Is Intel's Foundry Turnaround Finally Gaining Traction?

The semiconductor industry's most-watched comeback story-Intel's foundry business-has entered a pivotal phase in 2025. After years of stumbles in manufacturing execution and competitive setbacks, the company is now betting its future on a dual strategy: advancing cutting-edge process nodes and leveraging geopolitical tailwinds to secure a dominant role in U.S. semiconductor independence. But with mixed signals from customers, analysts, and financial results, the question remains: Is the foundry turnaround finally gaining traction, or is it still a work in progress?

Financial Stabilization and Strategic Partnerships

Intel's foundry segment reported $4.2 billion in revenue for Q3 2025, a 2% decline year-over-year but a modest improvement in operating margin to 54.8% from 49.7% in Q2. This stabilization is partly attributed to the successful deployment of the 18A process node at its Arizona facility, which has enabled the production of advanced wafers for internal and select external applications. The segment's progress is further bolstered by significant capital injections: $5.0 billion from NVIDIA and $2.0 billion from SoftBank Group, alongside $8.9 billion in U.S. government funding.

However, the path to profitability remains fraught. The foundry business posted a $2.3 billion operating loss in Q3, underscoring the high costs of scaling advanced manufacturing. Despite this, Intel's leadership has reaffirmed its commitment to the foundry as a strategic pillar, emphasizing its role in achieving "semiconductor independence" for the U.S. and securing long-term contracts with defense and government clients.

Manufacturing Innovation and 18A Challenges

Intel's 18A node, featuring RibbonFET transistors and PowerVia backside power delivery, represents a technological leap forward. Analysts note that the node is now competitive with TSMC's 2nm process in terms of performance and power efficiency. Yet, customer adoption has lagged. NVIDIA reportedly paused testing on 18A after finding yields insufficient for high-volume production. Similarly, AMD and other fabless firms have shown reluctance to commit to Intel Foundry Services for 18A, citing unresolved manufacturing challenges.

Intel has shifted focus to its next-generation 14A node, which is better positioned for high-performance computing (HPC) applications and external customers. Internal adoption of 18A remains strong: Panther Lake (a client AI PC processor) and Clearwater Forest (a server chip) are already being produced using the node. The company is also pursuing defense contracts through the RAMP-C program, leveraging the 18A node's security features for government clients.

Investor Sentiment and Geopolitical Tailwinds

Investor sentiment toward Intel's foundry business has evolved from "Max Pessimism" in 2024 to "Cautious Optimism" in late 2025. The stock surged approximately 80% from 2024 lows, driven by government equity stakes, improved manufacturing execution, and the "Sovereign Silicon" narrative. Intel's positioning as the U.S.'s "National Champion" in semiconductor manufacturing has secured a steady pipeline of federal contracts and military-related business.

Yet, analysts remain divided. While the 18A node's technical merits are acknowledged, concerns persist about Intel's ability to convert these innovations into repeatable, high-volume production. Bank of America's Vivek Arya has warned that without a major external customer committing to 18A by late 2026, the foundry business may struggle to become self-sustaining. Additionally, Intel's slower adoption of AI-focused chips compared to rivals like NVIDIA and AMD has kept most analyst ratings at "Hold".

The Path Forward: Risks and Opportunities

Intel's foundry turnaround hinges on three critical factors: 1. Customer Adoption of 18A: Securing a major external customer for the 18A node would validate the company's process leadership and accelerate revenue growth. 2. Geopolitical Momentum: Continued government support, including subsidies and defense contracts, will provide stability but may not offset long-term profitability challenges. 3. Execution on 14A: The next-generation node must attract HPC and AI clients to offset the 18A's slow start.

The risks are significant. Intel's capital expenditures remain high, and its operating loss in Q3 highlights the financial strain of scaling advanced manufacturing. Meanwhile, competitors like TSMC and Samsung are deepening their foundry partnerships, leaving Intel with a narrow window to prove its viability.

Conclusion

Intel's foundry business is undeniably on a more stable trajectory in 2025, supported by technological advancements, government backing, and strategic partnerships. Yet, the absence of major external customer commitments for 18A and lingering doubts about manufacturing scalability suggest the turnaround is far from complete. For investors, the key will be monitoring whether Intel can bridge the gap between technical capability and commercial success in the next 12–18 months. If it does, the foundry could become a cornerstone of the company's revival; if not, the "National Champion" may remain a title without substance.