Intel Lands Amazon Chip Deal Amid Foundry Split، Plant Pullback

Intel Corp. has made a raft of announcements over the past 24 hours in an effort to prove that a turnaround for the troubled chipmaker is starting to bear fruit.

Chief among them: It struck a multibillion-dollar deal with Amazon.com Inc.’s Amazon Web Services cloud unit to co-invest in a custom AI semiconductor. It’s shelving new factories in Germany and Poland. It may receive as much as $3 billion in US government funding to make chips for the military. And it’s turning its ailing manufacturing business، or foundry، into a wholly owned subsidiary. 

Ways to conserve cash

The news follows a meeting of Intel’s board last week، during which executives presented ways to conserve cash while keeping Chief Executive Officer Pat Gelsinger’s longer-term turnaround plan on track. The CEO’s effort hinges on transforming Intel into a foundry، but the Santa Clara، California-based company has been slow to line up customers. A high-profile client such as Amazon represents a notable win.

Intel shares rose as much as 4.8% after trading opened on Tuesday. They had been down 58% this year، closing at $20.91 on Monday.

Gelsinger، who embarked on a bold comeback effort for Intel in 2021، has had to scale back some of his ambitions in the name of efficiency. With sales shrinking and losses piling up، the company announced plans last month to slash 15،000 workers، find $10 billion in cost savings and suspend Intel’s dividend. Now he’s going further to rein in expansion plans، especially overseas.

The Poland and Germany construction projects will be paused for about two years depending on market demand. Another one in Malaysia will be completed but only put into operation when conditions support it، Intel said. 

The postponement of the German factory marks a setback for the European Union’s semiconductor ambitions and is likely to reignite controversy in Berlin over where to allocate €10 billion ($11 billion) in earmarked subsidies.