Intel Plans To Turn Foundry Business Into Subsidiary, Allow For Outside Funding (cnbc.com) 24
Intel shares surged 8% after announcing plans to make its foundry business an independent unit with its own board and potential for outside capital, part of CEO Pat Gelsinger's strategy to restructure the company amid financial challenges. The company is also exploring the possibility of spinning off the foundry business, pausing some European manufacturing projects, and expanding its AI chip production partnership with Amazon Web Services to regain market share in the growing AI server chip industry. CNBC reports: As part of CEO Pat Gelsinger's effort to turn around the struggling chipmaker, Intel said in a memo to employees that it will also sell off part of its stake in Altera. Gelsinger said the restructuring would allow the foundry business to "evaluate independent sources of funding,â and comes days after Intel's board met to assess the direction and future of the company. The foundry business, which Intel plans to use to manufacture chips for other customers, has been a big drag on its bottom line, with the company spending roughly $25 billion on it in each of the last two years. Beyond just considering outside funding, Intel is weighing whether to spin off the foundry business, possibly into a separate publicly traded company, according to a person with knowledge of the matter who declined to be named in order to discuss confidential information. With a standalone "operating board" and a cleaner corporate structure, the mechanics of a separation become far easier than trying to turn a fully integrated unit into a separate company. [...] Intel will also pause its fabrication efforts in Poland and Germany "by approximately two years based on anticipated market demand," Gelsinger said, and pull back on its plans for its Malaysian factory. U.S. manufacturing projects will remain unaffected, the company said.
In addition to the foundry announcement, Intel said it entered into a deal with Amazon Web Services to produce custom chips for AI, extending a long-running partnership between the two companies. Amazon is a big customer of Intel chips to power its AWS servers, and will buy a custom Xeon processor from Intel as well, Intel said. The move will potentially give Intel a new foothold in the growing industry for AI server chips. While Intel has several products that can be used for AI, including Gaudi 3, Nvidia has largely taken control of the market. Amazon has been developing its own AI chips, including one called Trainium, for over five years. Microsoft and Google have also invested heavily in custom chips to run AI, aiming to offer less expensive processors than Nvidia's general-purpose graphics processing units. Intel said that it would carry out its most advanced manufacturing, including the AI chip for AWS, at its plant in Ohio that's currently under construction. "All eyes will remain on us," Gelsinger said. "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."
In addition to the foundry announcement, Intel said it entered into a deal with Amazon Web Services to produce custom chips for AI, extending a long-running partnership between the two companies. Amazon is a big customer of Intel chips to power its AWS servers, and will buy a custom Xeon processor from Intel as well, Intel said. The move will potentially give Intel a new foothold in the growing industry for AI server chips. While Intel has several products that can be used for AI, including Gaudi 3, Nvidia has largely taken control of the market. Amazon has been developing its own AI chips, including one called Trainium, for over five years. Microsoft and Google have also invested heavily in custom chips to run AI, aiming to offer less expensive processors than Nvidia's general-purpose graphics processing units. Intel said that it would carry out its most advanced manufacturing, including the AI chip for AWS, at its plant in Ohio that's currently under construction. "All eyes will remain on us," Gelsinger said. "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."
Intel fabless? (Score:1)
Intel is going fabless? The government gave them blank checks to keep chip production in the US and they flushed that money down the toilet (though somehow the executives were seen partying in brand new yachts).
Re:Intel fabless? (Score:5, Interesting)
Anyway it's too early to call but at this stage, things aren't looking too rosy. It's hard to blame the government though. Sovereign risk is real, and what alternatives to invest in for chip fab at scale besides Intel are there in the USA? You'd never want to put all your eggs in the Taiwan basket, only in 12 months for China to steamroll that whole country and then cut you out.
Re:Intel fabless? (Score:4, Insightful)
You'd never want to put all your eggs in the Taiwan basket, only in 12 months for China to steamroll that whole country and then cut you out.
TSMC says they have yields up in AZ [tomshardware.com], so things are looking up here for the fabless.
Re:Intel fabless? (Score:5, Insightful)
But, if they play it smart, they've still got quite a few years before they're forced to act. Possibly a decade or more. They've got about 30 billion in cash, and this shows their profits:
https://www.statista.com/stati... [statista.com]
Their stock is getting hammered because they're not currently Nvidia-level hot, but nvidia stock is on an idiotic trajectory driven by investors that salivate like Pavlov's dog if you mention the word "AI". It's unlikely to last.
If Intel can revamp their leadership to include more technically-minded people and sustain investment for the future, they have a real chance of recovering. Same goes for Boeing, actually. Sometimes, things change and a company is truly doomed. Not these. These companies just require good, consistent leadership that keep one eye on the quarterly report but the other eye on the horizon.
Re: (Score:2)
We don't need Intel, the x86-64 ISA is owned by AMD, this is why we call it amd64, and at this point this ISA's patients have expired... yes the Athlon 64 is 21 years old now, so amd64 is effectively an open standard at this point. PowerPC and RISC-V are also open standards, so I'm certain that fabless customers will be able to figure out how to make a core for whatever it is that they want to do at this point.
Re: (Score:2)
Well technically that money could still be money well spent if the fab business that is spun off survives and thrives. If instead the fab business is cut out of Intel like a metastatic cancer and then dies a slow (or rapid) death then yes, it would be money flushed down the toilet. But maybe, just maybe, the spun-off business will have some EUV breakthroughs and catch up to our friends in Taiwan? Maybe a new management structure and fresh thinking is just what they need? Anyway it's too early to call but at this stage, things aren't looking too rosy. It's hard to blame the government though. Sovereign risk is real, and what alternatives to invest in for chip fab at scale besides Intel are there in the USA? You'd never want to put all your eggs in the Taiwan basket, only in 12 months for China to steamroll that whole country and then cut you out.
The government, being the behemoth it is, could have simply worked *WITH* Intel on setting up a fab, then rented/leased it out to Intel or anyone else who had the coin and needed it. This is our government's problem. There's this insane trust built in when it comes to private industry that has proven to be broken nearly every time it's used as a justification for tossing taxpayer funds at private industry. Telecoms do it constantly. And I was saying from the start the CHiPs act looked very much like the sam
Re: (Score:3)
Re: (Score:2)
Re: (Score:2)
Everybody who was laid off to enable this deserves an equal number of shares to what they had vetted in their employee owned stock plan.
Re: (Score:2)
Government is subsidizing the hell out of Intel. Now it's about $23B. The company is worth $90B or so right now. So the government is giving more than 25% of it's market cap in subsidies.
We the people are giving about 25% of it's market cap in subsidies would be what's really going on I guess. The government is just skimming billions more off the top as the money truck sails past.
Hence Intel is dead (Score:5, Insightful)
All Intel ever had was a superior foundry. They never did good CPU design (there is a reason it is that AMD64 architecture, and check how late they were to integrate the memory controller into the CPU), and they will not start now. Hence if they give up any chance of recovering that manufacturing advantage, they are dead or relegated to irrelevancy.
Good. They have done enough damage.
Re: (Score:3)
Even that was only a side effect of the massive revenue advantage coming from the PC industry. All other sources of semiconductor income paled in comparison in Intel's heydays.
The PC is no longer the only game in town. The Internet changed the rules.
Re: (Score:2)
After they started to really produce CPUs, yes. Before that Intel was a memory company.
Sounds like Boeing and its fuselage factory (Score:2)
In 2025, Boeing thought it would be a good idea to spin off its fuselage factory, forming Spirit AeroSystems. https://www.reuters.com/market... [reuters.com] That didn't turn out so well!
Intel is already struggling. If they spin off one of their core competencies, it's hard to imagine that turning out well.
Re: (Score:2)
2025? That's a typo, right?
Re: (Score:2)
Yeah, 2005 is the correct year.
Re: (Score:3)
In 2025, Boeing thought it would be a good idea to spin off its fuselage factory
Instead, they spun off their window panels. Mid flight.
Who fails harder? (Score:5, Interesting)
Nobody can tell if Intel's design teams or fabs are the more dysfunctional. We're about to find out though!
Things are bullish again! (Score:2)
Developers.... (Score:2)
I haven't even seen a Guadi 3 in the wild.
And no, I won't code for some niche item that has no mass economy option.
As for Arc, I'm still waiting for Intel to say they that they are committed to it.
A separation on paper (Score:5, Insightful)
Part of the problem that Intel has getting Foundry customers is that Intel may also sell products that compete with those customers. By putting up legal barriers between Design and Foundry the potential customers will worry less about Intel ripping off their designs.
The downside is that it makes it hard to to co-design the products and the process.
Re: (Score:2)
subsidiary
Re: (Score:2)
'cept these are the wrong kind of legal barriers
subsidiary .. the money doesn't mix, but all the privileged information still flows
It was good enough for GF US II to get in the Trusted Foundry program while Globalfoundries was still owned by the Emir of Abu Dhabi