AWS Deal Brings Some Peace for Intel

Intel CEO Pat Gelsinger announced a major restructure and cost-cutting initiative including a pause on building chip plants in Europe. Simultaneously, the company chief announced a multi-billion-dollar deal with Amazon Web Services to manufacture AI chips.

Starting with the AWS partnership, Gelsinger stated in a memo to employees it will expand an existing collaboration, with Intel’s foundry business to produce an AI fabric chip based on its 18A fabrication process, as well as a custom Xeon chip. He described the deal as a multi-year, multi-billion-dollar framework that has the potential to include additional chip designs going forward. The AWS deal is a welcome bit of good news for the company, as it laid out several steps it will take to turn around the business following a set of bleak second-quarter results.

Starting with its foundry unit, Gelsinger explained it plans to spin out the business so it has greater independence. As a subsidiary, the unit will be able to take outside capital and gain greater financial flexibility, while providing customers clear separation from the rest of Intel. Elsewhere, Intel said it plans to improve its balance sheet and liquidity by selling a stake in its programmable chip business Altera, as part of plans for an IPO. “All eyes will remain on us. We need to fight for every inch and execute better than ever before,” said Gelsinger.

Intel will also pause construction of its €30 billion chip plant in Germany and another project in Poland for approximately two years. There are no changes to its plans for manufacturing in the US. In other areas, the chip giant is making moves to simplify its portfolio by reorganizing several divisions including Edge and Automotive, and integrating its Software and Incubation unit into its core business.