Intel announces its foundry business spinoff
2024-09-22Intel has announced plans to establish a new Intel Foundry Services (IFS) spinoff. The foundry business is set to become its own standalone subsidiary. This strategic move is part of a long-term endeavor to curtail losses and reassure potential customers of its enduring leadership in chip design, demonstrating its capability to manufacture state-of-the-art chips.
The announcement was made by company CEO Pat Gelsinger, and is said to align with three of Intel’s main goals, enhancing its foundry operations, cutting costs and focusing on its core x86 technology. This news follows its second-quarter earnings call, when Intel announced a major $10 billion cost-reduction plan.
By doing so, Intel hopes to better address customer needs and showcase its expertise in chip manufacturing, particularly as it competes with other foundry services like TSMC and Samsung. This move could help streamline operations, attract new customers, and reassure stakeholders about its commitment to innovation and leadership in chip design.
Intel's decision to pause work on factories in Poland and Germany for two years underscores its focus on aligning production capacity with anticipated market demand. Meanwhile, the commitment to its facilities in Arizona, Oregon, New Mexico, and Ohio highlights its strategic prioritization of U.S. manufacturing.
The move to sell part of its stake in Altera and reduce its global real estate footprint by about two-thirds suggests a broader effort to streamline operations and optimize resources as the company navigates a challenging market landscape. This reconfiguration could help Intel better position itself for future growth and innovation in the semiconductor industry.
Intel's recent multibillion-dollar agreement with Amazon Web Services (AWS) marks a significant boost for its foundry business, particularly in the competitive AI chip market. The partnership will leverage Intel's advanced manufacturing process, 18A, to produce chips specifically for AWS's AI data centers.
This deal, alongside the development of a custom Xeon 6 server chip for AWS, indicates a promising direction for Intel, especially given its substantial investment of around $25 billion over the past two years. The positive market response, reflected in a 6% jump in Intel shares during after-hours trading, underscores investor optimism about the company's future growth and its ability to regain leadership in the semiconductor industry.
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