Intel’s foundry division has landed a contract with Amazon's AWS to produce specialized AI chips, leading to an 8% increase in Intel's stock price. The deal will see Intel create an advanced “artificial intelligence fabric chip” using its latest 18A technology. Alongside this, Intel is planning to cut costs and reorganize to boost efficiency and profits. The Economics Time
Intel’s foundry division has landed a significant deal with Amazon's cloud services unit, AWS, to produce custom artificial intelligence chips. This news, announced on Monday, has boosted Intel’s stock by about 8% in after-hours trading.
The deal is a major endorsement for Intel, which will now be responsible for designing and manufacturing these advanced chips. Intel’s CEO, Pat Gelsinger, shared the news with employees in a memo, which also detailed the company's plans for cost-cutting. According to the memo, Amazon has chosen Intel to produce an "artificial intelligence fabric chip" using Intel's latest 18A manufacturing process. This cutting-edge technology is among the most advanced available for external clients.
Intel is also set to produce additional chips for Amazon using its forthcoming 18AP and 14A processes. The partnership marks a significant achievement for Intel’s foundry business, which had been seeking high-profile clients to boost its profile and performance.
The announcement comes at a time when Intel is working to recover from disappointing second-quarter earnings. To address its financial challenges, Intel is implementing several measures to improve efficiency and profitability. These include selling a stake in its programmable chip business, Altera, and pausing construction on its chip factory projects in Germany and Poland. However, Intel confirmed that it will continue its plans to expand manufacturing within the U.S.
The foundry business, a crucial part of Intel's turnaround strategy, will be given more autonomy and will operate as an independent subsidiary with its own board. This move is part of Gelsinger’s broader plan to revitalize Intel’s operations, which was first outlined in 2021. The company has also separated the financial performance of its foundry business from its design operations.
In addition to these strategic changes, Intel has secured up to $3 billion in direct funding from the U.S. CHIPS and Science Act, specifically for the Secure Enclave program. This funding will support Intel’s continued growth and innovation in chip manufacturing.
Meanwhile, the company is preparing to notify around 15,000 employees of layoffs, a move that was initially announced in August. This reduction is part of Intel's broader strategy to streamline operations and enhance its market competitiveness.
Overall, Intel’s new partnership with Amazon is a promising development for the company, offering a significant boost to its foundry business and showcasing its advanced technology capabilities. The agreement highlights Intel's ongoing efforts to navigate financial challenges and position itself as a leader in the chip manufacturing industry.
