Semiconductor giant Intel (INTC +2.56%) has struggled to convince potential customers that its foundry business should be taken seriously. A long history of manufacturing delays and a lack of a track record in the foundry business are rightfully creating hesitation among fabless chip companies.
Image source: Intel.
While Intel Foundry has gotten off to a slow start, the explosion in demand for artificial intelligence (AI) accelerators and the limited advanced manufacturing capacity available at foundry leader Taiwan Semiconductor Manufacturing Company (TSMC) are coming together to create the perfect environment for Intel to succeed. An online report last week suggests that Microsoft has committed to using the Intel 18A or Intel 18A-P process for its next in-house AI chip, and that could be the first of many AI chips to roll off Intel's assembly lines.
Fleshing out the Intel-Microsoft partnership
Intel announced in early 2024 that Microsoft had signed on as a customer for its Intel 18A process, but no details or timelines were given. It now appears that Microsoft will be using Intel Foundry to manufacture a next-generation AI chip. The first version of Microsoft's Maia AI chip was manufactured using a 5nm process from TSMC, along with that company's advanced packaging technology.
While the scale of the reported agreement is still unknown and it has yet to be confirmed, Microsoft is investing heavily in AI data centers. The company previously forecast that its capital spending would reach $30 billion in the first quarter of fiscal 2026. Microsoft buys plenty of GPUs from Nvidia for its data centers, but its custom Maia AI chips can be tuned for its Azure cloud platform and potentially deliver a better value proposition for the cloud giant. The Intel 18A process is the only process available with backside power delivery, which enables improved energy efficiency.
The first of potentially many
Given the recent flurry of mega-deals involving AI data centers, it's clear that demand for advanced AI chip manufacturing capacity is likely to outstrip supply for the foreseeable future. TSMC is ramping up its own capacity, with the foundry accelerating its 2nm production plans in Arizona amid the AI boom. However, bringing new capacity online takes time, and the AI industry is moving fast.
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Key Data Points
If the report that Microsoft has committed to Intel Foundry for its Maia AI chip is true, the deal would represent a huge vote of confidence in Intel's quest to challenge TSMC. Any company looking to deploy a custom AI chip could turn to Intel's 18A process or its future Intel 14A process. While Intel has struggled to sell AI chips of its own, the company's foundry business could ultimately be a big AI winner.
