We maintain our fair value estimate of $21 per share and Standard Capital Allocation Rating for Intel INTC as the company announced former board member and well-respected semiconductor industry veteran Lip-Bu Tan as its new CEO. Reuters reported in December that Tan was being considered for the role.
We view this as a wise hire for Intel. Tan will likely accelerate the company’s split between its chip design and manufacturing (Intel Foundry) businesses, certainly internally and perhaps with a corporate breakup. Investors applauded the move, with shares up 12% after-hours.
Tan achieved tremendous success as CEO of Cadence Design Systems CDNS from 2009 to 2021, serving on its board from 2004 to 2023. Intel elected Tan to its board in August 2022, although he resigned in August 2024. A Reuters report later that month suggested he faced “differences with CEO Pat Gelsinger” and left out of frustrations with “the company’s large workforce, its approach to contract manufacturing and Intel’s risk-averse and bureaucratic culture.” Gelsinger exited Intel in December 2024, as the board likely had similar concerns. We believe his departure heightened the possibility of an Intel breakup, and now Tan’s hire raises this likelihood.
We can only assume that Tan will nudge Intel toward more outsourced manufacturing with Taiwan Semiconductor Manufacturing TSM, likely to the detriment of Intel Foundry, which might lead to a spinoff. Further streamlining of the business might also be in play.
Our best-case scenario for Intel involves outside support for Intel Foundry (driven either directly or indirectly by the US government), which we view as a drag that offsets a profitable products business. A breakup of Products and Foundry (perhaps with a sale of Products to reported suitors like Qualcomm QCOM or Broadcom AVGO) would likely unlock additional value for current shareholders.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.