Custom chip manufacturing deal between Microsoft and Intel.

Intel and Microsoft have entered into a partnership that will see Intel exclusively manufacture custom chips designed by Microsoft. This significant deal, worth over $15 billion, was announced by Intel during its Foundry event. While the specifics of the chips’ applications were not disclosed, Bloomberg reported that Microsoft has plans to develop in-house designs for processors and AI accelerators. The partnership underscores Microsoft’s commitment to creating its own custom chips and expands Intel’s foundry business, which is crucial to the company’s revival strategy under CEO Pat Gelsinger.

Microsoft CEO Satya Nadella expressed his enthusiasm for the shift, saying, “We are in the midst of a very exciting platform shift that will fundamentally transform productivity for every individual organization and the entire industry.” Intel will utilize its 18A process to fabricate the custom chips for Microsoft, a key component of the company’s roadmap to regain prominence in the chipmaking industry. The move is reminiscent of Taiwan Semiconductor Manufacturing Company (TSMC)’s successful strategy of producing other companies’ chip designs, a playbook that Intel is also adopting through its foundry business.

However, Intel faces challenges despite its new foundry plans and the potential of this partnership with Microsoft. The company recently delayed the opening of a $20 billion chip plant in Ohio to 2026 due to a sluggish chip market and obstacles in securing government grants. This setback highlights the difficulties Intel continues to encounter as it endeavors to position itself as a leading player in the foundry and chip manufacturing sector.

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