Intel foundry business to make custom chip for Amazon, chipmaker's shares jump

By Max A. Cherney

(Reuters) -Amazon's AWS unit said on Monday it would expand a collaboration with Intel (NASDAQ:INTC ) featuring co-investments on chip designs and a deal to manufacture a processor for artificial intelligence, a vote of confidence for Intel's contract manufacturing effort.

Intel's shares jumped 7% in extended trading after the chip maker's CEO Pat Gelsinger released a memo to employees announcing the Amazon (NASDAQ:AMZN ) unit would be a multibillion-dollar customer, paying Santa Clara, California-based Intel for design services and manufacturing.

Amazon's cloud computing division already designs several chips for use in its data centers and has hired Intel to package at least one version. Intel will produce an "artificial intelligence fabric chip" for AWS and use the chip maker's 18A process node, the most advanced version available for outside customers, the companies said.

The memo also outlined a number of steps Intel would take to revive itself after it reported disastrous second quarter earnings.

Among steps Intel's board has decided to take is selling a stake in its programmable chip business Altera. It also said it would pause construction at its project in Germany for two years, a move Reuters had previously reported.

Intel plans to keep its manufacturing business, or foundry, inside the company, confirming earlier Reuters reporting. The foundry business is crucial to Gelsinger's turnaround plan for the company, which he outlined in 2021. Until Amazon, Intel has struggled to find marquee customers that it could discuss publicly.

In the memo, Gelsinger said the foundry business would have greater independence, for instance being able to take outside capital. Intel plans to establish it as an independent subsidiary. The foundry unit separated its financial performance from the design business earlier this year.

The company is also taking several steps to prioritize the core technology behind its central processing units (CPUs), and is reorganizing several divisions, including its automotive and "edge" businesses.



On Monday Intel also said it was awarded up to $3 billion in direct funding from the CHIPS and Science Act, as part of the Secure Enclave program.

The company said it plans to send notices in the middle of October to the roughly 15,000 employees it said in August it would lay off.

Source: Investing.com