Intel’s shares dropped 8% on July 25, 2025, following CEO Lip-Bu Tan’s warning that the company may abandon its chip manufacturing ambitions if it fails to secure a major customer for its foundry business. The announcement, part of a broader cost-cutting strategy, marks a sharp pivot from the approach of Tan’s predecessor, raising concerns about Intel’s future in the semiconductor industry.

During a post-earnings call, Tan revealed plans to scale back Intel’s manufacturing operations, including halting construction on two European factories and slowing progress on an Ohio plant. This follows a surprising second-quarter adjusted loss and a grim third-quarter forecast, projecting a larger-than-expected deficit. The financial strain underscores Intel’s struggles after years of losing ground in PC and data center markets and failing to capitalize on the booming AI sector.

Analysts expressed alarm at the potential retreat from Intel’s foundry strategy, which aimed to rival industry leader TSMC. Joshua Buchalter of TD Cowen called the move a “pivotal moment” for the semiconductor industry, questioning Intel’s ability to regain its manufacturing edge. Hendi Susanto of Gabelli Funds noted that the success of Intel’s advanced 18A process is critical, warning that failure could jeopardize the foundry’s viability and risk $100 billion in assets. Intel may reserve 18A for its own products and only pursue the next-generation 14A process with a major external customer.

The shift could deepen Intel’s reliance on TSMC, further pressuring margins already at half their historical highs. With a market valuation of roughly $100 billion—less than half of rival AMD’s $260 billion—Intel faces a steep climb. Its stock has underperformed, gaining only 12.8% this year compared to Nvidia’s 30% and AMD’s 34%, with a forward price-to-earnings ratio of 42.55, higher than Nvidia’s 33.90 and AMD’s 32.12.

Since taking over in March, Tan has implemented aggressive measures, including layoffs, divestitures, and resource reallocation, to stabilize the struggling chipmaker. In a memo to employees, he declared, “There are no more blank checks,” signaling a disciplined approach to Intel’s recovery. As investor confidence wanes, the company’s next steps will be critical in determining whether it can reclaim its position as a semiconductor powerhouse.