Intel’s possible shift to 14A from 18A creates minimal near-term impact: Morgan Stanley

Intel’s (NASDAQ:INTC) potential plan to shift the focus of its Foundry to a 14A process from the current 18A would have minimal economic impact in the near-term, according to Morgan Stanley.

Reports surfaced on Wednesday that Intel CEO Lip-Bu Tan is considering shifting the foundry unit’s focus to the upcoming 14A technology, where Intel expects to have a better chance of competing with rival Taiwan Semiconductor Manufacturing (TSM). The new strategy would be aimed at attracting major customers like Apple (AAPL) and Nvidia (NVDA).

“To some degree, 18A ambitions have long been scaled back, and we see minimal potential impact – and minimal writedown – from the actions described here,” said Morgan Stanley analysts, led by Joseph Moore, in a Thursday investor note. “Even in the most optimistic case, customers will start with smaller projects to assess Intel capability, so there simply isn’t much capital spending associated with those smaller projects. Management has always emphasized that the path to foundry breakeven has only minimal dependence upon external foundry customers. So for 2025/26, none of this will have much economic impact.”

Morgan Stanley points out that Intel still holds a significant market share in client and server CPUs despite recent difficulties.

“More significantly, the market seems to want a quicker fix, no matter how many times that CEO Lip-Bu Tan reminds us that this will be a long road,” Moore added. “We heard enthusiasm for the various press reports of business separation or JV formation that seemed completely unrealistic. The stock underperformed as those did not come to fruition, but even now, much of the enthusiasm that we hear is for foundry success. For us, success in processors would be enough, but we’re not sure the market is in the same place.”

Morgan Stanley rates Intel at Equal-weight with a $23 price target.