Intel CEO Pat Gelsinger has secured Amazon Web Services (AWS) as a significant customer for Intel’s manufacturing business, a major win that could help rejuvenate the struggling chipmaker. Intel and AWS announced a multi-year, multi-billion-dollar partnership to co-invest in a custom semiconductor for artificial intelligence (AI) computing, known as a fabric chip. This deal will utilize Intel’s 18A process, its advanced chipmaking technology.
Read: iPhone 16 prices in South Africa announced, and its dropping
Following the announcement, Intel shares surged over 8% in late trading, a rare positive movement for a stock that had dropped 58% this year, closing at $20.91 on Monday.
“This is a big moment,” Gelsinger said in an interview. “AWS is a discerning customer with sophisticated design capabilities.”
This AWS deal comes on the heels of a pivotal board meeting where Intel also revealed plans to delay the construction of new factories in Germany and Poland, while reaffirming its commitment to US expansion projects in Arizona, New Mexico, Oregon, and Ohio. Gelsinger, who began a bold turnaround strategy in 2021, has scaled back some of his ambitions in light of shrinking sales and mounting losses. Last month, Intel announced it would cut 15,000 jobs, save $10 billion in costs, and suspend its dividend.
The Germany and Poland factory projects are postponed for up to two years, dependent on market demand, while a new facility in Malaysia will be completed but activated only when market conditions improve. These adjustments were part of the broader strategies discussed at last week’s three-day board meeting, where executives explored ways to conserve cash while advancing Gelsinger’s turnaround plan.
The partnership with AWS marks a significant milestone in Gelsinger’s effort to transform Intel into a foundry— a chipmaker that manufactures semiconductors for outside clients. Securing AWS, the world’s largest cloud computing provider, strengthens Intel’s position against rivals like Taiwan Semiconductor Manufacturing Company (TSMC). Although AWS has been developing in-house chips, Intel’s new collaboration could shift some of that production back.
Intel is also pushing to achieve $10 billion in cost savings and align its products more with AI computing, a sector where competitors like Nvidia have excelled. Additionally, Intel plans to reduce its real estate footprint globally by two-thirds by year-end and is working to sell part of its stake in Altera Corp, a business it acquired in 2015.
In another recent win, Intel announced it is eligible for up to $3 billion in US government funding to manufacture chips for military use, part of a project called Secure Enclave. This is separate from the $8.5 billion Intel could receive from the Chips and Science Act to support its expanding US factory operations, including a massive facility in Ohio.
While Gelsinger acknowledges Intel still has significant challenges ahead, these moves represent progress in the company’s recovery efforts. “Is it good enough? No. Is it substantial? Yes,” he remarked, doubling down on his commitment to completing the company’s turnaround.
