Intel (INTC -9.20%) entered into a partnership with Arm Holdings (ARM 4.11%) last year to ensure that its upcoming Intel 18A manufacturing process would be a viable choice for chip designers using Arm's technology. While Intel and its x86 instruction set dominate the PC and server central processing unit (CPU) markets, Arm-based chips dominate pretty much everywhere else. Around 30 billion Arm-based chips are shipped annually.
For Intel's foundry business to be a success, the company has little choice but to embrace Arm. The company's plan is for its Intel 18A process to overtake foundry leader Taiwan Semiconductor Manufacturing technologically by the beginning of 2025. The agreement with Arm involves optimizing both the Intel 18A process and Arm's chip designs.
This collaboration was always going to take time to pay off, given that the Intel 18A won't be ready for volume production until the start of next year. While Intel has won a handful of unnamed Intel 18A customers that have secured capacity, little is known about these customers.
An Arm-based design win
On Monday, ASIC designer and IP solutions provider Faraday Technology announced that it was collaborating with both Arm and Intel to develop a 64-core system-on-chip (SoC) that will use Intel 18A. This will be a chip aimed at the server market using Arm Neoverse, a set of Arm cores tailor-made for data center applications.
The caveat is that Faraday Technology, which is based in Taiwan, won't be selling this chip directly. Instead, the chip design will be part of the company's evaluation platform, providing the foundation for its customers to develop customized data center and high-performance computing chips. Faraday's solution is expected to be available to its customers in the first half of 2025.
Competing with itself
Data center CPUs are one of Intel's most important businesses. While the data center segment has fallen on hard times recently, partly due to stiff competition from AMD, it still generated about $15.5 billion of revenue in fiscal 2023.
It might seem strange, then, that Intel is enabling a direct competitor with this deal to manufacture Arm-based data center CPUs. The company is even set to roll out a new line of server CPUs, code-named Sierra Forest, in the first half of this year that is partly aimed at fending off the Arm incursion into the data center. Sierra Forest will feature as many as 288 low-power cores per chip, in contrast to Intel's main lineup of server CPUs that features fewer but more powerful cores.
Intel has to be willing to open the door to any potential customer for its manufacturing investments to pay off. Moving its manufacturing operations into a distinct business unit, part of a restructuring that went into effect this year, is a step in that direction. It will also enable the company to potentially sell a stake in its foundry business down the road to raise capital, something it's done with other business units.
No information was disclosed about how much revenue this deal to manufacture Arm-based server chips will generate for Intel, and Faraday didn't mention whether it had any customers on board.
The deal is notable, though, because it indicates that Intel is truly all-in on its foundry business. The company is willing to manufacture chips that directly compete with its own products, something that will be crucial as it looks to win foundry market share from TSMC.
Intel 18A is still a year away, and meaningful revenue generation will take time to materialize once the process is ready for volume manufacturing. However, this deal to manufacture Arm-based server chips will likely be the first of many customer wins Intel will announce this year.
