Intel is spinning off its chipmaking business into a separate entity

Intel has announced plans to spin off its chipmaking business and establish Intel Foundry, which will stand as an independent subsidiary, as part of efforts to turnaround strategy.

The move is also expected to offset the billions of dollars in losses incurred by the company. According to Intel CEO Pat Gelsinger’s Monday announcement the chipmaking operation will convert to an autonomous operation with a “clearer separation and independence” from Intel.

Intel Foundry to have its board

According to the firm, the change in the structure of the business will result in Intel Foundry operating as a stand-alone business with its own board. The chipmaking operation will also start reporting its earnings, separate from Intel.

Intel also revealed it going to cease work on factories it is developing in Germany and Poland for two years, “based on anticipated demand.” However, Intel will continue working on plants in Arizona, New Mexico, Ohio, and Oregon. Intel also revealed another plant in Malaysia will be completed but will only become operational when the conditions support it.

“As I’ve said before, this is the most significant transformation of Intel in over four decades. Not since the memory to microprocessor transition have we attempted something so essential.”

Gelsinger.

“We succeeded then — and we will meet this moment and build a stronger Intel for decades to come,” added Gelsinger.

The Verge article also reveals that Intel has plans in place to sell part of its stake in Altera Corp, a programable chip firm which it acquired in 2015 as part of the restructuring. It will sell the unit to private equity.

Restructuring to bring back Intel on track

According to the announcement, Intel will also cut about two thirds of its real estate footprint. The company also revealed receiving $3 billion from government for making chips for the military.

With this restructuring, the company is expected to get back on track. Intel reported $1.6 billion during the first quarter of this year while the chipmaking business alone recorded up to $7 billion in operating losses.

This also comes as the company has previously announced job cuts for thousands of workers In August. Intel said it would lay off 15,000 staff and has revealed it is “more than halfway” to achieving this “goal.”

While Intel is positive the chipmaking business will help the firm overturn losses to profitability, another report by Reuters says otherwise, suggesting early tests failed when creating Broadcom’s silicon wafers.

The company is planning on making chips with the 18A process for partners like Microsoft and Amazon. According to Bloomberg, the latest deal with Amazon will potentially bring work to its new plants under development in the US.

The Bloomberg article further explains that both Intel and AWS will jointly invest in a custom semiconductor for AI, which is known as a fabric chip,

Intel and AWS will co-invest in a custom semiconductor for artificial intelligence computing – what’s known as a fabric chip – in a “multiyear, multibillion-dollar framework,” according to a statement Monday. The work will rely on Intel’s 18A process, an advanced chipmaking technology.