Intel's Foundry Segment Eyes Success, Waits for Revenue Boost

Intel has taken a significant strategic turn by offering its manufacturing capabilities to third-party clients, a move overseen by CEO Pat Gelsinger. The company is diving into the foundry business with renewed vigor, differentiating from its first, narrower attempt which ended in 2018. Intel is determined to reclaim its lead in the semiconductor industry, predicting its advanced Intel 18A process node to rival TSMC by early 2025, and has already started securing customers for this technology.

Technological Catch-Up and Future Growth

Intel's bold strategy to catch up with TSMC's manufacturing prowess signals its potential to turn the foundry division into its major revenue stream. Currently, Intel still heavily relies on traditional packaging services for revenue, but with the anticipated decline in this sector's demand, the focus has shifted to wafer manufacturing and advanced packaging, where substantial external customer revenue has yet to materialize.

Intel's manufacturing offerings include the Intel 3 and Intel 18A process nodes, which are on the cusp of volume production. With its next-gen server CPUs utilizing Intel 3 soon, and Intel 18A set to follow, Intel is aligning its technical capabilities with future revenue expectations. Additionally, the company is also broadening its advanced packaging services, having acquired five customers in this area, and projecting significant revenue from these engagements by 2025, sustained by a newly opened facility in New Mexico.

With 50 test chips slated for 2024 and 2025, and most using the Intel 18A node, Intel boasts four committed customers for this technology. Its wafer manufacturing and advanced packaging efforts have led to a reported total deal value exceeding $10 billion.

Timeline for Earnings Growth

Pat Gelsinger has indicated that these foundry engagements require several quarters to transform into revenue, with wafer manufacturing wins taking even longer. While milestone readiness is projected for early 2025 for Intel 18A, it will take additional time for the revenue to scale up. By the end of 2026, the success of Intel's foundry strategy should become apparent. In a global foundry market projected to double by 2032, Intel's $10 billion pipeline is just the beginning.

The initial phase, starting in 2024, may see the foundry business dragging on Intel's performance due to the downturn in traditional packaging revenue. However, once the new processes are in place and the tech gap with TSMC narrows in 2025, Intel's foundry is expected to be central to chip manufacturing discussions, potentially heralding a new era of growth for the company.

Intel, revenue, foundry