Intel Shares Details Of Multi Billion Dollar Plan To Battle With Taiwan’s TSMC

Semiconductor manufacturer Intel Corporation shared details about its Intel Foundry business division earlier today as part of a change in its financial reporting format that now includes the contract manufacturing chip division as a separate line item. Intel and TSMC are locked in a battle to make high end chips for firms such as NVIDIA and Apple, and today’s release was accompanied by a talk by Intel CEO Patrick Gelsinger who shared that 2024 is seeing chip manufacturers utilize advanced technologies such as artificial intelligence to use the latest technologies to improve margins and chip quality.

Intel Chief Outlines Billions Of Dollars In Grants As Part Of Funding To Develop Foundry Business Division

The gist of today’s Intel release covered its plans to use its Foundry business division to drive cost savings and margins for its own products. According to the firm, Intel Foundry will improve key areas of chip manufacturing, such as chip expedites and test times to beef up margins and win back its own orders that have previously relied on third party contract chip manufacturers.

This shift has also seen the firm de-link the cost of manufacturing products from its product side on the income statement to a new heading called Intel Foundry. Intel believes that this new approach, also reflected in its refiled financial statements with the SEC, will allow investors to see how production costs are captured separately from the overall costs of product development.

The announcement accompanies Intel’s efforts to regain semiconductor technology leadership, after falling behind Taiwan’s TSMC. TSMC and Intel are locked in a battle to offer the latest manufacturing technologies to customers, and Intel chief Patrick Gelsinger shared that customer demand for Intel’s advanced 18A technologies is quite strong.

TSMC is currently mass producing chips manufactured through the 3-nanometer node, and 18A is Intel’s reply to its next generation node called 2-nanometer. Gelsinger shared that so far his firm has received five customer commits and worked with more than a dozen test chips for this particular manufacturing technology. His previous comments have seen him share that he has “bet the company” on 18A, and in order to beat TSMC, Gelsinger has stressed that the first 18A test chip will enter production this year.

The Intel CEO added that the new model creates a relationship between foundry investment and product groups to reflect a fair market wafer price as a cost for Intel products. Intel’s accelerated process node development, part of its plan for technology leadership, has also seen the firm plan to rapidly introduce five semiconductor process nodes over the course of four years.

After a turbulent couple of years of soaring business costs amid a troubled consumer chip market, Intel’s management was optimistic about 2024 being the “trough” for the foundry business. It believes that Intel Foundry will become the world’s second largest foundry by 2030, with operating margins driven by a shift to extreme ultraviolet (EUV) chip manufacturing technologies.

The current lifetime value of the contracts that Intel has signed for the Foundry business division sits at $15 billion, and the new cost framework coupled with the benefits of EUV should enable it to keep its operating margin for its Products division to 40% by the end of the decade.