Intel announced on Tuesday (January 14th) that it will be spinning off Intel Capital into a new independent fund. The fund has come under scrutiny in Washington due to its investments in Chinese technology companies.
Intel Capital, a renowned investment firm in Silicon Valley, has invested over $20 billion in approximately 1800 companies since its establishment in 1991.
Amidst financial challenges, American chip manufacturer Intel is seeking to cut costs. The company plans to transform Intel Capital, with $5 billion in assets, into an independent fund to allow for fundraising from external investors. Up until now, the venture capital fund has been fully funded by Intel.
Intel states that it will remain the primary investor in the new venture fund, which will operate under a new name starting in the second half of this year.
For Intel, 2024 was described as a “challenging year.” In response, the company implemented a series of cost-cutting measures to try to turn the situation around. Intel’s stock price has dropped by approximately 60% compared to a year ago.
In December, former Intel CEO Pat Gelsinger was ousted by the board, reportedly due to escalating tensions surrounding his five-year capital-intensive plan. The plan aimed to position the company as a manufacturing powerhouse competing with Taiwan Semiconductor Manufacturing Company (TSMC), while facing pressure from competitors like AMD and Nvidia.
Intel has appointed CFO David Zinsner and Executive VP Michelle Johnston Holthaus as interim co-CEOs to manage the company’s operations temporarily.
Additionally, just days before Gelsinger’s departure, the Biden administration finalized an agreement to provide nearly $7.9 billion in federal subsidies to support Intel. This subsidy is the largest direct subsidy within a plan aimed at promoting the development of the domestic semiconductor manufacturing industry in the United States.
Meanwhile, Intel Capital continues its investments in China. According to the Financial Times, as of last year, it still held stakes in 43 Chinese tech startups.
According to data provider Crunchbase, since the 1990s, Intel Capital has invested in over 120 Chinese enterprises, including chip manufacturers Horizon Robotics and Eeasy Tech.
The United States has been attempting to restrict capital inflow into Chinese enterprises, including a ban effective January 2025 on investments in companies involved in AI, quantum computing, and semiconductor production. The U.S. has also strengthened the scrutiny system of the Committee on Foreign Investment in the United States (CFIUS) for such investments.
In light of increasing geopolitical pressures, Sequoia Capital and GGV Capital, the two largest American venture capital firms in China, split their operations in China in 2023.