2 days Ago By Firstpost
Intel has signed a major deal with Amazon’s cloud computing division, Amazon Web Services (AWS), to manufacture custom artificial intelligence (AI) chips, marking a significant win for the chip maker’s foundry business. This announcement, made on Monday, sent Intel’s stock up by around 8 per cent in after-hours trading, providing a much-needed boost for the company. Intel’s CEO, Pat Gelsinger, shared the news with employees in an internal memo, revealing that Amazon had agreed to become a multibillion-dollar customer.
This agreement will see Intel providing both design services and manufacturing for AWS, using Intel’s most advanced chip-making process, known as the 18A process. Intel will be responsible for producing an “artificial intelligence fabric chip” for AWS, further solidifying its position in the AI chip sector. The company also expects to develop additional designs for Amazon using its forthcoming 18AP and 14A manufacturing processes.
This deal represents a significant milestone for Intel, as the company has struggled in recent years to secure high-profile customers for its foundry business, which focuses on contract manufacturing. The agreement with Amazon gives Intel a major vote of confidence and comes at a crucial time as the company works to revive its business after disappointing second-quarter earnings. In the same memo, Gelsinger outlined several strategic steps to improve Intel’s efficiency, profitability, and market competitiveness.
Among these steps, Intel announced it would sell a stake in its programmable chip business, Altera, and pause construction on its chip factory project in Germany for two years. Intel also plans to delay its project in Poland, although it reaffirmed its commitment to expanding manufacturing operations within the United States. In an effort to strengthen its foundry business, Intel will establish it as an independent subsidiary with its own operating board, allowing for greater autonomy and the potential to attract outside capital.
The foundry unit had already separated its financial performance from Intel’s design business earlier this year. This move is part of Gelsinger’s broader turnaround plan, which he first outlined in 2021, aiming to restore Intel’s position as a leading player in the semiconductor industry. In addition to the Amazon deal, Intel announced it had been awarded up to $3 billion in direct funding from the US CHIPS and Science Act, specifically as part of the Secure Enclave programme.
This funding aims to boost domestic semiconductor manufacturing and innovation, aligning with Intel’s ongoing efforts to expand its US operations. Lastly, Intel is expected to notify approximately 15,000 employees in mid-October regarding layoffs, a decision the company first announced in August. Despite these cutbacks, Intel remains focused on prioritising its core technology and reorganising its automotive and “edge” businesses to drive future growth.
With the Amazon deal, Intel hopes to reinvigorate its foundry business and regain its competitive edge in the fast-evolving world of AI and semiconductor technology..
