Intel Announces Spin off of Chip Foundry Business

Intel’s overall situation has been decided. Its CEO Pat Gelsinger announced in a statement that the company has adjusted its chip foundry business layout and won an important customer in order to turn losses into profits.

Specifically, Intel will spin off its chip foundry division into an independent subsidiary and add an operations board. According to Gelsinger, there will be no change in the leadership of the OEM business.

In addition, Gelsinger also stated that Intel will suspend its chip manufacturing projects in Poland and Germany, and consider withdrawing its chip packaging and testing business in Malaysia.

Intel previously promised to spend $36 billion to build chip factories in Germany, $4.6 billion to build chip factories in Poland, and $7 billion to build factories in Malaysia. However, Intel is still advancing its factory projects in Arizona, Oregon, New Mexico, and Ohio in the United States.

Intel will also sell a portion of its stake in Altera, a programmable chip company it acquired in 2015. According to Gelsinger, this is Intel’s most important transformation in over forty years, and he hopes to use this opportunity to build a stronger Intel in the coming decades.

Victory in OEM business?

The changes in Intel’s chip foundry business are undoubtedly one of the most concerning trends in the market. Gelsinger believes that by separating this business, it can evaluate independent funding sources and introduce external financing.

Over the past two years, Intel has spent approximately $25 billion annually on its foundry business, becoming a major drag on the company. On the other hand, Intel hopes to revitalize its foundry business to achieve its ambitious goal of manufacturing chips for other customers and competing with TSMC and Samsung Electronics.

Gelsinger added that Intel has signed an agreement with Amazon Web Services to jointly develop an AI chip using the 18A chip manufacturing process. In addition, Intel will also produce customized Xeon 6 processors for Amazon Web Services to strengthen the partnership between the two companies.

This is undoubtedly a major development for Intel’s OEM business. Gelsinger emphasized that Intel’s foundry transaction channels have doubled, and its deal with Amazon is a multi-year, multi billion dollar collaboration that may involve more chip designs. This means that Intel is moving towards becoming a world-class foundry service provider.

After the announcement of the business adjustment, Intel’s stock price experienced a sharp rise. As of press time, Intel’s stock price has surged by over 6% before Tuesday’s trading. However, since the beginning of this year, the company’s market value has fallen by 56%.