(Bloomberg) — Intel Corp. Chief Executive Officer Pat Gelsinger has landed Amazon.com Inc.’s AWS as a customer for the corporate’s manufacturing business, potentially bringing work to latest plants under construction within the US and boosting his efforts to show across the embattled chipmaker.
Most Read from Bloomberg
Intel and AWS will coinvest in a custom semiconductor for artificial intelligence computing – what’s generally known as a cloth chip – in a “multiyear, multibillion-dollar framework,” in line with an announcement Monday. The work will depend on Intel’s 18A process, a complicated chipmaking technology.
The shares jumped greater than 8% in late trading after the announcement. That they had been down 58% this 12 months, closing at $20.91 on Monday.
“Today’s announcement is big,” Gelsinger said in an interview. “This can be a very discerning customer who has very sophisticated design capabilities.”
The news was a part of a flurry of announcements that followed a pivotal board meeting last week. Intel is also postponing latest factories in Germany and Poland, but stays committed to its US expansion in Arizona, Latest Mexico, Oregon and Ohio.
Gelsinger, who launched into a daring comeback effort for Intel in 2021, has needed to reduce a few of his ambitions within the name of efficiency. With sales shrinking and losses piling up, the corporate announced plans last month to slash 15,000 staff, 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 shall be paused for about two years depending on market demand. One other one in Malaysia shall be accomplished but only put into operation when conditions support it, Intel said.
Ultimately week’s three-day board meeting, executives presented options on find out how to conserve money while keeping Gelsinger’s turnaround plan heading in the right direction. The CEO’s effort hinges on transforming Intel right into a so-called foundry, a chipmaker that manufacturers products for outdoor customers. The Santa Clara, California-based company has been slow to line up customers for the project — and a high-profile client similar to Amazon represents a notable win.
Intel is also seeking to speed up efforts to execute the $10 billion in cost savings and focus its products higher on AI computing, an area where rival Nvidia Corp. has excelled. It’s also seeking to pare its real estate globally by about two-thirds by the top of the 12 months.
And the corporate reiterated plans to sell a part of its stake in Altera Corp. to non-public equity investors. The business, which Intel bought in 2015, was separated from its operations last 12 months with the goal of taking it public.
Amazon Web Services is the most important provider of cloud computing, and it could help construct confidence that Intel can compete with the likes of foundry leader Taiwan Semiconductor Manufacturing Co. AWS has used Intel processors through the years, but has been shifting more toward in-house designs — the very products that Intel may now help manufacture.
Microsoft Corp., one other major cloud-computing provider, announced plans in February to make use of Intel for a few of its in-house chips as well.
One other change: Intel’s foundry operations, known as IFS, shall be further separated from the remainder of the corporate and develop into an entirely owned subsidiary. That move is aimed partly at convincing prospective customers — a few of whom compete with Intel — that they’re coping with an independent supplier. Bloomberg reported earlier on a possible foundry separation.
“We still have things to study becoming a foundry,” Gelsinger said within the interview. “I want plenty of customers.”
In one other win, Intel said earlier Monday that it’s eligible to receive as much as $3 billion in US government funding to fabricate chips for the military. The trouble, called the Secure Enclave, goals to ascertain a gentle supply of cutting-edge chips for defense and intelligence purposes. That news helped send the shares up 6.4% in regular trading Monday.
The Secure Enclave award is separate from a possible $8.5 billion Chips and Science Act grant that Intel is about to receive to support factories across 4 US states. The projects include a facility in Latest Albany, Ohio, that Intel has said could develop into the world’s largest chipmaking operation.
Intel still has an extended solution to go to win back Wall Street’s full confidence. After years of losing ground to rivals and seeing its technological edge slip, the Silicon Valley pioneer is valued at lower than $90 billion. It not ranks as considered one of the highest 10 chip firms on that basis. Nvidia, meanwhile, now has a market capitalization of about $2.9 trillion.
Intel shocked investors with a bleak financial report last month, triggering the most important single-day stock decline in many years. Analysts described the announcement as Intel’s worst-ever earnings report.
Gelsinger, in a letter to employees, acknowledged that the chipmaker’s performance has drawn negative scrutiny — and spurred speculation over what might occur to the corporate. The one solution to “quiet our critics” shall be to deliver results and execute higher, he said. Today’s announcements are a step toward that, he said.
“Is it adequate? No. Is it substantial? Yes,” he said within the interview. “I’ve reupped my commitment. We’re going to complete a seminal project.”
–With assistance from Mackenzie Hawkins.
(Updates with more from announcements starting in ninth paragraph.)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.