Chip-giant Intel (INTC 2.17%) agreed to acquire Tower Semiconductor, a specialty semiconductor manufacturer, 18 months ago. The deal is now officially dead. With China's regulators failing to sign off, Intel has terminated the transaction and will pay Tower a $353 million termination fee.
The end of the Tower deal is a blow to Intel's foundry ambitions, but it's not the end of the world. Intel has been pushing hard over the past year-and-a-half on its manufacturing process roadmap. It's been laying the foundation for rapid-fire growth in 2025 and beyond.
NASDAQ: INTC
Key Data Points
An aggressive roadmap
At the center of Intel's foundry strategy is its plan to roll out five new process nodes in four years. The company has struggled to bring new process nodes to volume production on time in the past. Notably, the company's 10nm process was originally slated to enter production in the first half of 2018, but it ultimately took until early 2021 for the first chips using the long-delayed process to be produced at volume.
Intel appears to have put this legacy of delays and missteps behind it. The 10nm process was rebranded as "Intel 7" and represents the first of five process nodes set to launch as part of Intel's roadmap. Intel 4 is up next and essentially ready to go right now. The company's Meteor Lake PC chips, which are expected to launch in the third quarter, will use the Intel 4 process.
Intel 4 will be followed by Intel 3, Intel 20A, and Intel 18A. It's the Intel 18A process that's expected to be a game changer for the company.
It's set to be ready by the end of 2024, and Intel expects this process node to propel it past foundry leader TSMC in terms of manufacturing technology. Intel will use this process for its own PC and data center chips, and it will also be available for foundry customers.
Laying the foundation
While Intel is generating some revenue from external foundry customers today, the Intel 18A process should kick the foundry business into high gear. The company has multiple deals in place that position the upcoming process to manufacture a wide variety of chips.
Back in April, Intel and Arm announced a collaboration that will make it easier for chip designers to use the Intel 18A process for Arm-based chips. The focus will initially be on mobile system-on-a-chip designs, with potential expansion into automotive, the Internet of Things (IoT), data center, aerospace, and government applications down the line. Intel and Arm will co-optimize chip designs and the process technology, opening the door for Intel to manufacture Arm-based smartphone chips.
The Intel 18A process is also at the center of the RAMP-C program from the U.S. Department of Defense. The goal of this program is to create a U.S.-based commercial semiconductor foundry ecosystem for chips critical for DoD systems. RAMP-C customers include Boeing, Northrop Grumman, Nvidia, Qualcomm, Microsoft, and IBM.
Intel is also going after business from chip designers needing a mature, inexpensive process node. The Intel 16 process, which is a revamped version of the company's 16nm process, is now supported by the major chip design tool vendors. Intel has also struck a deal with one of those vendors, Synopsys, to develop intellectual property on the Intel 3 and Intel 18A processes for Intel's foundry customers.
While the failure of the Tower Semiconductor acquisition is a disappointment, Intel remains on track to reclaim its semiconductor manufacturing edge and offer a compelling alternative to market leader TSMC.
