Intel announces plan to spin out semiconductor foundry business as independent subsidiary open to external investment and customers.

Intel shares jumped 8% in extended trading Monday following CEO Pat Gelsinger's announcement that the company plans to turn its foundry business into an independent unit with its own board and the potential to raise outside capital. As part of Gelsinger's effort to turn around the struggling chipmaker, Intel also said it will sell off part of its stake in Altera. Gelsinger stated the restructuring would allow the foundry business to "evaluate independent sources of funding," following a board meeting to assess the direction and future of the company. The foundry business, which Intel plans to use to manufacture chips for other customers, has been a significant drain on the company's finances, with Intel spending roughly $25 billion on it in each of the last two years. Beyond considering outside funding, Intel is weighing whether to spin off the foundry business, potentially into a separate publicly traded company, according to a person with knowledge of the matter.

Prior to the postmarket rally, Intel had lost almost 60% of its value this year. The company has surrendered market share in its core PC and data center business while watching Nvidia dominate the market for chips powering artificial intelligence workloads. In August, Intel reported disappointing quarterly results, triggering the sharpest sell-off in 50 years, and announced it would lay off more than 15% of its workforce as part of a $10 billion cost-reduction plan. Gelsinger said the company is about halfway through the layoffs. Additionally, Intel will pause its fabrication efforts in Poland and Germany "by approximately two years based on anticipated market demand" and pull back on plans for its Malaysian factory, though U.S. manufacturing projects will remain unaffected.

Earlier Monday, Intel was awarded up to $3 billion from the Biden administration and the CHIPS and Science Act for the "Secure Enclave" program, which furthers a project between Intel and the Department of Defense. The U.S. government is bolstering its investment in semiconductor production due largely to growing geopolitical risk around Taiwan, home to Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker. U.S. Commerce Secretary Gina Raimondo recently met with Gelsinger, who voiced frustration over domestic chipmakers' heavy reliance on Taiwan Semiconductor.

In conjunction with the foundry announcement, Intel entered into a deal with Amazon Web Services to produce custom chips for AI, extending their long-running partnership. Amazon will purchase a custom Xeon processor from Intel and will have its AI chip manufactured at Intel's plant in Ohio currently under construction. The move provides Intel with a potential new foothold in the growing AI server chip market, though Nvidia has largely taken control while Intel offers several products including Gaudi 3. Amazon has been developing its own AI chips, including Trainium, for over five years, while Microsoft and Google have also invested heavily in custom chips to offer less expensive alternatives to Nvidia's processors. Gelsinger stated: "All eyes will remain on us. We need to fight for every inch and execute better than ever before. Because that's the only way to quiet our critics and deliver the results we know we're capable of achieving."