Intel frees its Foundry biz – and that's just one of many major shake-ups today

Pauses European fabs, scores secret US gig, teams up with Amazon, re-orgs its innards, and more!

Intel will spin out its Foundry division as an independent subsidiary with its own board, in the hopes of bringing in new sources of capital for the ailing business unit.

The decision, announced in a Monday letter penned by CEO Pat Gelsinger, comes just months after Chipzilla made the Foundry division a separate line item on its financial disclosures.

Gelsinger, who has taken considerable flak for Foundry's mounting losses in recent quarters, claims the decision to establish the division as a subsidiary will offer multiple benefits.

"It provides our external Foundry customers and suppliers with clearer separation and independence from the rest of Intel," he wrote. "It also gives us future flexibility to evaluate independent sources of funding and optimize the capital structure of each business to maximize growth."

The move also provides a more immediate benefit for Intel's shareholders: getting the division's operating losses off Intel's books. In Q2 alone Intel Foundry racked up $2.8 billion in operating losses. That dismal performance has spurred multiple class action lawsuits alleging Gelsinger and CFO David Zinsner misled investors about the health of the business unit.

While Intel Foundry will function more like a standalone business, Gelsinger stressed the subsidiary's leadership who will continue to report directly to him.

In some respects, the decision mirrors AMD's decision – back in 2008 – to spin off its own foundry unit, which later became GlobalFoundries. AMD has since transitioned most of its foundry work to Taiwan's TSMC.

Intel's product division already makes heavy use of TSMC for its GPUs, NICs, and AI accelerators. Two weeks ago the silicon titan also outsourced client CPUs, following the decision to ditch its 20A process technology to focus on ramping production of its mass market 18A node.

Amazon hedges bets on Intel 18A

Speaking of Intel's next-gen process tech, the chipmaker announced it is "co-investing" with AWS for the development of an AI fabric chip built on 18A under a "multi-year, multi-billion-dollar framework."

Intel didn't provide specifics on the chip, but it appears that making the silicon stateside is a key element of the deal. The x86 giant specifically called out the state of Ohio, where it is building out a pair of leading edge fabs and where AWS is investing $7.8 billion to expand its datacenter footprint.

"By co-developing next-generation AI fabric chips in Intel 18A, we continue our long-standing collaboration, dating back to 2006 when we launched the first Amazon EC2 instance featuring their chips," Matt Garman, recently appointed CEO of AWS, explained in a canned statement.

Intel also revealed it would produce a custom version of its Xeon 6 processor, built on its existing Intel 3 process node, specifically for AWS. While this may sound like special treatment, it's not the first time Intel has offered the cloud giant customized Xeons – and it has done the same for other clouds.

Intel also suggested that AWS may manufacture additional infrastructure in its fabs using its upcoming 18A, 18AP, and 14A process nodes.

Intel Foundry scores $3B for defense chips

On a busy Monday, Intel also revealed it won up to $3 billion in funding under the CHIPS and Science Act to establish a secretive manufacturing program called the "Secure Enclave."

The program marks Intel's latest tie up with the Department of Defense (DoD) and aims to secure the supply of leading-edge semiconductors.

"Intel is proud of our ongoing collaboration with the US Department of Defense to help strengthen America's defense and national security systems," declared Chris George, president and general manager of Intel Federal in a canned statement.

While a welcome win for the embattled Foundry unit, Intel is realistically the only option for such a job – and Gelsinger seems to know it. "As the only American company that both designs and manufactures leading-edge logic chips, we will help secure the domestic chip supply chain," he wrote.

The Pentagon's reported insistence that chips built under the secretive program are manufactured in the United States by a US company limited its options from the get go. And while GlobalFoundries still produces semiconductors and other analog components, it abandoned development of leading-edge nodes back in 2018 when it scuttled its 7nm process tech.

While Intel was a shoo-in for the Secure Enclave project, it remains to be seen whether the decision to spin off its Foundry unit will add additional red tape for either the $3 billion defense project or the other $8.5 billion in CHIPS funding it was awarded this northern Spring.

Intel snubs Europe

While Intel prioritizes its US investments, it seems its European investment plans are stalled – or possibly over.

"We will pause our projects in Poland and Germany by approximately two years based on anticipated market demand," Gelsinger wrote, adding that its Ireland fab facility would remain its "lead European hub for the foreseeable future."

This suggests that Intel may do more than delay its €30 billion fab project in Magdeburg, Germany and $4.6 billion assembly and test facility in Wroclaw, Poland. Ironically, the decision to postpone the projects comes just days after the Polish government received approval from the European Commission to hand Intel $1.9 billion in state aid to fund the project.

It also remains unclear what a delay could mean for the €10 billion in state aid Intel persuaded the German government to hand over to support the Magdeburg plant.

The Register expects Europe will not fund delayed fabs – and without subsidies we can't imagine they'll go ahead as planned. Or, as the Germans might say: es ist fertig. (It's finished, it's over – Intel’s Euro-fab plans are toast.)

The Register has asked Intel for comment; we'll let you know if we receive a response.

In addition to the delays to its German and Polish facilities, Gelsinger noted that Intel would move forward with its advanced packaging facility in Malaysia but would "align" the startup of the facility with market conditions.

"There are no changes to our other manufacturing locations. We remain committed to our US manufacturing investments and are moving forward with our projects in Arizona, Oregon, New Mexico, and Ohio," Gelsinger wrote.

Consolidation hits Intel's networking, automotive groups

Intel's internal alignments will also see major changes as the x86 giant consolidates its Edge and Automotive businesses into its Client Computing Group (CCG).

This change, Gelsinger wrote, means the two businesses will "have a big opportunity to leverage our core client business and extend our leadership in the AI PC category."

Intel's integrated photonics group will find a new home in Intel's datacenter and AI group.

Finally, Intel will be integrating its software and incubation operations into its core business.

These consolidation efforts come as Gelsinger notes that, "through our voluntary early retirement and separation offerings, we are more than halfway to our workforce reduction target of approximately 15,000 by the end of the year."

Chipzilla's chief executive closed the letter by reiterating his belief that "this is the most significant transformation of Intel in over four decades. Not since the memory to microprocessor transition have we attempted something so essential. We succeeded then – and we will meet this moment and build a stronger Intel for decades to come." ®