Intel’s foundry still struggling to attract major clients after 4 years

Intel is facing challenges with its foundry business despite extensive efforts and investment, as the company has struggled to attract significant customers, putting its future at risk. The chipmaker acknowledged in a recent SEC filing that it has not been successful in bringing in major clients for its external foundry business. This setback comes after former CEO Pat Gelsinger made a significant push into the foundry sector in 2021, aiming to enable third-party companies to develop custom chips using Intel’s manufacturing technology.

The move was prompted by a global chip shortage, with Intel hoping to address demand and maintain domestic chip manufacturing capabilities in the US. Although Intel has announced partnerships with companies like Microsoft, Amazon’s AWS, and Arm to design chips using its upcoming 18A process, set to debut later this year, these agreements have not translated into substantial foundry revenue, according to the filing.

In a further blow, Intel has cast doubt on the demand for its next-generation manufacturing process, 14A. The company admits that the outlook for securing external customers for 14A is uncertain. Despite these challenges, Intel remains committed to producing its own processors using the 18A and 14A technologies. However, if the foundry business fails to gain traction, Intel warns that it may have to reconsider its pursuit of cutting-edge chip technologies, which could pose significant strategic, financial, operational, and reputational risks.

The filing also highlights Intel’s potential reliance on competitors like Taiwan Semiconductor Manufacturing Company (TSMC) if it opts to step back from developing in-house chip technologies. This shift would be a setback for the US’s chip-making ambitions, although TSMC has pledged to build six chip fabs in Arizona. Notably, major tech companies such as AMD, Apple, Nvidia, and Qualcomm already rely on TSMC for chip production, underlining the industry’s interconnected nature.

To navigate these challenges, Intel’s new CEO, Lip-Bu Tan, is implementing a turnaround strategy that includes laying off 24,000 employees this year. Tan recently acknowledged that Intel no longer holds the top position in the chipmaking market by market value. However, he emphasized the importance of focusing on advancing the 18A and 14A technologies to drive Intel’s future growth and competitiveness in the semiconductor industry.