Intel Plan to Manufacture Chips for Other Foundries

Why Does Intel Plan to Manufacture Chips for Other Foundries As Per CEO

“Why can't NVIDIA today do 2X the number of GPUs the world wants?” Gelsinger Says. “It’s not because of silicon, it’s because of packaging.”
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The plan for Intel to undertake a significant strategic shift and invest in opening up their factories to manufacture chips for other Foundries raises questions about their motivations, especially considering their previous unsuccessful attempts at the chip foundry model. This move marks a departure from Intel’s traditional focus on producing chips solely for internal use, prompting curiosity about the driving factors behind this pivotal decision.

“Why can’t NVIDIA today do 2X the number of GPUs the world wants?” Gelsinger says. “It’s not because of silicon, it’s because of packaging.”

This seismic shift prompts a deeper exploration into the motivations and strategic imperatives driving Intel’s bold move. Through an in-depth analysis of Gelsinger’s insights and the broader industry landscape, we unravel the multifaceted intricacies of Intel’s strategic pivot.

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Why Does Intel Plan to Manufacture Chips for Other Foundries As Per CEO

In January 2024, Intel and UMC announced a collaboration aimed at developing a 12nm chip manufacturing process. This initiative targets high-growth markets like mobile devices and networking infrastructure while expanding the companies’ process portfolio and potentially increasing chip production capacity to address global shortages. Intel’s U.S. fabs will play a key role in this partnership, potentially strengthening domestic chip manufacturing capabilities. Let’s figure out what Intel wants to do that.

The Crucial Role of Packaging Technology:

At the heart of Intel’s newfound direction lies the pivotal role of packaging technology. Gelsinger emphasizes the significance of advanced packaging capabilities, enabling the integration of multiple chiplets into complex System on Chip (SOC) architectures.

“What we found was everybody needed advanced packaging. so instead of this just being something that we can do, it’s become a foundational offering.”

~Pat Gelsinger, CEO, Intel

Leveraging decades of expertise in wafer-level assembly, Intel seeks to position itself as a leader in this critical aspect of semiconductor manufacturing, offering unparalleled sophistication and efficiency.

Read More: 6 Leading Companies in Advanced Packaging of Integrated Circuits

Embracing the System-Level Foundry Concept:

Intel is redefining the traditional approach to chip manufacturing by adopting a broader perspective known as the system-level foundry concept.

This approach acknowledges that modern chip designs require more than just cutting-edge process technologies to achieve optimal performance. Instead, Intel emphasizes the critical role of advanced packaging techniques in enhancing chip functionality and efficiency.

CEO Pat Gelsinger highlights the indispensability of advanced packaging, which allows for the integration of multiple chiplets into complex System on Chip (SOC) architectures. By transcending the limitations of process technologies alone, Intel aims to deliver more sophisticated semiconductor solutions that meet the evolving needs of the industry.

Furthermore, Intel’s shift towards a collaborative model represents a departure from its historical proprietary approach. In the past, Intel closely guarded its intellectual property and expertise, limiting collaboration with external partners. However, in embracing a more open approach, Intel now shares its IP and technical know-how with foundry customers.

Read More: What is 2D, 2.5D & 3D Packaging of Integrated Chips?

Navigating the Evolving Economics of Chip Design:

Gelsinger sheds light on the evolving economics of chip design, highlighting the shifting cost dynamics driven by advanced packaging technologies. As semiconductor architectures evolve towards more intricate 3D constructions, the value derived from package assembly and test stages increases substantially. Intel’s strategic emphasis on packaging capabilities reflects its proactive response to these evolving market dynamics. This positions intel as a leader in delivering high-value semiconductor solutions.

“If we would go back five years for a leading-edge CPU, in the Bill of Materials, 15% [of the cost] would be for package assembly and test. As we get to one of the modern chips, like Gaudi [an Intel AI Accelerator chip] or Granite Rapids [a future Intel server CPU], that are using these 3D construction technologies, package assembly and test is now 35-40%. So, the total value of the product is becoming much more, seen through the package assembly and test layers.”

~Pat Gelsinger, CEO, Intel

Other Reasons Intel Plan to Manufacture Chips for Other Foundries

1. To become a major contract chipmaker: Intel has historically built chips mainly for themselves, but they are aiming to become a leading manufacturer for other companies as well. This could help them diversify their revenue streams, boost production volume, and improve manufacturing efficiency.

2. To compete with TSMC and Samsung: The current top contract chipmakers, TSMC and Samsung, are ahead of Intel in terms of advanced manufacturing processes. By opening up their foundries, Intel hopes to attract customers by offering competitive pricing and technology, gaining market share and potentially catching up to their rivals.

3. To leverage their manufacturing strength: Intel has a long history and expertise in chip manufacturing. By making their fabs available to others, they can utilize their existing infrastructure and capabilities to generate additional revenue while showcasing their technological prowess.

4. To address the global chip shortage: The ongoing chip shortage has highlighted the need for increased production capacity. By expanding their foundry business, Intel can contribute to alleviating the shortage and potentially benefitting both themselves and their customers.

5. To secure government funding and partnerships: Governments around the world are actively investing in domestic chip manufacturing to reduce reliance on foreign suppliers. Intel’s foundry business could receive financial support and partnerships from governments, further incentivizing their plans.

6. To diversify their product offerings: Intel traditionally focused on PC and server chips. Expanding into foundry services allows them to cater to a wider range of chip designs and markets, diversifying their product portfolio and potential customer base.

Challenges and Opportunities:

Despite Intel’s ambitious vision and strategic positioning, formidable challenges lie ahead. The slow pace of government funds allocation and the complexities of navigating regulatory frameworks present significant hurdles. Moreover, Intel must contend with historical perceptions and competitive pressures as it seeks to establish itself as a premier player in the foundry market.


Intel’s strategic pivot into the chip foundry business represents a paradigm shift in semiconductor manufacturing, propelled by a confluence of technological innovation, collaborative synergy, and geopolitical imperatives. As Intel embarks on this audacious journey, the industry eagerly anticipates the unfolding of a new chapter in semiconductor history.

Reference: Reading Alpha

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