Intel faced an unpleasant surprise as part of its contract chip manufacturing project, which launched in 2021. Broadcom’s testing shows that Intel’s advanced 18A process technology is not ready for mass production.
Image Source: Intel
According to Reuters, tests of the Intel 18A advanced manufacturing process conducted by one of the key players in the field of networking equipment and radio chips, Broadcom, were unsuccessful. Broadcom received from Intel silicon wafers with semiconductors made using Intel 18A technology. But after studying these wafers, Broadcom engineers and management concluded that the 18A process was not yet ready for mass production.
Broadcom’s failed tests deal a blow to Intel’s plans to expand into contract chip manufacturing as Intel, under new CEO Pat Gelsinger, views contract manufacturing as a key part of its strategy to regain its position. The company has invested about $100 billion to expand manufacturing capacity across the United States and expects to attract large contract customers such as Nvidia or Apple to fill that capacity. However, despite statements from an Intel representative that everything is in order with 18A technology and that there is “great interest from the industry,” Broadcom is not yet ready to make final conclusions about cooperation. “We are evaluating all Intel Foundry offerings and have not yet completed that evaluation,” a Broadcom spokesperson said.
The situation is complicated by Intel’s current financial difficulties. In the second quarter, the company recorded an operating loss of $7 billion in its Foundry division, up from last year’s $5.2 billion loss, and Intel management expects the business to break even by 2027. In the context of falling market capitalization and reduced investment in the construction of new production facilities, the failure with Broadcom could further complicate the situation, especially against the backdrop of a 15% job cut and a revision of capital expenditures. In mid-September, the company’s board of directors will consider another plan to reduce costs in individual business units.
As for Broadcom, although not so well known to the general public, it is a large manufacturer of network equipment and radio chips, its revenue from chip sales in the last fiscal year amounted to $28 billion. The company is actively involved in projects related to artificial intelligence, and analyst J.P. Morgan Harlan Sur forecasts its AI revenues will be $11 billion to $12 billion this year, up from $4 billion last year. Interestingly, Broadcom is collaborating with Google (Alphabet) and Meta✴ Platforms to produce their own AI processors, which may include contracts with manufacturers including Intel or TSMC.
Despite the challenges, Intel continues to advance its 18A process technology. The company has released a toolkit for other chipmakers, and Gelsinger says about a dozen customers are already actively exploring it. Intel plans to complete production preparations by the end of the year and begin serial production of chips in 2025. However, the Broadcom situation shows that switching to new technology is fraught with risks and may deter potential customers, especially given the cost of manufacturing at advanced technology nodes, which runs into the tens of thousands of dollars per wafer alone.