Intel’s shares sank about 9 percent on Friday after it detailed late Thursday its efforts to cut costs around its struggling foundry business.

The troubles with Intel’s foundry, or contract chipmaking business, held investors’ interest in spite of better-than-expected earnings results for the second quarter, largely wiping out the company’s share gains for this year and leaving them roughly flat.

Intel’s shares lost 60 percent of their value in 2024, their worst year on record, leading to the forced exit of former chief executive Pat Gelsinger.

‘No more blank cheques’

New chief executive Lip-Bu Tan said in a memo to staff that going forward, the company would deploy manufacturing capacity based on confirmed customer commitments and that there would be “no more blank cheques”.

In its quarterly regulatory filing on Thursday Intel said it may “pause or discontinue” its foundry efforts entirely if it fails to find a significant external customer for its next-generation 14A manufacturing process.

Intel is currently rolling out its 18A process and is reportedly considering moving any external customers from 18A to 14A and reserving 18A for its own chips, a move that could involve writing off hundreds of millions or billions of dollars.

“We have been unsuccessful to date in securing any significant external foundry customers for any of our nodes and our prospects for securing a significant external foundry customer for Intel 14A are uncertain, the filing said.

Intel’s recent share weakness is largely based on its lack of a viable offering for the booming artificial intelligence market, dominated by Nvidia, and doubts around its plan to challenge the likes of Taiwan’s TSMC in the contract chipmaking business.

Tan said Intel was slowing construction work on new plants in Ohio and would cancel factories in Germany and Poland, while consolidating chip packaging operations in Costa Rica with other such operations in Vietnam and Malaysia.

Cost-cutting

“Over the past several years, the company invested too much, too soon – without adequate demand,” Tan wrote.

“In the process, our factory footprint became needlessly fragmented and underutilised.”

Barclays analysts said in a note that Intel was indicating it wanted confirmed customer commitments to build out the 14A process, but “this adds more uncertainty to product roadmaps and makes customer adoption more unlikely”.

He said Intel has completed most of its layoff plans for the year, which will see staff cut to 75,000 employees worldwide by the end of this year, a reduction of 22 percent compared to the end of 2024.

Intel said its second-quarter revenues to 28 June were flat at $12.9 billion (£9.6bn), ending four quarters of sales declines and beating analysts’ estimates of $11.92bn.