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Intel tepid on outsourcing chip production

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Intel will go outside more but not by as much as Wall Street wants. The company’s incoming CEO Pat Gelsinger said it will lean more heavily on outside factories to make its chips in the future but that it would produce most of its products this year at its own plants.

The lack of a strong embrace of outsourcing drove its shares down 5% in early trading Friday.

Since last July, the semiconductor giant has been considering whether to drop its decades-old strategy of designing and making chips in house and turn to Asian foundry makers for help with its central processing units, which are the brains of computers. Making its own chips means higher costs for the company.

Intel’s move comes just after the U.S. passed legislation to fund domestic chip production. Analysts say the company might take the opportunity to solicit government support for U.S. manufacturing.

Although it has benefited from the surging demand for PCs as students and workers stay at home, the long-time leader in chip-making technology faces a production crisis. It has lost its manufacturing edge in recent years to Taiwanese and Korean rivals, and it faces pressure to make changes from the hedge fund run by activist investor Dan Loeb. Intel is counting on Gelsinger to steer it out of its straits when he takes over the corner office next month.

Video Transcript

- Intel will go outside more, but not by as much as Wall Street wants. The company's incoming CEO, Pat Gelsinger, said it will lean more heavily on outside factories to make its chips in the future. But that it would produce most of its products this year at its own plants. The lack of a strong embrace of outsourcing drove its shares down in early trading Friday.

Since last July, the semiconductor giant has been considering whether to drop its decades old strategy of designing and making chips in-house and turn to Asian foundry makers for help with its central processing units, which are the brains of computers. Making its own chips means higher costs for the company.

Intel's move comes just after the US passed legislation to fund domestic chip production. Analysts say the company might take the opportunity to solicit government support for US manufacturing. Although it has benefited from the surging demand for PCs as students and workers stay at home, the long time leader in chip making technology faces a production crisis.

It has lost its manufacturing edge in recent years to Taiwanese and Korean rivals. And it faces pressure to make changes from the hedge fund run by activist investor, Dan Loeb. Intel is counting on Gelsinger to steer it out of its straits when he takes over the corner office next month.