Intel (NASDAQ:INTC) entered into a partnership with Arm holds (NASDAQ:ARM) last year to ensure that its upcoming Intel 18A manufacturing process would be a viable choice for chip designers using Arm technology. While Intel and its x86 instruction set dominate the PC and server central processing unit (CPU) markets, Arm-based chips dominate just about everywhere else. About 30 billion Arm-based chips are shipped each year.
For Intel’s foundry business to be successful, the company has no choice but to adopt Arm. The company’s plan is for its Intel 18A process to overtake foundry leader Semiconductor manufacturing in Taiwan technologically by early 2025. The deal with Arm involves optimization of both the Intel 18A process and Arm’s chip design.
This collaboration was always going to take time to bear fruit, given that the Intel 18A won’t be ready for mass production until early next year. Even though Intel has gained a handful of anonymous Intel 18A customers who have secure capacity, little is known about these clients.
An Arm-based design victory
On Monday, ASIC designer and IP solutions provider Faraday Technology announced that it is collaborating with Arm and Intel to develop a 64-core system-on-chip (SoC) that will use Intel 18A. This will be a chip aimed at the server market using Arm Neoverse, a set of Arm cores tailor-made for data center applications.
The caveat is that Taiwan-based Faraday Technology will not sell this chip directly. Instead, the chip design will be part of the company’s evaluation platform, providing the foundation for its customers to develop custom data center and high-performance computing chips. Faraday’s solution is expected to be available to its customers in the first half of 2025.
In competition with himself
Data center processors are one of Intel’s most important businesses. Although the data center segment has fallen on hard times recently, partly due to strong competition from AMDit still generated approximately $15.5 billion in income during the 2023 financial year.
So it might seem odd that Intel would allow a direct competitor to make Arm-based data center processors. The company is even set to roll out a new line of server processors, codenamed Sierra Forest, in the first half of this year, aimed in part at fending off Arm’s foray into the data center. Sierra Forest will feature up to 288 low-power cores per chip, unlike Intel’s main line of server processors which feature fewer but more powerful cores.
Intel must be willing to open the door to any potential customer for its manufacturing investments to bear fruit. The transfer of its manufacturing operations to a separate business unit, as part of a restructuring that took effect this year, is a step in that direction. It will also allow the company to potentially sell a stake in its foundry business to raise capital, which it does with other business units.
No information has been disclosed on how much revenue this deal to make Arm-based server chips for Intel generates, and Faraday didn’t mention whether it has any customers on board.
The deal is noteworthy, however, because it signals that Intel is truly investing in its foundry business. The company is willing to make chips that directly compete with its own products, which will be crucial to gaining foundry market share from TSMC.
Intel 18A is still a year away, and significant revenue generation will take time to materialize once the process is ready for volume manufacturing. However, this deal to make Arm-based server chips will likely be the first of many customer deals Intel will announce this year.
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Timothy Green holds positions at Intel. The Motley Fool holds positions and recommends Advanced Micro Devices and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
Intel Foundry scores a victory with an Arm chip was originally published by The Motley Fool
