Beleaguered chip maker Intel has announced plans to acquire key customers and make changes to its foundry business in an effort to turn things around.
Intel is taking steps to transition its chip-making unit, Intel Foundry, into an independent subsidiary, Intel CEO Patrick Gelsinger said in a blog post. Leadership of Intel Foundry will remain unchanged and the subsidiary will remain within Intel, but Intel Foundry will have an operating committee that includes independent directors.
Gelsinger also said the company would suspend chip-making projects in Poland and Germany for two years and consider scaling back chip packaging and testing operations in Malaysia “based on expected market demand.”Intel had previously committed to spending more than $36 billion to build a semiconductor fab in Magdeburg, Germany, $4.6 billion for a chip factory near the Polish city of Wroclaw and $7 billion for the Malaysian site.
But in a win for the foundry business, Gelsinger revealed that Intel has inked a deal with AWS to co-develop AI chips using its 18A chip manufacturing process. Intel has also agreed to manufacture custom Xeon 6 processors for AWS, building on an existing partnership between the two companies.
Gelsinger said Intel Foundry's business has “tripled its deal pipeline since the beginning of the year,” and that the AWS deal is a “multi-year, multi-billion dollar framework” that could include additional chip designs. He added that it “demonstrates our continued progress toward building a world-class foundry business.”
Intel's cost-cutting and deals, along with a new $3.5 billion contract to make chips for the Department of Defense, helped send the company's shares soaring more than 6% at the close — a bright spot in Intel's bleak fiscal year.
Intel posted a net loss of $437 million in the first quarter, which widened to $1.6 billion in the second quarter. Intel Foundry posted an operating loss of $5.3 billion in the first quarter, despite a slight increase in revenue compared to the same period last year.
Intel also reportedly lost a major customer, Sony, after failing to reach a deal to make chips for Sony's next-generation PlayStation, a deal that would have contributed $30 billion to Intel's foundry business, according to Reuters.
Intel announced a $10 billion cost-cutting plan this summer, which included cutting 15,000 employees through separations and early retirement offers. (Intel said the process is more than half-way done and should be completed by the end of the year.) The chipmaker is also reportedly considering selling its autonomous driving division, Mobileye, and its enterprise networking division.