(Reuters) – Intel’s ( INTC ) foundry or contract manufacturing business has signed on as a customer for Amazon’s ( AMZN ) cloud services unit to make custom artificial intelligence chips, the companies said on Monday, a deal that would give the chipmaker a vote. hope
Shares of Intel rose nearly 8% in extended trading on Tuesday. CEO Pat Kelsinger issued a memo to employees saying Intel had secured the Amazon unit as a multibillion-dollar customer, paying Santa Clara, California-based Intel for design services and manufacturing. The note also outlined Intel’s planned cost cuts.
Amazon’s AWS cloud computing division has already designed several chips for use in its data centers and has hired Intel to compile at least one version. Intel will make an “artificial intelligence fabric chip” for AWS and use the chipmaker’s 18A process, the most advanced version available to external customers, the companies said.
Intel expects to build additional designs from Amazon on the company’s upcoming 18AP and 14A manufacturing processes.
The memo also outlined several steps Intel would need to take to revive itself. Last month, it posted disastrous second-quarter earnings.
“The board and I agreed that there is much work to be done to drive greater efficiency, improve our profitability and increase our market competitiveness,” Kelsinger wrote in the memo.
Among the steps the board decided to take, Intel is selling a stake in its programmable chip business Altera. It also said it would suspend construction on its chip factory project in Germany for two years, a move Reuters previously reported. The company also plans to suspend its project in Poland.
Intel said there was no change in plans to expand production in the US
Intel plans to keep its manufacturing business, or foundry, within the company, confirming an earlier Reuters report. The foundry business is key to Gelsinger’s turnaround plan for the company, which he outlined in 2021. Until Amazon, Intel struggled to find marquee customers that could be discussed publicly.
But in the memo, Kelsinger said the foundry business would have more freedom, for example to be able to take out capital. Intel plans to establish it as an independent subsidiary, with a board of directors overseeing the foundry operation. The foundry unit separated its financial performance from the design business earlier this year.
The company is taking several steps to prioritize the core technology behind its central processing units (CPUs) and is restructuring several divisions, including its automotive and “edge” businesses.
Intel on Monday said it was awarded up to $3 billion in direct funding from the US CHIPS and SCIENCE Act as part of the Secure Enclave program.
The company said it plans to send notices in mid-October to about 15,000 employees it said it would lay off in August.
(Reporting by Max A. Cerny in San Francisco and Juby Babu in Mexico City; Editing by Krishna Chandra Eluri and David Gregorio)
