Intel Secures AWS AI Chip Deal, Pauses European Factory Plans
Intel strikes a multi-billion-dollar agreement with AWS to co-develop an AI chip while pausing its multi-billion-dollar factory projects in Poland and Germany for two years. The struggling chipmaker also transitions its foundry division into an independent subsidiary with its own operating board.
Intel announces a major partnership with AWS to co-develop an AI chip using Intel's 18A chip fabrication process as part of a multi-year, multi-billion-dollar framework. The deal also includes an agreement to produce a custom Xeon 6 processor for AWS, adding to Intel's existing partnership with the cloud giant. Intel CEO Patrick Gelsinger notes that the company triples its foundry deal pipeline since the beginning of the year, highlighting this AWS agreement as proof of progress in building a world-class foundry business.
Despite this significant customer win, Intel pauses its chip fabrication projects in Poland and Germany for two years due to anticipated market demand. The company also considers scaling back its chip packaging and testing operations in Malaysia, putting a massive $47.6 billion combined investment on hold. Simultaneously, Intel transitions Intel Foundry into an independent subsidiary with an operating board that includes independent directors, though the division remains inside the company and keeps its current leadership.
These strategic moves come during a grim fiscal year for Intel, which posts a $1.6 billion net loss in the second quarter and sees its foundry division suffer $5.3 billion in operating losses during the first half of the year. The company reportedly misses out on a potential $30 billion deal with Sony for the next PlayStation console and currently executes a $10 billion cost-reduction plan that involves laying off 15,000 employees. However, the AWS deal and a newly awarded $3.5 billion Pentagon contract boost Intel's stock by over 6%, offering a rare bright spot for the struggling chipmaker.