Intel's Bold Revival: Partnering with Amazon and Spinning Off Foundry Business to Challenge Industry Giants

Intel, once a dominant force in the chip industry, has made bold moves to regain footing by announcing the divestiture of its chip foundry business and entering into a strategic partnership with Amazon.

Intel's CEO, Pat Gelsinger, revealed the company's plan to separate its chip manufacturing unit into an independent subsidiary, Intel Foundry. This move aims to allow Intel to operate as a standalone entity, focusing on both internal and external clients, following the business models of TSMC and Samsung.

In a significant development, Intel has joined forces with Amazon Web Services (AWS) in a multi-billion dollar deal to produce AI chips. These chips will leverage Intel's cutting-edge 18A process technology, a direct challenge to TSMC's 2nm technology. Intel will also manufacture custom Xeon 6 chips for AWS servers.

Additionally, the company stands to benefit from up to $30 billion in U.S. government subsidies, part of the American semiconductor initiative. This support includes an initial $3 billion for a Defense Department project, enhancing Intel's role in the military chip sector.

Intel's transformation moves also include broad restructuring plans. This encompasses optimizing their x86 portfolio, expanding custom chip offerings, and realigning business sectors for efficiency.

Despite these strategic shifts, Intel remains committed to its U.S. manufacturing expansion, with projects in Arizona, Oregon, New Mexico, and Ohio. However, European plans have seen delays, particularly projects in Poland and Germany, while advancing the capacity of its Irish facilities.

These developments have positively impacted Intel’s market performance, with stock prices rising 6.84% in pre-market trading. However, Intel's stock has seen a 58% decline this year, reflecting ongoing challenges in reclaiming its industry leadership.