They have fresh new chip designs that would be perfectly adequate, but they are still hobbled by 14nm. They have now released three? four? iterations of x86 design on the same 14 nm process, because 10nm is that troubled
If you spun off the fabrication, as AMD did, you would have a much smaller, but more-competitive fabless business, and the fabricator would implode. (Which is pretty much what happened to Global Foundries, AMD's former fabrication house)
In any case, much of the value for shareholders would be eradicated. Intel has historically done very well as a vertically integrated business. They would like to remain vertically integrated.
We may see Intel resort to outside fabrication -- executives have already mentioned it in the business press -- but I very much doubt we will see them discard their internal fabrication capabilities.