Intel Announces Major Restructuring: Focus on X86 and Foundry Business

Intel announces major changes ahead: manufacturing, job cuts, prioritizing x86 CPU business

Intel has been struggling for a while now, with rumors of an emergency board meeting being held where CEO Pat Gelsinger would outline his plan to turn Intel around (again) and now we're here. Yep, 15,000+ job cuts are on the chopping block for Intel. Intel CEO Pat Gelsinger has posted a message to employees regarding the next phase of Intel's transformation after his meeting with the Board of Directors last week. Gelsinger said that he and the board have "a lot of work to drive greater efficiency, improve our profitability and enhance our market competitiveness". There were 3 key takeaways from the meeting that Gelsinger highlighted: One of the first major announcements was that Amazon Web Services (AWS) has chosen Intel Foundry to make custom chips, with a multi-year, multi-billion-dollar framework covering products and wafers from Intel. Intel Foundry will produce an AI fabric chip for AWS on Intel 18A, the company will also make a custom Xeon 6 processor on Intel 3 that builds on the company's existing partnership, which makes Xeon Scalable processors for AWS. Intel expects "deep engagement" with AWS on additional designs spanning Intel 18A, Intel 18AP, and Intel 14A. Intel was also awarded up to $3 billion in direct funding under the CHIPS and Science Act for the US government's Secure Enclave program, a program designed to expand the trusted manufacturing of leading-edge semiconductors for the U.S. government. As the only American company that both designs and manufactures leading-edge logic chips, we will help secure the domestic chip supply chain. Intel also plans to establish its semiconductor arm -- Intel Foundry -- into an independent subsidiary inside of Intel, with Gelsinger explaining: "A subsidiary structure will unlock important benefits. It provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel. Importantly, it also gives us future flexibility to evaluate independent sources of funding and optimize the capital structure of each business to maximize growth and shareholder value creation". "There is no change to our Intel Foundry leadership team, which continues to report to me. We will also establish an operating board that includes independent directors to govern the subsidiary. This supports our continued focus on driving greater transparency, optimization and accountability across the business. A more focused and efficient Intel Foundry will further enhance collaboration with Intel Products. And our capabilities across design and manufacturing will remain a source of competitive differentiation and strength". As for Intel Foundry's manufacturing buildout, here are some updates: One of the biggest takeaways for me is that Intel says its top priority is to "maximize the value of our x86 franchise across client, edge, and data center markets, including with a broader range of custom chiplets and other customized offerings that meet emerging customer needs, as demonstrated by today's AWS announcement".

6 Big Intel Changes, Wins Outlined By CEO: AWS Chip Deal, Independent Foundry, Factory Delays

In a Monday letter to employees, Intel CEO Pat Gelsinger outlined changes that will help the beleaguered chipmaker save billions of dollars and bounce back financially while highlighting a new multibillion-dollar chip deal with Amazon Web Services. Intel CEO Pat Gelsinger said the company plans to turn its contract chip manufacturing business into an independent subsidiary, among other changes he laid out that will help the beleaguered chipmaker save billions of dollars and bounce back financially. Gelsinger outlined the changes in a Monday letter to employees, made public on Intel's website, and said they are happening after he met with the chipmaker's board of directors last week on how to cut more than $10 billion in costs, as Intel revealed on Aug. 1, while improving its profitability and competitiveness. [Related: Intel Channel Stalwart Jason Kimrey Is Leaving Beleaguered Chipmaker] The Santa Clara, Calif.-based company announced the spending reduction plan, which includes the elimination of more than 15,000 jobs, in response to worsening financial conditions, which included a $1.6 billion net loss and lower-than-expected revenue in the second fiscal quarter. "As I've said before, this is the most significant transformation of Intel in over four decades. Not since the memory to microprocessor transition have we attempted something so essential. We succeeded then -- and we will meet this moment and build a stronger Intel for decades to come," he wrote in his letter. Gelsinger also highlighted Monday announcements regarding a new, multibillion-dollar strategic collaboration with Amazon Web Services for chip design and manufacturing as well as federal funding for up to $3 billion from the U.S. government's Secure Enclave Program. Intel's stock price was up more than 7 percent in after-hours trading. Before Intel's shares went up at market close, the company's stock price was down a little more than 56 percent since the beginning of the year. What follows are the six changes and wins outlined for Intel by Gelsinger, which include the AWS and U.S. Secure Enclave announcements, the move to make Intel Foundry an independent subsidiary, the delay of new plants starting operations or construction outside of the United States., a reorganization of certain product groups driven by a prioritization of Intel's x86 and AI strategies.

Intel outlines a plan to get back in the game -- pause fab projects in Europe, make the foundry unit an independent subsidiary, and streamline the x86 portfolio

Intel's chief executive Pat Gelsinger revealed the company's next steps this week. The head of Intel outlined three main goals: advance the company's foundry business and turn Intel Foundry into an independent subsidiary; achieve $10 billion in cost savings; and strengthen its x86 product line while continuing to execute its AI strategy. In a recent Board meeting, Intel leadership discussed how the company would pursue its long-term strategy. The Board, comprised of independent directors, emphasized the importance of Intel's efficiency, profitability, and market competitiveness. Three core objectives were agreed upon: enhancing Intel's foundry operations, optimizing costs to hit the $10 billion savings target, and refocusing on its core x86 technology while driving forward with its AI initiatives. Notable announcements include a multi-billion-dollar partnership with Amazon Web Services (AWS) and the decision to put fab and packaging facility projects in Germany and Poland on hold for the next two years while continuing to build capacity in the U.S. Intel's internal manufacturing remains crucial to the company's long-term success. However, the company plans to make Intel Foundry an independent subsidiary, completing the separation of profit and financial reporting from Intel Products started earlier this year. This new structure will offer more apparent distinctions for customers and suppliers while allowing Intel to explore external funding and optimize capital strategy for the Foundry and Products units. The leadership team remains unchanged, reporting to the CEO, with an independent board providing oversight to ensure transparency and accountability. A more focused Intel Foundry will enhance collaboration with Intel Products, while Intel's design and manufacturing capabilities will remain a competitive advantage. Intel says that its Foundry unit has seen increased customer interest, with a significant uptick in demand for its advanced packaging technologies. Intel has tripled its deal pipeline since the start of the year, and the collaboration with AWS (more on this in a while) is a testament to this growth. Intel is also enhancing its capital efficiency within the foundry business. After a period of significant investment in manufacturing, the company is shifting toward a more balanced development pace. Intel remains committed to its manufacturing projects in the U.S., so the fabs and packaging facilities in Arizona, Oregon, New Mexico, and Ohio will be built according to Intel's plans. It may not be particularly surprising that Intel received billions of dollars from the U.S. government to expand its production capacity in America. Given the current demand outlook, Intel will pause its fab and packaging facility projects in Germany and Poland for two years as part of the overall business optimization. Intel recently expanded the capacity of its fab near Leixlip in Ireland and expected this facility to remain its lead European hub. The company did not reveal whether demand expectations concern foundry or internal products, but it is obvious that Intel limits the growth of its production capacity in general. Also, Intel will build the shell for its advanced packaging facility in Malaysia but will not equip it before demand picks up. One significant development is Intel's expanded partnership with Amazon Web Services (AWS). Under this multi-year agreement, Intel will produce custom AI fabric chips for AWS using its Intel 18A technology and a custom version of the Xeon 6 CPU based on Intel 3, as planned. In the future, Intel will produce AWS designs using Intel 18A, Intel 18AP, and Intel 14A process technologies. AWS has become Intel Foundry's long-term client, which is a big deal. The manufacturing and packaging contribute to Intel's ongoing collaboration with AWS, which already uses Intel Xeon Scalable processors (many of which are the so-called off-roadmap semi-custom processors). Intel calls this collaboration a 'better together' strategy, integrating foundry services, infrastructure, and x86 products. Intel's x86 instruction set architecture (ISA) and expertise in its enhancement have been its core strengths for decades, so Intel is certainly not giving up on x86. Instead, Intel is streamlining its portfolio, including developing competitive x86 offerings across its client, edge, and data center lineups. Intel's collaboration with AWS exemplifies its commitment to providing customized x86 solutions for customers to better compete against Arm and RISC-V. The company also sees opportunities to simplify its portfolio to increase efficiency and innovation. To that end, it integrates its Edge and Automotive businesses into its Client Computing Group (CCG), allowing it to expand its leadership in AI PCs and vertical edge solutions. Networking and telco will remain the focus of Intel's Network and Edge (NEX) group, while its Integrated Photonics Solutions division will merge into the Data Center and AI (DCAI) group. These changes are vital to creating a leaner, more streamlined, and efficient Intel by making internal changes and reducing the company's workforce by 15,000. With efforts underway to cut around 15,000 jobs by year-end, the company has already reached more than half of this target through voluntary retirements and separation packages. In addition, Intel plans to reduce or exit two-thirds of its global real estate by the end of the year as part of its cost-saving initiatives. To bolster its financial position, Intel is also preparing to sell part of its stake in Altera, generating funds ahead of Altera's anticipated IPO.

Intel CEO Reveals Plans For The Future: Focusing on Foundry Now An Independent Subsidry, Aggressive Restructuring Policies & Ramping Up x86 Adoption

We have several pieces of news to share that support these priorities. Today we announced that we will expand our strategic collaboration with Amazon Web Services (AWS). This includes a co-investment in custom chip designs, and we have announced a multi-year, multi-billion-dollar framework covering products and wafers from Intel. Specifically, Intel Foundry will produce an AI fabric chip for AWS on Intel 18A. We will also produce a custom Xeon 6 chip on Intel 3 that builds on our existing partnership, under which Intel produces Xeon Scalable processors for AWS. More broadly, we expect to have deep engagement with AWS on additional designs spanning Intel 18A, Intel 18AP, and Intel 14A. This framework reflects the power of our "better together" strategy, anchored on our integrated portfolio across foundry services, infrastructure, and x86 products. And with the 5N4Y finish line in sight, we are beginning to see a meaningful uptick in interest from foundry customers. This includes continued momentum in advanced packaging, which remains a meaningful differentiator for Intel Foundry as we have tripled our deal pipeline since the beginning of the year. U.S. Secure Enclave award Earlier today, we also announced that Intel has been awarded up to $3B in direct funding under the CHIPS and Science Act for the U.S. government's Secure Enclave program. This program is designed to expand the trusted manufacturing of leading-edge semiconductors for the U.S. government. As the only American company that both designs and manufactures leading-edge logic chips, we will help secure the domestic chip supply chain. This news, combined with our AWS announcement, demonstrates the continued progress we are making to build a world-class foundry business. Greater independence for Intel Foundry To build on our progress, we plan to establish Intel Foundry as an independent subsidiary inside of Intel. This governance structure will complete the process we initiated earlier this year when we separated the P&L and financial reporting for Intel Foundry and Intel Products. A subsidiary structure will unlock important benefits. It provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel. Importantly, it also gives us future flexibility to evaluate independent sources of funding and optimize the capital structure of each business to maximize growth and shareholder value creation. There is no change to our Intel Foundry leadership team, which continues to report to me. We will also establish an operating board that includes independent directors to govern the subsidiary. This supports our continued focus on driving greater transparency, optimization, and accountability across the business. A more focused and efficient Intel Foundry will further enhance collaboration with Intel Products. And our capabilities across design and manufacturing will remain a source of competitive differentiation and strength. A more efficient Intel Foundry manufacturing buildout A key priority for Intel Foundry is to increase our capital efficiency. Our manufacturing investments across three continents have laid the foundation for a world-class foundry for the AI era. Now that we have completed our transition to EUV, it's time to shift from a period of accelerated investment to a more normalized cadence of node development and a more flexible and efficient capital plan. We will maintain our Smart Capital approach to maximize financial flexibility as we complete our manufacturing buildout, making some adjustments to the near-term scope and pace of our manufacturing expansion. A stronger Intel Products portfolio focused on x86 We are also taking actions to strengthen and streamline our Intel Products portfolio, where we have identified clear opportunities to drive greater focus, speed, and efficiency. Our top priority is to maximize the value of our x86 franchise across client, edge, and data center markets, including a broader range of custom chiplets and other customized offerings that meet emerging customer needs, as demonstrated by today's AWS announcement. Our AI investments -- including continued leadership of the AI PC category, our strong position with AI in the data center, and our accelerator portfolio -- will leverage and complement our x86 franchise with a focus on enterprise, cost-efficient inferencing. Alongside this, we are taking steps toward simplifying our portfolio to unlock efficiency, accelerate innovation, and deliver more integrated solutions. This includes moving our Edge and Automotive businesses into CCG, where we have a big opportunity to leverage our core client business and extend our leadership in the AI PC category to a wide range of vertical edge solutions. In NEX, we will be focusing the business on networking and telco. We are moving Integrated Photonics Solutions into DCAI as we focus on driving a more focused R&D plan that's fully aligned with our top business priorities. In addition, we are integrating our Software and Incubation business into our core business units to foster more integrated roadmaps, unlock efficiencies, and create value. An engine of financial performance Collectively, these changes are critical steps forward as we build a leaner, simpler, and more efficient Intel. And they build on the immediate progress we have made since announcing our plan on August 1 to create a more competitive cost structure. Through our voluntary early retirement and separation offerings, we are more than halfway to our workforce reduction target of approximately 15,000 by the end of the year. We still have difficult decisions to make and will notify impacted employees in the middle of October. Additionally, we are implementing plans to reduce or exit about two-thirds of our real estate globally by the end of the year. As we continue acting with urgency to execute the plan we announced last month, we are also working to carefully manage our cash as we meaningfully improve our balance sheet and liquidity. This includes through selling part of our stake in Altera -- which is something we have talked about publicly several times and has long been part of our strategy to generate proceeds for Intel on Altera's path to an IPO. All eyes will remain on us. We need to fight for every inch and execute better than ever before. Because that's the only way to quiet our critics and deliver the results we know we're capable of achieving. We must maintain our focus on innovation while also becoming an engine of operational efficiency and financial performance that's built to win in the market. As I've said before, this is the most significant transformation of Intel in over four decades. Not since the memory-to-microprocessor transition have we attempted something so essential. We succeeded then -- and we will meet this moment and build a stronger Intel for decades to come. On behalf of the entire ELT and our Board of Directors, thank you for all you're doing. I greatly appreciate your patience, grit, and resilience as we do the hard work needed to deliver on our plan and position our company for the future.

Intel CEO announces major restructuring, tells employees: "We need to fight for ..." - Times of India

Intel is restructuring its foundry business as an independent subsidiary, marking a major shift in strategy as the 56-year old chipmaker fights to regain its footing in the semiconductor industry CEO Pat Gelsinger outlined the changes in a memo to employees, stating, "We need to fight for every inch and execute better than ever before. Because that's the only way to quiet our critics and deliver the results we know we're capable of achieving." The restructuring will give Intel Foundry "clearer separation and independence" from the rest of Intel, with its own operating board and separate financial reporting.Gelsinger noted this structure provides "flexibility to evaluate independent sources of funding" for the foundry business. Intel's foundry subsidiary inks AI chip deal with AmazonIn a significant win for the newly independent foundry, Intel announced a multiyear, multibillion-dollar agreement with Amazon Web Services (AWS) to produce an "artificial intelligence fabric chip" using Intel's advanced 18A manufacturing process. "All eyes will remain on us," Gelsinger said, emphasising the importance of the restructuring and new partnerships in Intel's turnaround efforts. The company also revealed plans to pause construction of new chip plants in Germany and Poland for approximately two years, citing "anticipated market demand." However, Intel will continue with its US manufacturing projects in Arizona, Oregon, New Mexico, and Ohio. Additionally, Intel plans to sell part of its stake in Altera, a programmable chip company it acquired in 2015, and reduce its global real estate footprint by about two-thirds. These moves come as Intel struggles to regain its footing in the competitive chip market. The company reported a $1.6 billion loss in the first quarter of 2024 and announced layoffs affecting 15,000 workers in August. Gelsinger described the changes as "the most significant transformation of Intel in over four decades," comparing it to the company's shift from memory to microprocessors. The TOI Tech Desk is a dedicated team of journalists committed to delivering the latest and most relevant news from the world of technology to readers of The Times of India. TOI Tech Desk's news coverage spans a wide spectrum across gadget launches, gadget reviews, trends, in-depth analysis, exclusive reports and breaking stories that impact technology and the digital universe. Be it how-tos or the latest happenings in AI, cybersecurity, personal gadgets, platforms like WhatsApp, Instagram, Facebook and more; TOI Tech Desk brings the news with accuracy and authenticity.

Intel ejects Foundry as independent subsidiary

Pauses European fabs, scores secret US gig, teams up with Amazon, re-orgs its innards, and more! Intel will spin out its Foundry division as an independent subsidiary with its own board, in the hopes of bringing in new sources of capital for the ailing business unit. The decision, announced in a Monday letter penned by CEO Pat Gelsinger, comes just months after Chipzilla made the Foundry division a separate line item on its financial disclosures. Gelsinger, who has taken considerable flak for Foundry's mounting losses in recent quarters, claims the decision to establish the division as a subsidiary will offer multiple benefits. "It provides our external Foundry customers and suppliers with clearer separation and independence from the rest of Intel," he wrote. "It also gives us future flexibility to evaluate independent sources of funding and optimize the capital structure of each business to maximize growth." The move also provides a more immediate benefit for Intel's shareholders: getting the division's operating losses off Intel's books. In Q2 alone Intel Foundry racked up $2.8 billion in operating losses. That dismal performance has spurred multiple class action lawsuits alleging Gelsinger and CFO David Zinsner misled investors about the health of the business unit. While Intel Foundry will function more like a standalone business, Gelsinger stressed the subsidiary's leadership who will continue to report directly to him. In some respects, the decision mirrors AMD's decision - back in 2008 - to spin off its own foundry unit, which later became GlobalFoundries. AMD has since transitioned most of its foundry work to Taiwan's TSMC. Intel's product division already makes heavy use of TSMC for its GPUs, NICs, and AI accelerators. Two weeks ago the silicon titan also outsourced client CPUs, following the decision to ditch its 20A process technology to focus on ramping production of its mass market 18A node. Speaking of Intel's next-gen process tech, the chipmaker announced it is "co-investing" with AWS for the development of an AI fabric chip built on 18A under a "multi-year, multi-billion-dollar framework." Intel didn't provide specifics on the chip, but it appears that making the silicon stateside is a key element of the deal. The x86 giant specifically called out the state of Ohio, where it is building out a pair of leading edge fabs and where AWS is investing $7.8 billion to expand its datacenter footprint. "By co-developing next-generation AI fabric chips in Intel 18A, we continue our long-standing collaboration, dating back to 2006 when we launched the first Amazon EC2 instance featuring their chips," Matt Garman, recently appointed CEO of AWS, explained in a canned statement. Intel also revealed it would produce a custom version of its Xeon 6 processor, built on its existing Intel 3 process node, specifically for AWS. While this may sound like special treatment, it's not the first time Intel has offered the cloud giant customized Xeons - and it has done the same for other clouds. Intel also suggested that AWS may manufacture additional infrastructure in its fabs using its upcoming 18A, 18AP, and 14A process nodes. On a busy Monday, Intel also revealed it won up to $3 billion in funding under the CHIPS and Science Act to establish a secretive manufacturing program called the "Secure Enclave." The program marks Intel's latest tie up with the Department of Defense (DoD) and aims to secure the supply of leading-edge semiconductors. "Intel is proud of our ongoing collaboration with the US Department of Defense to help strengthen America's defense and national security systems," declared Chris George, president and general manager of Intel Federal in a canned statement. While a welcome win for the embattled Foundry unit, Intel is realistically the only option for such a job - and Gelsinger seems to know it. "As the only American company that both designs and manufactures leading-edge logic chips, we will help secure the domestic chip supply chain," he wrote. The Pentagon's reported insistence that chips built under the secretive program are manufactured in the United States by a US company limited its options from the get go. And while GlobalFoundries still produces semiconductors and other analog components, it abandoned development of leading-edge nodes back in 2018 when it scuttled its 7nm process tech. While Intel was a shoo-in for the Secure Enclave project, it remains to be seen whether the decision to spin off its Foundry unit will add additional red tape for either the $3 billion defense project or the other $8.5 billion in CHIPS funding it was awarded this northern Spring. While Intel prioritizes its US investments, it seems its European investment plans are stalled - or possibly over. "We will pause our projects in Poland and Germany by approximately two years based on anticipated market demand," Gelsinger wrote, adding that its Ireland fab facility would remain its "lead European hub for the foreseeable future." This suggests that Intel may do more than delay its €30 billion fab project in Magdeburg, Germany and $4.6 billion assembly and test facility in Wroclaw, Poland. Ironically, the decision to postpone the projects comes just days after the Polish government received approval from the European Commission to hand Intel $1.9 billion in state aid to fund the project. It also remains unclear what a delay could mean for the €10 billion in state aid Intel persuaded the German government to hand over to support the Magdeburg plant. The Register expects Europe will not fund delayed fabs - and without subsidies we can't imagine they'll go ahead as planned. Or, as the Germans might say: es ist fertig. (It's finished, it's over - Intel's Euro-fab plans are toast.) The Register has asked Intel for comment; we'll let you know if we receive a response. In addition to the delays to its German and Polish facilities, Gelsinger noted that Intel would move forward with its advanced packaging facility in Malaysia but would "align" the startup of the facility with market conditions. "There are no changes to our other manufacturing locations. We remain committed to our US manufacturing investments and are moving forward with our projects in Arizona, Oregon, New Mexico, and Ohio," Gelsinger wrote. Intel's internal alignments will also see major changes as the x86 giant consolidates its Edge and Automotive businesses into its Client Computing Group (CCG). This change, Gelsinger wrote, means the two businesses will "have a big opportunity to leverage our core client business and extend our leadership in the AI PC category." Intel's integrated photonics group will find a new home in Intel's datacenter and AI group. Finally, Intel will be integrating its software and incubation operations into its core business. These consolidation efforts come as Gelsinger notes that, "through our voluntary early retirement and separation offerings, we are more than halfway to our workforce reduction target of approximately 15,000 by the end of the year." Chipzilla's chief executive closed the letter by reiterating his belief that "this is the most significant transformation of Intel in over four decades. Not since the memory to microprocessor transition have we attempted something so essential. We succeeded then - and we will meet this moment and build a stronger Intel for decades to come." ®