Gelsinger: IFS Here to Stay, Intel Embraces Contract Chipmaking Future

In June this year, Intel hosted the “Intel Internal Foundry Model Investor Webinar,” elucidating a transformative shift in its internal foundry business model. The plan entails a separation of design and manufacturing operations, with the chip manufacturing division set to operate independently, including separate financial reporting, starting from the first quarter of 2024.

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Image: Intel

It’s noteworthy that just a few years ago, Intel grappled with challenges at the 10nm process node. Many investors viewed wafer manufacturing as a long-term encumbrance potentially impacting Intel’s financial performance. The move to operate this business independently is anticipated to significantly enhance internal efficiency. In the long run, emulating a model akin to AMD’s spinoff of Global Foundries appears more viable. The challenge lies in identifying suitable investors. However, Intel withstood the pressure and chose to continue in-house chip manufacturing. It even established Intel Foundry Services (IFS), becoming a pivotal component of the IDM 2.0 strategy.

Recently, Intel CEO Pat Gelsinger attended a public event and participated in a media interview. When asked about the substantial funding required to expand chip manufacturing and whether it might lead to further division of the foundry business, he responded negatively. Gelsinger stated, “The idea of the internal foundry model, we think, is the right path for us in the current environment.

Since Gelsinger’s return as CEO of Intel, he has split off several business units, such as Mobileye and the Programmable Solutions Group (PSG). However, his stance on wafer manufacturing starkly contrasts with his approach to other divisions. Gelsinger prefers to maintain the original structure of Intel Foundry Services. While Intel opted to operate the foundry service independently for greater financial transparency, the company is not inclined towards a true division. Intel steadfastly believes that unified operations offer more pronounced benefits, such as better capacity utilization.