Intel has announced the win of a key customer and changes to its foundry business as the struggling chipmaker seeks a turnaround.
Intel is taking steps to convert its chip foundry division, Intel Foundry, into an independent subsidiary, Intel CEO Patrick Gelsinger said in a blog post. The leadership of Intel Foundry will not change, and the subsidiary will remain part of Intel. However, Intel Foundry will have a board of directors with independent directors.
Gelsinger also said the company would pause its chip manufacturing projects in Poland and Germany for two years “due to expected market demand” and was considering scaling back its chip packaging and testing operations in Malaysia. Intel had previously pledged to invest over $36 billion to build semiconductor factories in Magdeburg, Germany, $4.6 billion in a chip factory near the Polish city of Wroclaw and $7 billion in its Malaysian facility.
But in a win for the foundry business, Gelsinger announced that Intel has signed a deal with AWS to jointly develop an AI chip using Intel’s 18A chip manufacturing process. Intel has also agreed to manufacture a custom Xeon 6 processor for AWS, building on an existing partnership between the two companies.
“We’ve tripled our deal pipeline since the beginning of the year,” Gelsinger said of Intel Foundry’s business, describing the AWS deal as a “multi-year, multi-billion dollar framework” that could potentially include additional chip designs. He added that it “demonstrates the continued progress we’re making in building a world-class foundry business.”
Intel’s cost-cutting and contract wins — along with a newly awarded $3.5 billion contract to make chips for the Pentagon — sent the company’s shares up more than 6% at market close, a bright spot in Intel’s otherwise dismal fiscal year.
In the first quarter, Intel reported a net loss of $437 million – a loss that widened to $1.6 billion in the second quarter. Intel Foundry reported an operating loss of $5.3 billion in the first half of the year, despite a slight increase in revenue year-over-year.
Intel is also said to have lost a key customer: Sony, after failing to reach an agreement to manufacture chips for Sony’s next Playstation console. According to Reuters, this merger would have brought Intel’s foundry business $30 billion.
This summer, Intel announced a $10 billion cost-cutting plan that includes laying off 15,000 employees through severance and early retirement. (Intel says the process is already more than halfway through and is expected to be completed by the end of the year.) The chipmaker is also reportedly considering selling its autonomous driving unit Mobileye and its enterprise networking division.
