Intel’s Four-Year Struggle to Secure Major Clients in Foundry Business Revealed.
Intel Corporation, a leading US chipmaker, finds itself grappling with the ongoing challenge of attracting significant clients to its foundry business, casting doubt on the long-term viability of this sector.
In a recent Securities and Exchange Commission (SEC) filing, Intel acknowledged that it has yet to secure substantial customers for its external foundry services. This development follows nearly four years of sustained effort and substantial investments.
The strategic shift towards the foundry business was initiated in 2021 by former CEO Pat Gelsinger, opening up the opportunity for third-party companies to manufacture custom chips using Intel’s advanced technology. This move was made amidst a historically acute chip shortage, with Intel envisioning this investment as a means to both meet demand and ensure US self-sufficiency in domestic chip manufacturing.
Despite some agreements with notable entities such as Microsoft, Amazon Web Services (AWS), and Arm for the design of chips using Intel’s 18A process, set for launch later this year, these partnerships have yet to generate substantial foundry revenue, according to the filing.
Furthermore, the company has expressed uncertainty regarding the prospects of securing external clients for its upcoming 14A manufacturing process successor to the 18A. The filing indicates that these prospects are uncertain at best.
In a bid to maintain its own processor production using both 18A and 14A, Intel is warning that failure in the foundry business may compel it to halt or abandon the pursuit of next-generation leading-edge process technologies. Such a scenario could have far-reaching strategic, financial, operational, and reputational implications for the company.
In case Intel decides to retreat from developing in-house chip technologies, it would be left dependent on competitors, particularly Taiwan Semiconductor Manufacturing Company (TSMC), which poses a significant setback to US domestic chip ambitions. TSMC has pledged to construct six chip fabrication plants (fabs) in Arizona, while companies including AMD, Apple, Nvidia, and Qualcomm all rely on TSMC for their manufacturing needs.
In an effort to engineer a turnaround, Intel plans to reduce its workforce by 24,000 employees this year under the leadership of new CEO Lip-Bu Tan. Tan recently addressed his staff, stating that he no longer considers Intel a top chipmaker based on market value. However, he emphasized the importance of focusing on the development and implementation of both the 18A and 14A processes moving forward.
