Third Level urges Intel to search for “strategic alternate options”.

Intel CEO Robert Swan speaks at the Rakuten Optimism event in Yokohama, Japan on July 31, 2019.

Tomohiro Ohsumi | Getty Images

Third Point, the hedge fund led by Dan Loeb, is calling on Intel’s board of directors to hire an investment advisor to investigate “strategic alternatives” after the chipmaker lost market share to TSMC, Samsung and AMD.

One of the considerations is the sale of “failed acquisitions”, Loeb wrote on Tuesday in a letter to Intel’s board of directors. CNBC looked at a copy of the letter. Third Point, known for its activism, recently acquired a significant stake in Intel.

Intel shares rose 5% to $ 49.39 after reports of the letter surfaced. Despite Tuesday’s rally, Intel fell 18% in 2020, while AMD, Intel’s biggest US rival, nearly doubled its value and the S&P 500 was up 15%.

“The loss of manufacturing leadership and other missteps have enabled several semiconductor competitors to leverage TSMC and Samsung’s process technology and gain significant market share at the expense of Intel,” Loeb wrote. In the meantime, AMD has eaten up Intel’s stake in the “core markets for PC and data center CPUs,” he wrote.

Intel’s financial results last quarter were impacted by delays in 7-nanometer chips, allowing AMD to take a dramatic lead with its competitive chips. The processors are key to improving computing power and meeting the demands for faster speeds.

AMD has contracts with TSMC in Taiwan, the world’s largest contract foundry, and a company that also makes chips for Apple and Nvidia. Intel CEO Bob Swan Intel said in July the company is open to outsourcing its manufacturing to keep up with the current generation of chips.

Loeb pointed out that Intel’s loss of manufacturing capabilities raises national security concerns.

“Without an immediate change at Intel, we fear US access to cutting edge semiconductor supplies will dwindle, forcing the US to rely more on geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more “, he wrote .

Loeb added that Intel needs to be able to manufacture products for large companies like Amazon, Apple and Microsoft that develop their own chip designs and have them made overseas.

He said the company has more recommendations to privately give to Intel. Third Point has also filed with the Federal Trade Commission to purchase incremental shares and retain the option to recommend board members in 2021 “if we feel reluctance to work together to address the concerns raised in this letter.”

– CNBC’s Leslie Picker contributed to this report.

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