Intel is trying to turn around its business by restructuring its chip manufacturing division Intel Foundry and winning a key contract with Amazon Web Services (AWS).
Amid plummeting profits and fierce competition, Intel is pushing to turn its chipmaking division, Intel Foundry, into a standalone subsidiary with its own board of directors, including independent directors. However, according to Techcrunch, Intel Foundry will continue to operate within Intel without a change in leadership.
Intel CEO Patrick Gelsinger said the company will pause chip factory construction projects in Poland and Germany for two years due to poor market demand forecasts.
The chip giant has previously committed to spending more than $36 billion to build semiconductor factories in Magdeburg, Germany; $4.6 billion in Wrocław, Poland; and $7 billion for a facility in Malaysia.
The suspension of these projects is believed to be a move to save costs and adjust strategies in the face of volatile market conditions. In addition, Intel is also considering cutting the scale of chip packaging and testing operations in Malaysia.
Collaborating to Develop AI Chips with AWS
One bright spot for Intel Foundry is its AI chip development partnership with Amazon Web Services (AWS). Intel will use its 18A manufacturing process to jointly develop AI chips with AWS and produce custom Xeon 6 processors for AWS.
Gelsinger described it as a “multi-year, multi-billion dollar” deal that could expand to other chip designs in the future.
Intel Foundry has tripled its number of new contracts since the beginning of the year, and the deal with AWS is a testament to Intel Foundry's progress in building a world-class chip manufacturing business.
Intel CEO Pat Gelsinger speaks at an event called AI Everywhere in New York, Thursday, Dec. 14, 2023. Photo: AP/Seth Wenig. Positive effects on the stock market
Cost-cutting measures and new partnerships, along with a $3.5 billion contract to make chips for the Pentagon, helped Intel’s stock close up more than 6%, a bright spot in an otherwise difficult financial year for the company.
In Q1, the company reported a net loss of $437 million, which increased to $1.6 billion in Q2. Intel Foundry also reported a loss of $5.3 billion in the first half of the year, despite a slight increase in revenue compared to the same period last year.
Intel also struggled after losing the contract to manufacture chips for Sony's next-generation PlayStation game console, a deal that could have brought Intel Foundry $30 billion.
To address its financial challenges, Intel has announced a $10 billion cost-cutting plan, including 15,000 layoffs. The company is also considering selling its Mobileye autonomous vehicle unit and its enterprise networking business.
The company is understood to be making efforts to adjust its strategy and restructure to cope with financial challenges, while further consolidating its position in the global chip industry.
