Intel moved chip production into a separate company to attract customers

Intel announced that it is spinning off its chip contract manufacturing into a separate subsidiary. The move could boost the company’s chances of winning orders from tech giants including Apple and AMD. The restructuring is aimed at strengthening the confidence of potential customers and expanding Intel’s contract manufacturing capabilities.

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On September 16, Intel’s board of directors approved a plan to transform the contract manufacturing company into a wholly owned subsidiary with its own operating committee within the parent corporation’s board of directors. CEO Pat Gelsinger called the decision “the most significant transformation in more than four decades.”

According to a report by the Taiwanese publication Anue, based on analysis of foreign media and experts, this measure is designed to overcome the mistrust of potential customers such as Apple, Qualcomm, Broadcom and even AMD, who are afraid to transfer their developments to a competitor. Separating production into a separate entity may reduce the risk of conflicts of interest if it is truly independent and has the right board members, but the effectiveness of this remains to be seen.

In parallel with the announcement of the restructuring, Intel entered into a multi-billion-dollar, multi-year agreement with Amazon. The corporations will jointly develop the next generation of chips for the AWS AI infrastructure based on the Intel 18A process technology. In addition, Intel will produce chips for AI-focused Amazon Web Services (AWS) data centers, as well as develop custom Xeon 6 server processors for AWS.

The collaboration with Amazon is seen as a promising start for Intel’s revamped contract manufacturing. Successful implementation of the project could open up opportunities for the production of other Amazon chips, including AWS Graviton processors and Trainium AI chips for machine learning (ML). However, until now Intel has not been able to attract a significant number of customers to its contract manufacturing and at the moment its largest customer is Microsoft.

Two years ago, Intel lost a contract to design and manufacture chips for Sony’s PlayStation 6, a major blow to its contract manufacturing ambitions. The new structure is designed to provide greater independence for customers and suppliers from other Intel divisions. It also gives the company the opportunity to consider independent sources of financing in the future and optimize the capital structure of each business line to maximize growth and increase market capitalization.