Intel has finally qualified to manufacture semiconductor components for the Pentagon, with the potential to receive contracts of up to $3.5 billion. At the same time, the company has reached an agreement with Amazon AWS to manufacture customized ai chips for them, and to establish a multi-year product and wafer supply cooperation framework. In addition, Intel plans to spin off its foundry business (IFS) as a subsidiary to enhance its market competitiveness. Intel has adjusted its overseas expansion plans, pausing the Poland and Germany factory projects for about two years. As a result of these bullish news, Intel soared 6.4% at Monday's close, and rose more than 11% in post-market trading.
Intel, which is in a difficult situation, has frequently received positive news.
According to media reports on Monday, Intel not only finally qualified to manufacture semiconductor components for the Pentagon, securing a contract of up to $3.5 billion, but also will manufacture customized AI chips for Amazon, reaching a multi-year cooperation framework on products and wafers. As a result, Intel's stock price surged 6.4% at Monday's close, and rose more than 11% in post-market trading.
Establishing Intel Manufacturing as an independent department and receiving government support.
First, Intel will manufacture custom AI chips for Amazon, and the two parties have reached a multi-year cooperation framework on products and wafers. Intel CEO Pat Gelsinger announced that AWS (Amazon Web Services), a subsidiary of Amazon, has become a customer of Intel's chip manufacturing business, and this cooperation is expected to bring business to Intel's new factory in the United States and help the company turn around its current situation.
According to a joint statement released by both parties on Monday, Intel and AWS will jointly invest in the development of a custom semiconductor for artificial intelligence computing, namely, the "fabric chip." This cooperation involves a multi-year, billion-dollar investment framework and will leverage Intel's 18A process, an advanced chip manufacturing technology.
CEO Gelsinger said in an interview, "Today's news is very important. Amazon is a demanding customer with very advanced design capabilities."
Secondly, Intel has received government support. The Biden administration has allocated up to $3 billion to Intel through the Chip and Science Act to support its development of the "Secure Enclave" microelectronics technology project, aimed at providing stable advanced chip supply for the US Department of Defense and Intelligence. Through this project, Intel is expected to win more government contracts, including a potential contract worth up to $3.5 billion to manufacture semiconductor components for the Pentagon.
Thirdly, Intel will establish Intel Foundry Services (IFS) as an independent division. In order to attract more customers, Intel plans to separate its foundry business from its other operations and make it a wholly-owned subsidiary. This move aims to demonstrate to potential customers that IFS is an independent supplier, especially for companies that compete with Intel, so that they can cooperate with them more confidently.
Fourthly, Intel is adjusting its expansion plans and focusing on core markets. Intel is further reducing its overseas expansion plans. The company has announced that it will suspend the construction of new factories in Germany and Poland, and the delay of these two projects will depend on market demand and could be as long as two years. In addition, the factory in Malaysia will be completed but will only be put into operation when market conditions are appropriate. However, the company is still committed to its expansion plans in Arizona, New Mexico, Oregon, and Ohio in the United States.
Facing pressure from declining sales and financial losses, Intel announced last month that it would lay off 0.015 million employees and plan to save $10 billion in costs. In addition, Intel has also suspended shareholder dividends. These adjustments show that Intel is focusing its resources on advancing its core business priorities and controlling expenses.
Last month, Intel released a very disappointing second-quarter report. The financial report showed that Intel's second-quarter performance and third-quarter guidance both fell short of expectations, leading to a significant decline in the company's stock price and the largest single-day drop in decades. Analysts say it is one of the worst financial reports in Intel's history. Despite this, Intel's leadership remains committed to its revival plan and is working hard to regain market share.
Previously, despite some progress in Intel's revival plan, investors remained skeptical about the company's prospects. This is because after years of setbacks in competition and the loss of technological leadership, Intel's market capitalization is now less than $90 billion, far below the $2.9 trillion of its competitor, Nvidia.
Editor/Lambor