Intel signs contract with Microsoft to produce custom computing chips for its foundry customers

Intel said on Wednesday that Microsoft plans to use its services to build custom computing chips, as the company expects to surpass its top rival Taiwan Semiconductor Manufacturing Co. in advanced chip manufacturing by an internal deadline of 2025.

The U.S. chipmaker also provided new details on how it plans to maintain its lead over TSMC in 2026 and beyond.

Intel revealed the news at the inaugural technology conference in San Jose, Calif., for Intel Foundry, the contract manufacturing operation Intel established to compete with TSMC.

Intel said it plans to use Intel 18A manufacturing technology to take back the crown of manufacturing the world’s fastest chips from TSMC later this year, and use Intel 14A new technology to extend this lead until 2026.

The company said Microsoft will use its 18A technology to manufacture an undisclosed chip and now expects foundry orders to reach $15 billion, higher than the $10 billion the company had previously told investors.

TSMC said it “does not comment on the competitiveness of our advanced technologies” beyond what CEO CC Wei said at the company’s last investor meeting in January.

TSMC’s Taipei-listed shares have risen nearly 17% so far this year as it dominates the production of advanced chips used in artificial intelligence applications by companies such as Nvidia.

News of 14A Technologies is the first time the Silicon Valley company has detailed its plans beyond 2025. That’s the deadline Intel CEO Pat Gelsinger set when he took over three years ago to regain the chipmaking crown.

For decades, Intel made chips only for itself and used its leadership in manufacturing to create a cycle of making industry-leading performance chips and charging a premium. These profits, in turn, financed manufacturing advances. But when Intel lost its manufacturing leadership, its chips became less competitive and profit margins fell, undermining funding for a manufacturing rebound.

Now, Intel is counting on potentially billions of dollars in U.S. government subsidies and business from outside customers to help it get back on track.

It hopes some customers will be attracted by its long history of operating cutting-edge fabs on multiple continents, especially those concerned about TSMC’s focus on concentrating its most advanced fabs in Taiwan.

“It’s a sales pitch that’s resonating right now. People hope so,” Stu Pann, Intel’s foundry chief, said of the company’s geographic diversity.

Intel said it has four “large” customers signed up to use its 18A manufacturing technology, but it has not yet named the customers. It’s unclear whether Microsoft is one of these financially significant customers.

Intel said on Wednesday it was working with Arm Holdings to make it easier to produce chips powered by Arm technology in its factories. Intel also said it will work with the University of California, Berkeley, and the University of Michigan to expose students to its 18A manufacturing technology.

Intel also has a special technology that analysts say will help speed up power-hungry artificial intelligence chips. Nvidia, the leader in the AI ​​chip market, has said it is evaluating Intel’s manufacturing technology, but the companies have not yet announced a deal.

Ben Bajarin, chief executive of consulting firm Creative Strategies, said Intel’s efforts to attract outside customers “will be key to the turnaround.”

“Unfortunately, that’s an open question because it will be two to three years before we know whether this works.”

© Thomson Reuters 2024

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