Semiconductor chip manufacturer Intel (NASDAQ:INTC) stock gained over 2% in yesterday’s extended trade after the company disclosed its turnaround plans. INTC seeks to separate Programmable Solutions Group’s (PSG) unit into a standalone business by January 1, 2024. The company plans to retain a majority stake in the business and eventually conduct an IPO to fully spin off the unit within the next two to three years.
Under the PSG unit, the company manufactures programmable chips, which are widely used in the automotive, aerospace, industrial, and defense markets. These chips can be reprogrammed after they are manufactured. It is worth mentioning that INTC acquired the PSG business when it bought Altera for $16.7 billion in 2015.
Intel named Sandra Rivera, the company’s data center and AI chip division head, as CEO of the separate entity. Also, Shannon Poulin, currently Corporate Vice President and General Manager of the PSG unit, will become the Chief Operating Officer (COO) of the new entity.
Growth Efforts
This strategic move is part of CEO Patrick Gelsinger‘s efforts to sharpen the company’s focus on its core business. INTC seeks to catch up with its rival Taiwan Semiconductor (TSM) in manufacturing by 2026. At the same time, the CEO seeks to give the programmable chip unit power to boost its presence in the booming field-programmable gate array (FPGA) industry.
Citing third-party sources, Intel said that the FPGA market is expected to grow at a compound annual growth rate of over 9%, expanding from $8 billion in revenue in 2023 to $11.5 billion by 2027.
Thus, several companies are making efforts to grab a share in the FPGA market due to its promising growth potential. INTC’s key competitor, Advanced Macro Devices (AMD), bought FPGA maker Xilinx for $35 billion last year.
Is Intel a Buy, Sell, or Hold?
INTC’s efforts to turn around the business by shedding noncore businesses and spinning off shares of its attractive automotive business, Mobileye, are impressive. Also, its large market share in the PC and server processor markets provides INTC with a competitive advantage. However, intense competition in the data centers and AI space remains a drag.
Overall, Intel has a Hold consensus rating on TipRanks. This is based on six Buys, 20 Holds, and five Sells. The average price target of $36.13 implies 1.2% upside. INTC stock has risen 36.2% year-to-date.
