Chip giant Intel (INTC +2.55%) still generates nearly all its revenue from selling its own chips, but that won't remain the case as the company ramps up its foundry business. Intel has its sights set on regaining its manufacturing advantage with an aggressive plan to launch five process nodes in a four-year span, culminating with the Intel 18A process in late 2024.
Intel has already announced that it won a major unnamed customer for its Intel 18A process, and that that customer had made a large prepayment. Along with its third-quarter report, the company disclosed additional customer wins for the Intel 18A process and for its advanced packaging services.
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Key Data Points
Gaining momentum
On top of that initial Intel 18A customer, Intel has signed two additional customers for the Intel 18A process. No information was given about these customers, other than that both are focused on high-performance computing. Intel is also in talks with another major customer, and the company expects to finish negotiations by the end of the year.
While revenue from the Intel 18A process won't materialize until 2025 at the earliest, Intel is generating foundry revenue right now from its advanced packaging services. Intel's foundry business generated $311 million in revenue during the third quarter, up 299% year over year, driven partly by increased packaging revenue.
Advanced chips, including artificial intelligence (AI) accelerators, generally require packaging technology that goes beyond the standard fare used for decades. Foundry market leader TSMC has struggled to provide enough advanced packaging capacity to handle soaring demand for AI chips, which has provided an opening for Intel. "We have seen a surge of interest in our advanced packaging from most leading AI chip companies," said Intel CEO Pat Gelsinger during the Q3 earnings call.
Intel won advanced packaging deals for two AI chip designs during Q3, and it's in active negotiations with six additional customers. The company expects to win multiple new deals before the end of the year. Intel views advanced packaging as an on-ramp for foundry customers, allowing chip designers to become comfortable with Intel Foundry and potentially leading them to become full-blown foundry customers in the future.
On track
The key to Intel's success in the foundry business is delivering on its manufacturing promises and timelines. So far, the company is on track to do just that.
The Intel 4 process is ready, with the company's own Meteor Lake PC chips set to launch using that process in December. The Intel 3 process, which will power Intel's Sierra Forest and Granite Rapids server CPUs in 2024, is on track to be manufacturing-ready by the end of the year. The Intel 20A process, which will be used for Intel's next-gen Arrow Lake PC chips, is still on track to be ready in the first half of 2024. The Intel 18A process, which is expected to deliver the manufacturing lead for Intel, will be ready before the end of 2024.
Intel has a long history of manufacturing delays, which may be giving potential foundry customers pause. If the company can deliver its process nodes on time through the end of its current road map, any hesitation on the part of chip designers should fade away. Assuming the Intel 18A process outperforms those of competitors when it launches, the company's foundry revenue should start expanding rapidly in 2025 and beyond.
