Intel is undergoing a significant restructuring, with its Network and Edge Group (NEX) set to become a standalone entity. This move, confirmed on July 25, 2025, is part of a broader strategy under CEO Lip-Bu Tan to streamline operations and refocus on Intel's core semiconductor business. The goal is to provide greater autonomy and market focus for the networking unit, potentially attracting outside investors and accelerating innovation.
The decision to spin off NEX comes as Intel faces financial pressures and seeks to bolster its balance sheet. The company has been trimming operations, including canceling manufacturing projects in Europe and delaying its Ohio chip plant. There have also been layoffs in other divisions, such as automotive. These actions reflect a pattern of cost-cutting and a shift towards prioritizing high-margin segments.
Sachin Katti, the current head of NEX, stated in a memo that the spin-off would create a "new, independent entity focused exclusively on delivering leading silicon solutions for critical communications, enterprise networking, and Ethernet connectivity infrastructure". He assured customers that the change would enhance the unit's ability to operate with greater focus, speed, and flexibility to better meet their needs. Intel will remain an anchor investor in the spun-off entity, ensuring continued collaboration while inviting outside funding to fuel growth. This mirrors Intel's strategy with its Altera programmable chip business.
The restructuring allows Intel to concentrate on core growth drivers, such as data center chips, AI processors, and cutting-edge manufacturing technologies. By shedding non-core assets, Intel aims to reallocate resources toward these high-priority areas, helping it remain competitive against rivals like AMD, NVIDIA, and TSMC. Intel's NEX unit generated $5.8 billion in revenue during the company's most recent fiscal year. The unit makes chips for data center networking equipment, including the Atom P7000 CPU series, and competes in the telecommunications market with the Atom P5900 base station chip series.
Analysts view this spin-off as a calculated pivot to shed non-core assets and bolster Intel's balance sheet. Earlier reports indicated that Intel was exploring options to divest or sell parts of its networking and edge businesses, aligning with CEO Tan's vision. The company has already begun identifying potential investors for the spin-off.
However, some critics argue that spinning off NEX might dilute Intel's integrated ecosystem, where networking complements its chip designs. Others see it as essential for survival in a competitive market. Wall Street remains cautious about the long road ahead despite the overhaul. The announcement of the NEX spin-off coincided with Intel's Q2 2025 financial results, which revealed a $2.9 billion net loss on revenue of $12.9 billion. The financial report detailed the immense cost of the turnaround, including charges for severance and manufacturing tools. Alongside the spin-off, Intel is reducing its global workforce by 15%, cutting nearly 25,000 jobs by the end of 2025.
Despite these challenges, Intel's leadership expresses confidence that these strategic changes will position the company for renewed growth and competitiveness in the semiconductor industry. The restructuring reflects a commitment to becoming leaner, more agile, and focused on semiconductor innovation.
