Pat Gelsinger, the CEO of Intel, has secured Amazon’s AWS as a new client for the tech giant’s manufacturing division. This deal could potentially provide income to Intel’s newly established US plants, aiding Gelsinger’s endeavour to revive the struggling microprocessor manufacturer.
Under a multiyear, multibillion-dollar plan, Intel will work with AWS to develop a unique semiconductor for AI computing, also referred to as a fabric chip. The collaboration will utilise Intel’s 18A process, a leading-edge chipmaking technology, as noted in a recent statement.
Gelsinger confirmed the significance of this partnership in an interview, saying, “Today’s announcement is big. This is a very discerning customer who has very sophisticated design capabilities.”
Intel has seen its shares surge nearly 10% in late trading post the announcement, a ray of hope amid a year that saw shares falling by 58%.
This announcement surfaced following an instrumental board meeting last week. Alongside this, Intel confirmed the delay in creating new plants in Germany and Poland, even as the firm reaffirms its commitment to its US-based expansion in Arizona, New Mexico, Oregon, and Ohio.
Gelsinger, who set out on an ambitious resuscitation mission for Intel in 2021, has had to modify some plans in favour of greater efficiency amidst dwindling sales and mounting losses. Last month, the company disclosed its intentions to cut down 15,000 jobs, identify $10 billion in cost reductions and halt Intel’s dividend payment. Gelsinger is now focusing on curtailing expansion plans, particularly overseas.
Intel’s construction endeavours in Poland and Germany will now observe a temporary halt of approximately two years, dictated by market demand. Another project in Malaysia, though completed, will be operational only when market conditions allow, according to the company.
During the three-day board meeting last week, management discoursed on how to preserve capital whilst keeping Gelsinger’s revitalisation strategy alive. The scheme is centred on evolving Intel into a foundry – a chipmaker creating products for outside clientele. An Amazon deal is a significant triumph for the initiative, which previously struggled to secure customers.
Intel is making plans to expedite the implementation of its $10 billion cost-saving strategy, with a focus on enhancing its products for Artificial Intelligence (AI) computing. This move is seen as an attempt to compete effectively with Nividia, a key rival in the AI computing sector.
Amazon Web Services (AWS), the leading cloud computing provider, could bolster faith in Intel’s capabilities to compete with semiconductor heavyweight Taiwan Semiconductor Manufacturing Co. Over the years, AWS has used Intel processors, however, a shift towards in-house designs has been noted; Intel might now assist in the production of these. Similarly, Microsoft, another cloud computing giant, disclosed their intention to utilise Intel for some of their in-house chips in February.
Intel’s foundry operations, known as IFS, will be restructured as a fully owned subsidiary, increasing its separation from the core company. This decision is partially aimed at assuring potential customers, some of which are Intel’s competitors, of their detachment and independence as a supplier.
Intel’s CEO, Mr. Gelsinger, acknowledged the company’s ongoing learning curve in becoming a foundry, emphasising the need for multiple customers. In a recent triumph, the company announced its eligibility to receive up to $3 billion in US government funding for the production of military chips under the Secure Enclave initiative. This development, which seeks to provide a reliable source of advanced chips for defence and intelligence, boosted Intel’s shares by 6.4% on Monday.
Nevertheless, Intel needs to cover substantial ground to regain Wall Street’s trust. Following years of falling behind competitors and technological retrenchment, the legendary Silicon Valley firm is presently valued at less than $90 billion and no longer ranks as a top ten chipmaker. Conversely, Nvidia boasts a market capitalization of roughly $2.9 trillion.
Intel’s disappointing financial report last month caused significant shock among investors, resulting in the largest single-day stock decline in years, with analysts dubbing it Intel’s poorest earnings report ever.