Sept 16 (Askume) – Intel ‘s foundry or contract manufacturing business has struck a deal with Amazon’s (AMZN.O) cloud services unit to produce customized artificial intelligence , the companies said on Monday.
Intel CEO Pat Gelsinger sent a memo to employees informing them that Intel had acquired the Amazon unit, which is a billion-dollar customer for the Santa Clara, California-based company, with Intel providing design services and paying manufacturing costs, and Intel shares rose by about 8%. Intel’s planned cost cuts were also mentioned in the memo.
Amazon’s AWS cloud computing unit is already designing a variety of chips for use in its data centers and has hired Intel to package at least one version. Intel will produce “artificial intelligence fabric chips” for AWS and use the chip maker’s 18A process, the most advanced version available to external customers, the companies said.
Intel said it expects to receive additional designs from Amazon for the company’s upcoming 18AP and 14A manufacturing processes.
The memo also said Intel would take a number of measures to revive itself. Last month, the company reported disappointing second quarter earnings.
“The board of directors and I agree that we have much work to do to improve efficiency, improve profitability and enhance market competitiveness,” Kissinger wrote in the memo.
One of the steps the board said would be taken was that Intel would sell its stake in its programmable chip business, Altera. The company also said it would suspend the planned construction of a chip factory in Germany for two years, as first reported by Askume . The company also plans to halt projects in Poland.
Intel said there was no change in its plans to expand production in the United States.
Intel plans to keep its manufacturing operations or foundries within the company, as confirmed in a previous Askume report . The foundry business is key to the company’s turnaround plan outlined by Gelsinger in 2021. Before Amazon, Intel struggled to find large customers it could discuss publicly.
But Gelsinger said in the memo that the foundry business will gain more independence, such as being able to accept outside capital. Intel plans to set it up as an independent subsidiary and establish a steering committee to oversee the foundry business. Earlier this year, the casting division separated its financial performance from its design operations.
The company is taking a number of steps to prioritize the core technology behind central processing units (CPUs) and is reorganizing several divisions, including automotive and “edge” businesses.
On Monday, Intel also said it had received up to $3 billion in direct funding from the US Chip and Science Act as part of its Secure Enclave program.
The company said it plans to send notices in mid-October to about 15,000 employees it had said in August it would carry out layoffs.
