Intel Spins Off Chip Manufacturing Unit and Partners with AWS for AI Chip Development

Intel to Spin Off Foundry Business and Partners with AWS for AI Chip Development

Intel is set to undergo major changes within its foundry operations and has secured a significant partnership with AWS. The company plans to spin off its chip manufacturing division, Intel Foundry, into an independent subsidiary. Despite this shift, Intel Foundry will remain within the Intel umbrella, managed by an operational board that includes independent directors.

Additionally, Intel CEO Pat Gelsinger announced a two-year pause on new semiconductor factory projects in Poland and Germany, contingent on market demand. The company is also considering closing its chip packaging and testing operations in Malaysia. This follows Intel's prior commitment to invest over $36 billion in semiconductor facilities in Germany and Poland, and $7 billion in Malaysia.

In place of these projects, Intel has signed a deal with AWS to co-develop AI chips using Intel's advanced 18A manufacturing process. Intel will also produce a specialized Xeon 6 processor for AWS, building on their existing collaboration. Gelsinger highlighted that this agreement represents a multi-year, multi-billion-dollar deal, showcasing significant progress in Intel's foundry business.

Recent cost-cutting measures and new contracts, including a $3.5 billion deal to produce chips for the Pentagon, have boosted Intel’s stock by over 6% at market close. This is a positive development amidst the company's financial struggles.

Intel recently reported substantial losses, with $437 million in the first quarter and $1.6 billion in the second quarter. Intel Foundry experienced $5.3 billion in operational losses in the first half of the year despite a slight increase in revenue.

The company also lost a major client, Sony, after failing to secure a deal for producing chips for the next PlayStation console, which could have brought $30 billion to Intel’s foundry business. This summer, Intel announced plans to cut $10 billion in expenses, including laying off 15,000 employees and potentially selling its Mobileye and corporate networking divisions.