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(Bloomberg) -- Intel Corp. shares tumbled after the incoming chief executive officer pledged to regain the company’s lead in chip manufacturing, countering growing calls from some investors to shed that part of its business.
“I am confident that the majority of our 2023 products will be manufactured internally,” Pat Gelsinger said on a conference call to discuss financial results. “At the same time, given the breadth of our portfolio, it’s likely that we will expand our use of external foundries for certain technologies and products.”
He plans to provide more details after officially taking over the CEO role Feb. 15, however Gelsinger was clear that Intel is sticking with its once-mighty manufacturing operation.
“We’re not just interested in closing gaps,” he told analysts on a conference call Thursday. “We’re interested in resuming that position as the unquestioned leader in process technology.”
Keeping production in-house may be bad for Intel because its manufacturing technology has fallen behind Taiwan Semiconductor Manufacturing Co., which makes chips for many of Intel’s rivals. If the U.S. company can’t catch up, its products will become less competitive and it could lose sales and market share.
Intel shares fell 5.7%% at 9:36 a.m. in New York on Friday. They have declined about 6% over the last 12 months compared with a 16% increase in the S&P 500.
Activist Dan Loeb has suggested the company consider spinning off its manufacturing business. Other investors have been waiting to see if Intel will outsource more production.
“Where investors are going to be disappointed is that some were expecting some sort of larger announcement of a strategic partnership with TSMC,” said Edward Jones & Co. analyst Logan Purk.
TSMC recently announced capital spending of as much as $28 billion for 2021 to maintain its lead. Purk said Intel would have to increase its own spending massively to try to catch the Asian company.
TSMC dropped 3.6%, the most since March 23. Shares of some Intel suppliers also dropped, with Screen Holdings Co. down 3.7% and Tokyo Electron Ltd. declined 1.6%.
Read More: Intel Probes Potential Unauthorized Access to Earnings Report
Gelsinger is taking the reins of a company in the midst of its worst crisis in at least a decade. It has been the largest chipmaker for most of the past 30 years, dominating the $400 billion industry by making the best designs in its own cutting-edge factories. Most other U.S. chip companies shut or sold plants and tapped other firms to make the components. Intel held out, arguing that doing both improved each side of its operations and created better semiconductors.