Intel’s Foundry Business Has $10 Billion Locked In

The biggest shift in Intel‘s (NASDAQ: INTC) strategy over the past few years under CEO Pat Gelsinger has been opening up its manufacturing operations to third parties. This isn’t the first time Intel has attempted to build its own foundry business — it tried and failed for about five years ending in 2018, although that effort was much narrower than what it’s now aiming to accomplish.

This time around, Intel is all in. Manufacturing has been broken out into a separate business unit, and the company plans to regain its manufacturing edge over TSMC by early 2025 with its advanced Intel 18A process node. It has been picking up customers for Intel 18A, as well as for its advanced packaging services, although details have been scarce.

The fact that Intel is even capable of catching up technologically to TSMC after so many years of rampant manufacturing delays is almost a miracle. If the company can pull it off, the foundry business could one day be the largest source of revenue for Intel.

On the right track

Right now, Intel’s foundry business generates revenue primarily from traditional packaging services. One reason for the company’s weak first-quarter guidance was an expected drop in demand for traditional packaging, which isn’t a high-margin business where Intel can gain a competitive advantage. It won’t be the focus as the foundry business ramps up.

Wafer manufacturing and advanced packaging will be the two key services offered by Intel. Neither is generating meaningful revenue from external customers today.

On the manufacturing side, the two process nodes offered, Intel 3 and Intel 18A, aren’t yet ready for volume production. Intel 3 is close, with Intel’s next-gen server CPUs set to use the process in the first half of this year. Intel 18A won’t be far behind in early 2025.

On the advanced packaging front, it takes time for commitments to turn into revenue. Intel has won a total of five advanced packaging customers but doesn’t expect meaningful revenue generation to…