Intel has announced significant changes to its chip manufacturing business and has secured a key deal in its effort to recover after a challenging financial streak. The company is taking steps to transition its chip foundry division, Intel Foundry, into an independent subsidiary, though it will remain within Intel, according to CEO Patrick Gelsinger in a company blog post.
Business Restructuring and Project Pauses
While Intel Foundry’s leadership will not change, the subsidiary will gain an operating board with independent directors. These changes come alongside Intel’s decision to pause its chip manufacturing projects in Poland and Germany for two years, in response to anticipated market demand. Additionally, the company is considering scaling back its chip packaging and testing operations in Malaysia.
Initially, Intel had pledged over $36 billion to build semiconductor factories in Magdeburg, Germany, as well as $4.6 billion on a plant near Wrocław, Poland, and $7 billion in Malaysia. However, the pause on these projects reflects a strategy of adjusting to current market conditions.
Key Deal with AWS
In a positive development for its foundry business, Intel has signed a deal with Amazon Web Services (AWS) to co-develop an artificial intelligence chip using Intel’s 18A chip fabrication process. Moreover, Intel will manufacture a custom Xeon 6 processor for AWS, further strengthening an existing partnership between the two companies.
Gelsinger noted that the deal with AWS is part of a “multi-year, multi-billion-dollar” framework that could involve the development of additional chip designs in the future. He also mentioned that Intel has tripled its deal pipeline since the beginning of the year, highlighting the company’s continued progress in building a world-class foundry business.
Financial Results and Cost-Cutting Measures
Despite this positive news, Intel has faced a challenging fiscal year. The company reported a net loss of $437 million in the first quarter of 2024, which increased to $1.6 billion in the second quarter. Additionally, Intel Foundry accumulated $5.3 billion in operating losses during the first half of the year.
To counteract this situation, Intel has launched a $10 billion cost-reduction plan, which includes laying off 15,000 employees.
