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Intel lands a giant for its fledgling foundry business

Phoenix Business Journal

Microsoft Corp. (Nasdaq: MSFT) will use Intel Corp. (Nasdaq: INTC) to make chips on Intel’s most advanced technology, a victory for the fabrication business that CEO Pat Gelsinger has vowed to build as a key part of a larger revitalization effort.

The announcement came Wednesday morning as Gelsinger hosted a foundry-focused event in San Jose where he declared that the IDM 2.0 vision he unveiled shortly after his arrival as CEO in February 2021 — greeted then by no small amount of skepticism — had become real.

“Today is a day three years in the making,” Gelsinger said.

With it, what had been known as Intel Foundry Services on Wednesday was renamed Intel Foundry, which Gelsinger called “interdependent” with Intel’s own product line.

“We’re not fixing one company,” he said. “We’re establishing two vibrant new organizations.”

Both will lean on advanced technology, and Gelsinger said Intel had made good on a promise to push its process technology five nodes in four years after a series of stumbles in the 2010s. He also revealed what’s next for Intel on the technology front for the first time, a node called 14A, for 1.4 angstrom (an angstrom is one hundred-millionth of a centimeter).

The Microsoft chip will be made on 18A, the last step of the five-nodes-in-four years plan. Intel says that node moves it past Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) on advanced technology.

Intel, one of the Valley’s largest employers with a headcount of more than 12,000 in the Phoenix metro, is currently constructing a $20 billion expansion at its Ocotillo campus in Chandler, which will include capacity dedicated to the foundry business. TSMC is also building out its massive operation in north Phoenix.

Details on the Microsoft contract — the chip, the timing, the size of the deal — weren’t revealed. And the announcement didn’t appear to wow markets, with Intel’s stock down down around 1.5% in the hour or so after the announcement.

But the message from Microsoft was exactly what Intel wants broadcast to the technology world.

“We need a reliable supply of the most advanced, high-performance and high-quality-semiconductors,” Microsoft Chairman and CEO Satya Nadella said in a videotaped appearance at the Intel event. “That’s why we are so excited to work with Intel Foundry, and we have chosen a chip design that we plan to produce on Intel 18A process.”

Gelsinger’s plan to bring Intel back from years of doldrums has it investing billions in Ohio, Arizona and Europe to boost its chipmaking prowess and capacity. Casting it as a national security issue — Gelsinger said silicon was the new oil as an indispensable economic building block — the company is also looking for big federal support.

Reports have Intel receiving up to $10 billion through the Biden administration’s CHIPS Act program. The Commerce Department is overseeing that award process and Secretary Gina Raimondo made a remote appearance at the Intel event on Wednesday. She delivered no revelations about Intel, but Gelsinger alluded to the expected bounty.

“We haven’t announced our CHIPS grant yet,” he said. “Very soon, right. We’re making that happen.”

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