Intel strikes foundry deal with AWS

In a very big win for its foundry business, Intel announced it has signed a multi-year, multi-billion-dollar deal with AWS to co-develop an “AI fabric chip” using Intel’s 18A chip fabrication process. Intel also agreed to produce a custom Xeon 6 processor for AWS as part of an existing deal between the two firms. The custom Xeon 6 CPUs for AWS will use the Intel 3 manufacturing process, which is what Intel uses now to produce Xeon Scalable processors for AWS.

“We have tripled our deal pipeline since the beginning of the year,” CEO Pat Gelsinger said of Intel Foundry’s business in a blog post, noting that the AWS deal could potentially involve additional chip designs.

In addition, Intel has received $3 billion in funding under the CHIPS and Science Act for the U.S. government’s Secure Enclave program. “This program is designed to expand the trusted manufacturing of leading-edge semiconductors for the U.S. government. As the only American company that both designs and manufactures leading-edge logic chips, we will help secure the domestic chip supply chain,” Gelsinger wrote.

The CHIPS funding news and AWS announcement “[demonstrate] the continued progress we are making to build a world-class foundry business,” Gelsinger wrote.

The AWS announcement is good news for the company’s new fab in Ohio, which was supposed to open in 2025 but has been delayed due to market conditions. As part of the deal, Amazon will invest $7.8 billion in its data center operations for AWS in central Ohio. In Gelsinger’s blog post, he said the company plans to engage with AWS to produce additional designs the Ohio fab spanning Intel 18A, Intel 18AP and Intel 14A nodes, but that is not likely to happen until 2026 at the earliest.

The momentum isn’t all positive, however, as Intel is putting the brakes on some fab projects in Europe. Gelsinger said the company would pause its multibillion dollar projects in Poland and Germany for two years based on “anticipated market demand,” and consider pulling back on its chip packaging and testing operations in Malaysia.

Greater independence for Intel Foundry

Intel is taking another step toward competing with TSMC by transitioning its chip foundry division, Intel Foundry Service, to become an independent subsidiary.

Gelsinger reiterated plans to establish Intel Foundry as an independent subsidiary inside of Intel. The first step came earlier this year when Intel separated the P&L and financial reporting for Intel Foundry and Intel Products.

“A subsidiary structure will unlock important benefits. It provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel. Importantly, it also gives us future flexibility to evaluate independent sources of funding and optimize the capital structure of each business to maximize growth and shareholder value creation,” Gelsinger wrote.

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