Intel: Future Of Foundry Business Hinges On A ‘Significant External Customer’

While the semiconductor giant says it may ‘pause or discontinue our pursuit of Intel 14A and successor nodes’ if it can’t secure a ‘significant external customer,’ Intel CEO Lip-Bu Tan says the company remains ‘committed’ to the Intel Foundry business.

Intel said the future of its contract chip manufacturing business and its willingness to invest in advanced chip-making technologies will hinge on the semiconductor giant landing a “significant external customer” for its upcoming Intel 14A process.

“If we are unable to secure a significant external customer and meet important customer milestones for Intel 14A, we face the prospect that it will not be economical to develop and manufacture Intel 14A and successor leading-edge nodes on a go-forward basis,” Intel said Thursday in a quarterly filing with the U.S. Securities and Exchange Commission.

“In such event, we may pause or discontinue our pursuit of Intel 14A and successor nodes and various of our manufacturing expansion projects,” it added.

Despite the warning, Intel CEO Lip-Bu Tan said the company is “committed” to the Intel Foundry contract chip-making business that has been key to its comeback plan, and he is confident about the steps it’s taking to make Intel 14A attractive to customers.

Tan made the commitment as he enacts major changes within the company, including a 15 percent reduction in the workforce that was confirmed Thursday, to “create a faster-moving, flatter and more agile organization.”

“The team is laser-focused, and the feedback from the partners and outside is that, ‘Wow, Lip-Bu, the culture is changing, and you guys are really focused on the yield, better than just performance,’” he said on Intel’s second-quarter earnings call Thursday.

At the same time, Tan said, he will not deploy capital expenditures for Intel 14A unless he sees the “internal customer, external customer volume commitment.”

“We’re not going to put any CapEx until we see the yield performance and also our internal customer and external customer feedback and the volume commitment that we put the CapEx in,” he said on the earnings call.

This is the first time Intel has indicated that it could potentially abandon the development of cutting-edge manufacturing nodes since its former CEO, Pat Gelsinger, revitalized its contract chip-making business and announced an accelerated node development plan in 2021 to turn the company around and make it the top semiconductor firm once again.

Revealed last year, Intel 14A is the successor to the Intel 18A node, which was the last process in Gelsinger’s turnaround plan, to surpass Asian foundry giants TSMC and Samsung and regain “process performance leadership.”

Intel CFO David Zinsner said in the Thursday earnings call that the Intel 18A node “probably won’t get a lot [of customers] in wave one” but left open the possibility for the company to land more customers in the future. The company has previously announced Amazon Web Services and Microsoft as customers for Intel 18A.

“There’ll be more opportunities for us to attract external customers after we do so much improvement in terms of performance and yield on our own products,” he said.

Tan said Intel 18A will serve as the foundation for the next three generations of Intel client and server CPUs at a minimum, adding that the node and a complementary process, Intel 18A-P, “will drive meaningful wafer volumes well into the next decade.”

“Once we get our own product ramping in high volume, we will be in better position to attract external customers to this technology,” he said. “The Intel 18A family is also important as we continue to advance our work for the U.S. government within the Secure Enclave programs, as well as for other initial committed customers.”