Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Can Intel spend its way back to chipmaking relevance? That was the question on investors’ minds when Pat Gelsinger took over as chief executive in 2021. Fast-forward three years and the answer appears to be an emphatic “no”.Intel once dominated the $600bn chip industry as a designer and maker of cutting-edge processors. But production issues and strategic mis-steps allowed rivals, including Taiwan Semiconductor Manufacturing Company and Samsung, to take the lead.Under Gelsinger, the company has sought to overhaul its business model with a push to become a major foundry player, committing tens of billions of dollars to build new factories to make chips for other companies.The factories are still years away. But the spending spree has pushed up Intel’s costs and hurt profitability. The foundry unit generated sales of $18.9bn last year but reported an operating loss of $7bn.At the same time, Intel’s other two main businesses — providing chips that power personal computers and data centres — have been respectively hurt by falling PC sales and a shift in spending that prioritises artificial intelligence chips dominated by Nvidia. Adjusted free cash flow was negative $11.9bn last year.The company’s finances are now too stretched to keep funding its expensive turnaround plan. Intel on Thursday announced a drastic plan to cut costs by $10bn. It is slashing its workforce by 15 per cent, scrapping its dividend and reining in capital spending.Intel shares, down 40 per cent so far this year, tumbled another 19 per cent in after-hours trading. As recently as January 2020, Intel was worth more than AMD and Nvidia combined. Today, those competitors are collectively worth nearly $2.6tn, while Intel’s market value could fall below $100bn at Friday’s open in New York.Intel’s second-quarter results underscored its predicament. Sales are too weak, costs are too high and margins are too low. Net sales for the June quarter fell 1 per cent to $12.8bn as its data centre business continued to lose ground. The foundry business remains in the red.Things will get tougher still after the US government revoked Intel’s license to supply chips to China’s Huawei Technologies in May. Third-quarter revenue could fall by as much as 12 per cent, Intel said. Its gross margin is forecast to decline by 8 percentage points to 34.5 per cent.Intel’s emergency cost-cutting will help liquidity. But firing 15,000 workers when you could be getting $8.5bn in government funding is never a good look.Nor will it solve Intel’s fundamental problems: how to compete against TSMC and Samsung in chip foundry and how to reclaim its lead as a designer of cutting-edge processors from Nvidia. pan.yuk@ft.com
