On February 19th, in order to promote the development of the chip foundry business and reverse the decline, American chipmakers said at the 2022 annual investor conference on Thursday, local time, that they need to invest a lot of money in the next two years. Intel CEO Pat Gelsinger also confirmed that the company's server chip, code-named Granite Rapids, will be delayed from 2023 to 2024.

Shares of Intel fell more than 5% on Friday on the news.

The server chip, called Granite Rapids, is a big deal for Intel. This is Intel's first server processor to use extreme ultraviolet lithography, a key technological achievement Intel needs to catch up with TSMC and other top chipmakers.

Gelsinger took over as Intel's CEO a year ago. He pledged to help Intel turn around the chip industry as rivals such as AMD and traditional customers of the company such as Apple began to challenge Intel's market position.

But the market's reaction to Intel's announcement underscored investors' misgivings about the company's strategy. Investors are generally concerned that Gelsinger's five-year transformation plan will affect the company's profit margins, and Intel's chip foundry business is capital-intensive and risky.

"Some of you said, 'How do I know you're focused on this? Help me build confidence,'" Gelsinger said.

Intel executives said on Thursday that the company plans to achieve 10 percent annual sales growth by 2025, but that revenue growth is expected to be "more modest" this year. Intel's chief financial officer, Dave Zinsner, said Intel is entering an "investment phase," with free cash flow forecast to be negative $1 billion in 2022 as the company ramps up capital spending.

Currently, Intel is investing $20 billion to build chip manufacturing plants in Arizona and Ohio, and plans to build a new factory in Europe this year.

Delays in Granite Rapids chips

At the same time, Intel also hopes to catch up with TSMC and Samsung in chip manufacturing technology. In recent years, TSMC and Samsung have overtaken Intel in the "process nodes" used to make chips. TSMC's chip "process node" is 5nm, while Intel's "process node" is still 10nm.

The delayed Granite Rapids chip release shows that while Intel is confident that it will catch up to rivals by 2026, building new processor manufacturing technology remains a technically demanding and challenging process prone to production delays. Intel said it plans to launch five new process nodes over the next four years, a plan that is more aggressive than its rivals.

Postponing the Granite Rapids chip release would allow Intel to make server chips through more advanced process nodes, Gelsinger said, and the company would also be able to introduce a new biannual schedule for server chip releases.

"Granite Rapids is now an Intel 3 process product, and the Granite Rapids chip, which is delayed until 2024, will be a better-performing product," Gelsinger said. "So we changed the product roadmap to make it Better performance."

He added that he has spoken with Intel server customers about the adjustment. "We've had all of our major customers embraced the change and they're happy with the change we've made."

At Thursday's investor conference, Gelsinger repeatedly acknowledged that Wall Street is skeptical of Intel's turnaround plan. He said he wanted Intel stock's earnings per share to double and Intel's "price-earnings ratio" to double, but that would require investor confidence.

Intel will begin releasing more information about its business units to help build investor confidence. "You'll see how they all perform and how we're delivering on the promises we've made," Gelsinger said.