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Intel CEO Pat Gelsinger speaks during the Mobileye Global Inc. IPO at the Nasdaq MarketSite in New York on Oct. 26, 2022. Mobileye Global Inc., the self-driving technology company owned by Intel Corp., priced one of the biggest US initial public offerings of the year above its marketed range to raise $861 million.
Michael Nagle | Bloomberg | Getty Images

Intel stock dropped 6% on Wednesday after the company gave investors an update on the company’s turnaround plan to become a chip manufacturing company competing with Taiwan Semiconductor Manufacturing Company.

Wednesday’s update featured Intel’s CFO, David Zinsner, explaining how the company would soon change the way it reports its financial results to give its foundry business, known as IFS, its own profit-and-loss statement, which would reveal the company’s manufacturing margins.

Intel’s new reporting structure could also help control costs at the chipmaker, which is seeking to trim as much as $10 billion from its costs over the next three years.

The update comes as investors continue to assess Intel’s turnaround plan under CEO Pat Gelsinger, which depends on catching up with TSMC’s manufacturing technology by 2026, a plan it calls “five nodes in four years.” Intel plans to use its own chips to work out problems in its manufacturing before opening up the factories to third-party companies.

If Intel catches up with TSMC, then it can compete for contracts to build high-performance chips from companies like Apple, Nvidia, and Qualcomm, which don’t run their own manufacturing and currently often opt for TSMC or Samsung manufacturing. Intel said it expected to announce a key customer for its foundry business later this year.

“The manufacturing group will now face the same market dynamics as their foundry counterparts,” Zinsner told analysts. “They’ll need to compete for volume through performance and price as internal customers will have the option to leverage third party foundries and to attract external foundry volume, they must do the same.”

Wednesday’s update was focused on how Intel would use its manufacturing capabilities for its own chips. It said more updates on the foundry business and third-party customers would come later this year. It said its own chip needs would contribute $20 billion in revenue to the unit next year.

Analysts on the call worried about Intel’s gross margins and asked how this plan would increase them. In April, Intel said its gross margin for the first quarter was 38.4%, down 51.3% in a year. Intel management said on Wednesday it was shooting for 60% margins.

“We think we have a good path to 60 [percent],” Zinsner said.

Separately, Intel said on Wednesday that it planned to sell 20% of an Austrian subsidiary, IMS Nanofabrication, to private equity firm Bain Capital in a deal that valued the unit at $4.3 billion.

“This will turn out to be one of the best acquisitions we’ve ever made, given that level of valuation and investment made,” Zinsner said on Wednesday.

Other chip stocks also fell on Wednesday amid a down day for tech stocks. AMD, Intel’s chief rival, fell nearly 6%, while Qualcomm fell over 3%. Nvidia, which has been boosted by the recent AI wave, fell kess tgab 2%.