Report: Intel holds talks with AMD about manufacturing its chips

Intel Corp. is reportedly engaged in talks with Advanced Micro Devices Inc. over a deal that could see it manufacture some of its rival’s less advanced semiconductors.

A report by Semafor on Wednesday cited people familiar with the matter as saying the talks are focused on AMD becoming a customer of Intel’s foundry business, though it’s not clear how big a deal is being discussed.

There’s no guarantee that the talks will move forward, but if they do, it would represent a substantial vote of confidence in Intel’s efforts to revive its manufacturing arm after years of lagging behind Taiwan Semiconductor Manufacturing Co.

AMD is the latest in a growing list of big technology companies to be involved in discussions with Intel. The company gave up manufacturing its own chips several years ago, spinning off its semiconductor fabrication plants as a separate business entity, called GlobalFoundries Inc. However, Intel continues to maintain its own chip fabs, which are mostly used to manufacture its own products.

Intel Chief Executive Lip-Bu Tan, who took over the company earlier this year following the ouster of ex-CEO Pat Gelsinger, has previously said he might look to spin-off the Intel Foundry business if he cannot find external customers for its most advanced 14A processing node.

The market reacted warmly to the report, and Intel’s stock gained more than 7% during the regular trading session yesterday. The stock has been gaining momentum this year, after a long period of decline, during which investors had raised serious questions over the company’s future. However, Wall Street now seems much more optimistic about its prospects, following reports of new partnerships in the offing, and Intel’s stock has gained 80% in the year to date.

While Intel has not yet secured an external customer for its chip fabs, it did strike a deal with Nvidia Corp. that will see the two companies collaborate with one another on the development of customized personal computing and data center chips. Nvidia also agreed to invest $5 billion in Intel, in return for a 4% stake. According to Semafor, AMD is also mulling over the possibility of an investment in its rival.

Prior to the Nvidia partnership, the U.S. government announced that it would acquire a 10% stake in Intel, in a move that analysts say was designed to increase confidence in the chipmaker.

Semafor noted that Intel does not have the capabilities to manufacture AMD’s most advanced chips, but it can make many of its older semiconductor designs. AMD currently relies on TSMC to manufacture the bulk of its processors, but the company could potentially benefit from diversifying its supply chain, especially as the White House under Donald Trump has urged American companies to bring more manufacturing back home.

However, Bernstein analyst Stacy Rasgon told MarketWatch he thinks it’s unlikely AMD would agree to do business with its chief competitor in the personal computer and server chip industries.

“AMD and Intel appear to be much starker competitors than Nvidia and Intel are in their current core markets, and we find it unlikely that either would really want to rely on each other, at least for now,” he said. “We would think that a push for more U.S.-based manufacturing of AMD’s parts would be much more easily satisfied through TSMC Arizona,” he added, referring to TSMC’s new manufacturing facility in the U.S.

Semafor’s report suggests that talks between Intel and AMD are at a very early stage, and said it’s possible that nothing may come of them.

Reports of the talks come just one week after Bloomberg said Intel was involved in discussions with the iPhone maker Apple Inc. over a similar deal. Apple, which designs its own processors for its iPhones and iPad devices, is also feeling the pressure to bring more manufacturing stateside. Like AMD, it currently relies on TSMC for its most advanced processors.

Photo: Intel