During Intel's investor event, the company's CFO, David Zinsner, unveiled a new strategy to separate chip development and production, which should result in annual savings of $8-$10 billion by 2025, and boost Intel's profitability to 60%, with operating profitability climbing to 40%.



This move was made in response to investor concerns over Intel's investment policy and decreasing revenue.

Zinsner and his team are striving to rebuild trust among stakeholders with their new IDM 2.0 model, which emphasizes transparency in financial reporting and a more balanced approach to the relationship between manufacturing and development. By transitioning to this model, Intel expects to save $3 billion this year, and $8-$10 billion by 2025, as well as attract more third-party customers to increase profits.

In the new model, Intel developers can utilize third-party contractors for production if it makes more financial sense than producing in-house, much like AMD and NVIDIA. Intel's manufacturing division will compete with contract chip makers for orders based on pricing and performance.

It is clear that Intel is shedding its "monolith" image from the 2010s and adopting practices of competitors to manage risks. The struggles faced in the race against AMD's ZEN platform, along with the pandemic and electronic market crisis, convinced the board of the importance of this shift. As a result, Intel is actively abandoning unsuccessful projects and embracing the strategies of rivals. For example, Intel recently discontinued its Arc A770 16GB Limited Edition video card, which entered the market less than a year ago, because it was deemed unnecessary.

Here are some details on Intel's new strategy to boost profitability and reduce costs:

Cost Cutting:
- Intel plans to cut $3 billion in costs in 2023, with the majority of these savings coming from reduced headcount.
- The company did not specify how many jobs would be cut, but reports suggest it could be in the range of 5,000 to 15,000 employees, out of a total workforce of around 121,000.
- Other cost-saving measures include reducing travel and entertainment expenses, consolidating facilities, and streamlining operations.

Product Focus:
- Intel will focus investment and resources on its most profitable and strategic product lines, such as data center chips and high-performance CPUs.
- It will deprioritize some lower-margin product segments, like entry-level PCs and older chipsets.
- This aligns with Intel's goal of improving its operating margins to the "high teens" range.

Manufacturing Efficiency:
- Intel aims to improve factory utilization and chip yields to drive better cost efficiencies in production.
- This includes optimizing its global network of chip fabs and leveraging newer manufacturing processes.
- Improved yields can significantly lower the cost per chip produced.

Financial Discipline:
- Intel will be more selective and disciplined in its investments, delaying some lower-priority projects to preserve cash flow.
- The company also plans to improve its pricing strategies to avoid excessive discounting that hurts profitability.

Competitive Positioning:
- These measures are intended to strengthen Intel's competitiveness and financial performance amid market share losses to rivals like AMD.
- The goal is to regain Intel's leadership position in the semiconductor industry through a renewed focus on profitability and efficiency.

Overall, Intel is taking a more targeted and disciplined approach to managing its costs and investments in order to improve its margins and financial health in the current challenging environment.