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Yikes. Despite four years of effort and billions spent, Intel still hasn’t attracted “significant customers” to its foundry business, putting its future in peril.
“We have been unsuccessful to date in attracting significant customers to our external foundry business,” the US chipmaker wrote in an SEC filing last week.
In 2021, former Intel CEO Pat Gelsinger made a huge bet on the foundry business, opening the door for third-party companies to build custom chips using Intel’s manufacturing technology. That came amid a historic chip shortage, with Intel eyeing the investment as a way to both fulfill demand and ensure the US maintained its capability to manufacture chips domestically.
Since then, Intel has touted some agreements with Microsoft, Amazon’s AWS, and Arm to design chips using Intel's 18A process, scheduled to launch later this year. But its filing suggests none of the agreements amount to meaningful foundry revenue.
In more bad news, Intel is indicating that demand for Intel 14A, the successor to the 18A manufacturing process, is also on shaky ground. "Prospects" for securing external customers for 14A "are uncertain," the filing says.
The company still plans on building its own processors using 18A and 14A. But if the foundry business fails to pan out, then Intel is warning “we may pause or discontinue our pursuit of next generation leading-edge process technologies, which may have significant strategic business, financial, operational and reputational risks and repercussions.”
The filing goes on to say Intel will be forced to depend on rivals, particularly Taiwan’s TSMC, if it bails from developing new in-house chip technologies. That would be a huge blow to the US’s domestic chip ambitions, although TSMC has committed to building six chip fabs in Arizona. Companies including AMD, Apple, Nvidia, and Qualcomm all tap TSMC.
Intel is preparing to lose and lay off thousands of employees as new CEO Lip-Bu Tan attempts to engineer a turnaround. Earlier this month, he told employees he doesn’t consider Intel a top chipmaker anymore based on market value. Still, Tan urged staffers to prioritize building up 18A and 14A.