress Report.
[17] The Information. (2025, January). Intel’s Foundry Losses Mount as External Customers Remain Elusive.
[18] Semiconductor Industry Association. (2024, Q3). Global Foundry Market Report. [19] Counterpoint Research. (2024, Q3). Global Foundry Market Share Tracker.
[20] Tom’s Hardware. (2025, April). Intel 18A Volume Heavily Reliant on Internal Products, External Wins Limited.
[21] EE Times. (2025, March). Intel Foundry Services Still Struggling to Attract Major External Customers.
[22] Intel. (2024, July). Intel Accelerates Process Roadmap, Delivers 18A PDK 1.0 to Foundry Customers.
[23] Intel. (2025, February). Intel Q4 2024 Earnings Call Transcript.
[24] Oregon Live. (2025, June). Intel Plans Significant Layoffs in Manufacturing Division, Ohio Fab Delayed.
[25] Intel. (2025, May). Lip-Bu Tan’s Vision for Intel: Customer-Centric and Engineering-First.
[26] Intel. (2023, September). Intel Process Roadmap Update: Five Nodes in Four Years on Track.
[27] Intel. (2025, February). Intel Foundry Direct Connect 2025 Keynote Highlights.
[28] Intel. (2023, June). Intel 3 Process Node Enters Product Manufacturing Phase.
