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Amid mounting losses, Intel is restructuring to become more efficient and boost profitability.
Computer giant Intel has announced a multiyear deal to develop custom chips for Amazon Web Services (AWS).
In a memo sent to employees yesterday (16 September), CEO Pat Gelsinger said that Intel and AWS will develop a custom semiconductor for AI computing on the Intel 18A. They will also develop a custom Xeon 6 chip on Intel 3, building on the existing partnership between the companies which has seen Intel produce processors for AWS.
“Today’s announcement is big,” Gelsinger said in an interview yesterday. “This is a very discerning customer who has very sophisticated design capabilities.”
Gelsinger expects “deep engagement” with AWS on designs spanning Intel 18A, 18AP and 14A.
Intel made a number of announcements in the memo, which came after a pivotal board meeting last week. The company is under pressure to cut costs by $10bn as sales have shrunk in recent years.
Last month, the company announced a plan to cut 15pc of its workforce, about 15,000 staff, as part of its cost-cutting measures. Gelsinger said in the memo that the company is already more than halfway to its targeted workforce reduction.
Intel to separate Foundry
Gelsinger also announced that Intel’s Foundry business will become a wholly owned, independent subsidiary, with no change to its leadership team.
This continued decentralisation is part of the process Intel initiated earlier this year with its separation of profit and loss and financial reporting for the Intel Foundry.
This structure provides a “clear separation and independence” of the Intel Foundry from the rest of Intel, Gelsinger said. “It also gives us future flexibility to evaluate independent sources of funding and optimise the capital structure of each business to maximise growth and shareholder value creation.”
The foundry business reported an operating loss of nearly $7bn in 2023 and in April of this year, the company warned that the losses were expected to grow in 2024.
The company also plans to exit two-thirds of its real-estate globally by the end of 2024, and has paused its projects in Poland and Germany for two years.
However, Ireland will remain Intel’s European hub and the planned packaging factory in Malaysia will be completed.
In better news for the company, it has been awarded up to $3bn in direct funding under the US Chips and Science Act by the US government to secure its domestic market. The ‘Secure Enclave’ programme aims to expand the trusted manufacturing of semiconductors for the US 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 said.
Earlier this year, the White House agreed a separate deal to support the construction and modernisation of Intel’s fab facilities with $8.5bn in direct funding and $11bn in loans.
Following the memo, Intel stocks, that were taking a slump this year, jumped by 8pc.
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