Intel Corporation (INTC) is planning for a transition in its corporate strategy and this will have a huge effect on its shares. On January 21, the day of the release of the next financial report, the company expects to announce that it will outsource, for the first time in its history, the manufacturing of flagship processors that have yet to be placed into production. The data came from unofficial sources and has already contributed to a rise in Samsung (+2.5 percent) shares, one of Intel’s two major allies, on whose pipelines the chip line will be renovated. Taiwan Semiconductor (TSMC), which already builds processors for Apple using the 5-nanometer (newest) process technology, will carry on the biggest responsibility.
This is an unprecedented scenario in many respects and a non-standard convergence of powers. For PCs and servers, Intel manufactures 80% of the processor chips, but it doesn’t have its own 7-nanometer assembly. Around the same time, its recent clients, represented by Apple and Microsoft, either have or are preparing to manufacture their own next-generation chips, and this year the contractor, represented by TSMC, aims to try 4-nanometer process technology, surpassing the main technology market leader by 3 generations of chips at a time.
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The market has been awaiting Intel’s decision to outsource essential manufacturing since the fall when CEO Bob Swan first outlined such a strategic threat. It becomes apparent from the latest leaks that we are talking about a very deep corporate restructuring. Intel has exclusively kept production secrets for decades and now willingly surrenders them to rivals who, however, have bypassed it tremendously in terms of the speed of upgrading the ‘hardware.’
Around the same time, as a kind of industrial designer, Intel is likely to mimic AMD’s practice, creating modular processors that would be more flexible in execution. Any new information associated with Intel’s move to outsourcing will seriously warm up the shares of the company, which have now dropped to their equal values. On the 2-4 week horizon, the stock will win back about 8.5 percent, rising to the highs of last October to $56 each.