What happened

Shares of Intel (NASDAQ:INTC) rose on Tuesday after Reuters reported that hedge fund Third Point wants the chip giant to consider strategic alternatives, including a possible shift away from manufacturing. Third Point reportedly owns about $1 billion of Intel stock. As of 2:35 p.m. EST, shares of Intel were up about 4.25%.

So what

Third Point is highly concerned about losses of key chip designers, saying that they were "demoralized" at Intel. The hedge fund also pointed to Intel falling behind other semiconductor manufacturers and losing market share to Advanced Micro Devices.

Data center servers.

Image source: Getty Images.

"Without immediate change at Intel, we fear that America's access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more," read the hedge fund's letter sent to Intel.

Third Point wants Intel to consider separating its chip design operations from its manufacturing operations, potentially via a manufacturing joint venture. Intel has faced years of delays on the manufacturing side, and the company's upcoming 7-nanometer process has been pushed back due to problems with defects hurting yields.

Now what

One of Intel's key advantages over the years has been that it both designed and manufactured its chips. But with other manufacturers now surpassing Intel in terms of capabilities, it's unclear if that advantage still exists. One remaining benefit, though, is that Intel doesn't have to scramble to secure capacity at third-party foundries like its rivals do.

Third Point's stake isn't big enough to force Intel to do anything, but a sagging stock price may provide enough incentive for the company to take at least some action.

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