TLDR:
- Intel’s foundry business to become independent subsidiary with own board
- Intel signs deal with Amazon Web Services for custom AI chip production
- Company plans to sell stake in Altera and pause some European manufacturing projects
- Intel awarded up to $3 billion from CHIPS Act for “Secure Enclave” program
- Stock jumps 8% in extended trading on restructuring news
Intel, the tech giant known for its computer processors, has announced significant changes to its business structure and partnerships.
The company plans to transform its foundry business, which manufactures chips for other companies, into an independent subsidiary with its own operating board. This move is designed to allow the foundry division to seek outside funding and potentially operate more efficiently.
In a memo to employees, CEO Pat Gelsinger outlined several key initiatives aimed at revitalizing Intel’s position in the semiconductor industry.
One of the most notable developments is a new partnership with Amazon Web Services (AWS). Intel will produce custom artificial intelligence chips for AWS using its advanced 18A manufacturing process.
This collaboration extends an existing relationship between the two companies and could provide Intel with a stronger foothold in the growing AI chip market.
The restructuring also involves selling a portion of Intel’s stake in Altera, a programmable chip business.
Additionally, the company will pause construction at chip factory projects in Germany and Poland for approximately two years, citing anticipated market demand. However, Intel emphasized that its manufacturing expansion plans in the United States will remain unchanged.
These announcements come at a crucial time for Intel, which has faced challenges in recent years. The company has lost market share in its core PC and data center businesses and has struggled to compete with Nvidia in the booming AI chip sector. Intel’s stock has declined significantly in 2024, prompting the need for strategic changes.
The U.S. government has shown support for Intel’s efforts to boost domestic chip production. The company was recently awarded up to $3 billion in funding from the CHIPS and Science Act for its “Secure Enclave” program, a collaboration with the Department of Defense.
Intel’s foundry business has been a significant investment for the company, with approximately $25 billion spent on it in each of the past two years. By restructuring this division as a separate entity, Intel aims to improve its financial performance and explore new funding options. The company is even considering the possibility of spinning off the foundry business into a separate publicly traded company, according to sources familiar with the matter.
The partnership with AWS is particularly noteworthy as it demonstrates Intel’s commitment to competing in the AI chip market. Amazon, like other major tech companies, has been developing its own AI chips for several years. This collaboration could help Intel establish itself as a key player in this rapidly growing sector.
Intel’s CEO emphasized the importance of these changes, stating,
“We need to fight for every inch and execute better than ever before. Because that’s the only way to quiet our critics and deliver the results we know we’re capable of achieving.”
The company’s stock responded positively to these announcements, jumping 8% in extended trading. This reaction suggests that investors see potential in Intel’s restructuring efforts and new partnerships
