Intel (INTC.O) announced on Tuesday that it will operate its programmable chip unit as a separate business beginning in January, with plans to arrange a public offering of stock in the business within the next two to three years.
After the bell, Intel shares were up more than 2%.
When Intel paid $16.7 billion for Altera in 2015, it purchased the company. Programmable chips are utilized in anything from data encryption to 5G wireless telecommunications equipment and sit between Intel’s general purpose CPUs and chips optimized for a single activity.
Sandra Rivera, an Intel veteran, will supervise the new unit, which will continue to manufacture chips at Intel’s facility. Intel announced that it has begun “an extensive internal and external search” to replace Rivera, who now manages the company’s data center and artificial intelligence chip businesses, which compete with Nvidia (NVDA.O) and Advanced Micro Devices (AMD.O).
Rivera stated during a conference call with investors that the unit is increasingly employing Intel’s plants rather than the Taiwanese manufacturers where its chips were formerly manufactured. In defense applications such as fighter jets, programmable chips are used.
“We see enormous customer interest in a more secure, resilient supply chain in North America, and you could just imagine the industrial customers, the aerospace and defense base customers,” Rivera stated. “We’re setting this up to really have a unique advantage by leveraging Intel.”
The agreement follows Intel’s previous attempts to sell its memory chip unit to SK Hynix and to make a portion of its Mobileye self-driving car chip company public. Both attempts were intended at streamlining Intel’s business and raising funds for Chief Executive Pat Gelsinger’s goal to turn the company around by revitalizing its manufacturing arm, which had lagged behind rivals like Taiwan Semiconductor Manufacturing Co (2330.TW).
“This seems like an overdue, smart, and effective move to potentially create more value for investors while allowing Intel to focus on core competencies while raising funds for its turnaround attempt,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
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