Intel's Foundry Spinoff: A High-Stakes Bet on US Chip Manufacturing

Intel is making one of the biggest pivots in modern technology history. The company is transitioning from exclusively building its own processors to manufacturing chips for other global tech leaders. This move to establish a standalone domestic foundry aims to bring crucial semiconductor production back to the United States.

Why Intel is Spinning Off Its Foundry Business

For decades, Intel operated under a traditional integrated model. The company designed its own computer processors and manufactured them in its own factories. Meanwhile, competitors like AMD and Nvidia shifted to a “fabless” model, meaning they design their chips but hire outside companies to actually build them.

In September 2024, Intel CEO Pat Gelsinger announced that Intel Foundry would become an independent subsidiary. The new entity will have its own board of directors and a distinct financial reporting structure. This separation is necessary for building trust with new customers. Fabless companies might hesitate to share their highly proprietary chip designs with Intel if those designs could accidentally benefit Intel’s own internal product teams. By creating a strict financial and operational firewall between its design arm and its manufacturing arm, Intel is trying to convince direct competitors to become paying clients.

The Financial Reality and CHIPS Act Funding

Building advanced microchips requires massive amounts of capital, and Intel’s foundry transition is extremely expensive. In 2023, the Intel Foundry unit reported an operating loss of $7 billion. This was a significant drop from its $5.2 billion loss the previous year.

To offset these enormous infrastructure costs, Intel secured massive backing from the federal government. Under the US CHIPS and Science Act, Intel was awarded up to $8.5 billion in direct funding in March 2024. The company also secured access to $11 billion in federal loans to support its construction efforts. In September 2024, Intel locked in up to $3 billion in additional funding to produce specialized semiconductors for the US military under the Secure Enclave program. The US government views domestic chip manufacturing as a critical national security priority, and Intel is the primary beneficiary of that strategy.

Securing Big Tech Customers: Microsoft and AWS

A semiconductor foundry cannot survive without massive production volume. To achieve profitability, Intel is actively courting major tech giants to fill its factories.

In February 2024, Microsoft announced it would use Intel’s advanced 18A manufacturing process to build custom chips. Intel stated this specific deal helped push its foundry order backlog past the $15 billion mark. Microsoft requires millions of chips to power its massive Azure cloud computing network, making this a highly lucrative partnership.

Amazon Web Services (AWS) is another major partner committing to Intel’s factories. In September 2024, Intel and AWS announced an expanded partnership. Under a multi-year agreement, Intel will produce an artificial intelligence fabric chip for AWS using the Intel 18A process. The two companies will also co-develop custom Xeon processors on the Intel 3 process node. These multi-billion dollar agreements prove that top-tier cloud providers are willing to bet heavily on American manufacturing.

Pausing Global Expansion to Focus on the US

While Intel originally planned a massive global factory expansion, recent financial pressures forced the company to prioritize domestic projects. In late 2024, Intel announced a two-year pause on building new factory sites in Magdeburg, Germany, and Wrocław, Poland.

Instead, the company is doubling down on its investments within the United States. Intel is actively constructing and expanding manufacturing facilities in Chandler, Arizona, and New Albany, Ohio. The Ohio project represents an initial investment of over $20 billion and is expected to become one of the largest semiconductor manufacturing sites in the world. Intel is also spending heavily to modernize its existing research and development facilities in Rio Rancho, New Mexico, and Hillsboro, Oregon.

The Competition: Chasing TSMC and Samsung

Intel faces a steep uphill battle against the current market leaders. Taiwan Semiconductor Manufacturing Company (TSMC) dominates the industry, currently controlling over 60% of the global foundry market. TSMC is the exclusive manufacturer for major brands like Apple, Nvidia, and AMD. Samsung currently holds the second-place spot.

For several years, Intel fell behind TSMC in the highly competitive race to shrink transistors to the 5-nanometer and 3-nanometer sizes. Intel’s current comeback strategy relies entirely on its upcoming 18A process node. The company claims this new technology will help it regain manufacturing leadership by 2025. Furthermore, because TSMC is located in Taiwan, global tech companies are exposed to significant geopolitical risk. If Intel’s 18A process delivers on its promises of better power efficiency and performance, Intel will present a highly attractive, US-based alternative to vulnerable Asian supply chains.

Frequently Asked Questions

What is a semiconductor foundry?

A foundry is a massive factory that manufactures microchips based on designs provided by other companies. Instead of designing and selling their own branded chips, foundries act as a service provider for technology businesses that lack the billions of dollars needed to build and maintain a chip factory.

Why is Intel separating its foundry business?

Intel is separating its foundry into an independent subsidiary to create a clear boundary between its chip design team and its manufacturing team. This separation gives outside customers the confidence that their secret chip designs will not be shared with or copied by Intel’s own product developers.

Where are Intel’s new chip factories located?

Intel is currently focusing its major new construction and expansion efforts strictly in the United States. The primary new manufacturing sites are located in New Albany, Ohio, and Chandler, Arizona. The company also maintains significant advanced packaging and research operations in Oregon and New Mexico.