Intel moves to spin off Foundry business, signs AI chip deal with AWS | TechCrunch

Intel has announced a key customer win and overhauled its foundry business as the beleaguered chipmaker looks to execute a turnaround.

Intel is taking steps to move its chip foundry division, Intel Foundry, into an independent subsidiary, Intel CEO Patrick Gelsinger said in a blog post. Intel Foundry leadership is not changing, and the subsidiary will remain within Intel. But Intel Foundry will gain an operating board with independent directors.

Gelsinger also said the company would pause its chip manufacturing projects in Poland and Germany for two years “based on anticipated market demand” and consider bringing back its chip packaging and testing operations to Malaysia. Intel previously pledged to spend $36 billion on a semiconductor factory in Magdeburg, Germany, $4.6 billion on a chip plant near the Polish city of Wroclaw and $7 billion on its Malaysian footprint.

But in a win for the foundry business, Gelsinger revealed that it has signed a deal with AWS to co-develop an AI chip using Intel's 18A chip manufacturing process. Intel has also agreed to build a custom Xeon 6 processor for AWS, building on an existing partnership between the two companies.

“We've tripled our deal pipeline since the beginning of the year,” Gelsinger said of Intel Foundry's business, describing the AWS deal as a “multi-year, multi-billion-dollar framework” that could potentially involve additional chip designs. He added that it “demonstrates the continued progress we are making to build a world-class foundry business.”

Intel's cost-cutting and deal-making — including the newly awarded $3.5 billion contract to make chips for the Pentagon — sent the company's stock up more than 6% on the market. This is one bright spot in Intel's otherwise dire fiscal year.

In Q1, Intel posted a net loss of $437 million — a loss that grew to $1.6 billion in Q2. Intel Foundry posted an operating loss of $5.3 billion in H1, despite a slight year-over-year increase in revenue.

Intel has reportedly lost a major customer, Sony, after failing to come to an agreement to manufacture a chip for Sony's next PlayStation console. According to Reuters, the tie-up will contribute $30 billion to Intel's foundry business.

This summer, Intel announced a $10 billion cost-cutting plan, which included laying off 15,000 workers through severance and early retirement offers. (Intel says it's more than halfway through the process and expects to finish by the end of the year.) The chipmaker is also said to be considering selling its autonomous driving arm Mobileye and its enterprise networking division.