Intel Stock: What Effect Will Foundry Strategy Shift Have? Morgan Stanley Weighs In

Business Insider

03-07-2025

After years of lagging behind rivals like TSMC, Intel (NASDAQ:INTC) has been trying to re-establish itself as a leading chip manufacturer – not just for its own products, but as a foundry for others as well.
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Its foundry strategy has so far revolved around its 18A process node, which was originally expected to launch next year. The 18A node is the fifth and final step in former CEO Pat Gelsinger's ambitious 'five nodes in four years' roadmap – a plan designed to rapidly reclaim process technology leadership. At one point, 18A was billed as the node that would give Intel 'unquestioned leadership' in the space. On the product side, Intel's next-generation PC chips, known as Panther Lake, are expected to arrive in the second half of this year, built on the 18A process. Server chips under the Clearwater Forest line are slated for 2026, with the possibility of onboarding external foundry customers sometime later next year.
However, that focus might now be shifting. According to a Reuters report that cites 'unnamed Intel sources,' the company is considering pulling back on its foundry plans for the 18A process node in order to shift resources toward its next-generation node, known as 14A. That process is expected to enter risk production next year, with internal use slated for 2027. If true, the move could result in a writedown potentially amounting to hundreds of millions – or even billions – of dollars. The report suggests Intel would still fulfil limited 18A foundry commitments it has already made, but would largely pivot its foundry strategy to 14A going forward.
While it's not clear yet whether the report is true, Morgan Stanley analyst Joseph Moore believes that shifting the foundry focus to 14A wouldn't be 'economically disruptive, given low 18A expectations.'
To some extent, Intel had already dialed back its ambitions for 18A, so the potential impact from the reported shift – and any associated writedown – appears 'minimal' to Moore. Even under the most optimistic outlook, prospective foundry customers were expected to start with small-scale projects to evaluate Intel's capabilities, meaning the capital tied to those efforts was always going to be modest. Management has consistently stressed that reaching breakeven on the foundry business doesn't rely heavily on external customers in the near term. 'So for 2025/26, none of this will have much economic impact,' Moore opined.
That said, while the initial foundry projects were always expected to be small in scale, pushing their start out by a year or two would also delay any meaningful volume ramp. 'We are generally pessimistic about foundry contributing to profits in an investable time frame anyway, so it doesn't change our view that much, but we can see why foundry optimists saw this as a negative,' Moore said on the matter. And while Moore sees the value in Intel, he shares CEO Lip Bu Tan's view that this is a 'long path to recovery.'
Accordingly, Moore stays on the INTC sidelines for now, maintaining an Equal-weight (i.e., Neutral) rating and $23 price target, suggesting the shares are fully valued. (To watch Moore's track record, click here)
25 other analysts join Moore on the fence while 1 Buy and 4 Sells can't alter a Hold consensus rating. Going by the $21.35 average target, a year from now, shares will be changing hands for a 5% discount. (See Intel stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.