Intel manufacturing business suffers setback as Broadcom tests disappoint

NEW YORK, Sept 04 (Reuters): Intel's contract manufacturing business has suffered a setback after tests with chipmaker Broadcom failed, three sources familiar with the matter told Reuters, dealing a blow to the company's turnaround efforts.

The tests conducted by Broadcom involved sending silicon wafers - the foot-wide discs on which chips are printed - through Intel's most advanced manufacturing process known as 18A, the sources said. Broadcom received the wafers back from Intel last month. After its engineers and executives studied the results, the company concluded the manufacturing process is not yet viable to move to high-volume production.

Reuters could not determine the current relationship between Broadcom and Intel or whether Broadcom had decided to walk away from a potential manufacturing deal.

"Intel 18A is powered on, healthy and yielding well, and we remain fully on track to begin high volume manufacturing next year," an Intel spokesperson said in a statement. "There is a great deal of interest in Intel 18A across the industry but, as a matter of policy, we do not comment on specific customer conversations."

A Broadcom spokesperson said the company is "evaluating the product and service offerings of Intel Foundry and have not concluded that evaluation."

Intel's contract manufacturing business was launched in 2021 as a key part of Chief Executive Pat Gelsinger's turnaround strategy.

Broadcom is not a household name but makes crucial networking gear and radio chips that helped generate $28 billion in overall chip sales in its last fiscal year. It has benefited from the boom in spending on artificial intelligence hardware, and J.P. Morgan analyst Harlan Sur estimated it will bank $11 billion to $12 billion from AI this year, up from $4 billion last year.

Some of its chip sales are from agreements with companies such as Alphabet's Google and Meta Platforms to help produce in-house AI processors, which can include arrangements with a manufacturer, such as Intel or Taiwan Semiconductor Manufacturing Co.

Intel announced a 15 per cent job cut and a reduction in capital spending related to its factory construction.