According to a recent report by Reuters, Broadcom has expressed dissatisfaction with Intel’s 18A chip manufacturing process. Broadcom is said to have been testing Intel’s 18A chip process for the past few months and received wafers from Intel last month. However, after an internal review, Broadcom’s senior management concluded that the manufacturing process has not yet met the standards for high-volume production.
Neither company has publicly commented on the news, but this development undoubtedly adds uncertainty to the future prospects of Intel’s foundry business. It could also impact investor confidence in Intel CEO Pat Gelsinger’s strategy to revitalize the company and return it to industry leadership. Reportedly, SoftBank had already decided to terminate its collaboration with Intel due to mass production issues, a move that further fueled external doubts about Intel’s foundry business.
Intel’s foundry business, which began in 2021, is a central part of CEO Pat Gelsinger’s strategy to turn around the company’s current losses. The setbacks in the foundry business have not only negatively affected Intel’s overall operations but also contributed to a one-quarter plunge in its market value during the second quarter. Furthermore, Intel announced a 15% workforce reduction and cut capital expenditures for factory construction.
Although Broadcom is less known in the consumer market, it achieved $28 billion in chip sales last fiscal year, primarily from its network equipment and wireless chips. Additionally, due to the surge in demand for AI hardware, Broadcom expects to generate between $11 billion and $12 billion in revenue from AI-related hardware this year, up from $4 billion last year.
To return to profitability, Intel has been aggressively expanding its factory investments in the United States, committing to approximately $100 billion for factory construction in multiple locations. Attracting major clients such as Nvidia and Apple to fill the capacity of these new factories is a crucial part of the expansion plan. However, this is proving to be a difficult path, as Intel’s foundry business is currently incurring significant losses, with an operating loss of $7 billion this year, an increase from $5.2 billion in the same period last year.
Chip manufacturing is an extremely complex process, involving more than 1,000 steps, and the chip yield per wafer is critical for large-scale production. Broadcom’s engineers are reportedly concerned about the yield of Intel’s 18A process, which indicates that Intel faces significant technical risks in actual mass production.
Gelsinger stated in a recent earnings call that Intel has released its 18A process development kit to other chip manufacturers and plans to begin mass production for external customers in 2025. Currently, more than a dozen customers are actively collaborating on this technology.
According to Intel’s plan, the 18A process will enter large-scale mass production next year. This process is vital to Gelsinger’s IDM 2.0 strategy, representing a major breakthrough for Intel in the chip foundry sector and carrying the hope that this business will begin to generate revenue growth. Intel’s goal is to achieve breakeven by 2027, and the successful mass production of the 18A process is a key part of realizing that target.
The disclosure of this news may raise investor concerns about whether Intel can deliver on its promises on time, which could affect Intel’s competitiveness in the global semiconductor industry. However, chip manufacturing itself is a very difficult road, and it’s not possible for it to be smooth from the beginning. It’s too early to draw conclusions, and we will have to continue to observe the situation.