Intel bags a huge fish for its new Foundry Services as Microsoft places an order for home-grown chips

 Image of Satya Nadella speaking at IFS Connect 2024.
Image of Satya Nadella speaking at IFS Connect 2024.

What you need to know

  • Microsoft is Intel's newest 18A customer.

  • Microsoft will use Intel's newly revamped Foundry Services to create a Microsoft-designed chip.

  • CEO Satya Nadella spoke at IFS Connect 2024 to praise Intel's vision for Foundry in the future.

It has taken a few years, but the lessons learned during the pandemic seem to be finally being applied as Intel is going all out to try to fill a void in the foundry market and provide a more reliable supply chain for semiconductors for the western world.

They have done this by branching out to other companies like Arm to make more efficient options using Arm's new Neoverse 3 chip on their 18A process to power AI data centers. Now, it has partnered with Microsoft as the latest customer of the Intel 18A process to build bespoke chips for the company.

What chips are Intel making for Microsoft?

Microsoft Azure chips
Microsoft Azure chips

While we aren't sure what the chips are, we do know that Microsoft has designed its own versions. The new Arm chip is called 'Cobalt 100 CPU,' and a dedicated AI processor is dubbed 'Maia AI Accelerator.' However, we don't know if these are the chips that Intel is making.

It would make sense that Intel is assisting with making these chips, as recent reports show that Intel and Arm have buried the hatchet and are now working together. It's interesting to think what the world would look like now if the NVIDIA acquisition of Arm had been permitted to go through. It now seems that Intel and Arm are corroborating to fight against NVIDIA's insane hot streak and demand as well as TSMC's nearly 60% foundry market share.

We have reported as well that future Surface devices will be using Arm processors, and recent Xbox leaks show an Arm-based device as well. It's possible Microsoft could turn to Intel to make these for them as well and get the exact bespoke power they want instead of buying an off-the-shelf chip.

What does CEO Satya Nadella think about Intel Foundry Services?

Microsoft CEO Satya Nadella Smiling
Microsoft CEO Satya Nadella Smiling

During the IFS Direct Connect, Arm CEO Rene Hass introduced Satya Nadella as Intel's newest 18A customer. Satya gave a short but sweet video presentation.

Satya said, "All of us at Microsoft are committed to supporting Intel's efforts to build a strong supply chain right here in the United States."

We need a reliable supply of the most advanced, high-performance and high-quality semiconductors. That’s why we are so excited to work with Intel.

While it's not likely that the previously announced chips from Microsoft will be the ones being built on Intel's 18A process, if Microsoft really is committed to Intel, they could be using Intel for more than just the single 18A process chip that was announced.

Most of what Microsoft and OpenAI care about right now is powering their AI engine, which has rocketed Microsoft to the most valuable company in the United States. It's interesting to see how quickly AI demand has pushed the foundry market forward, and Intel is filling a real need globally as right now, close to 80% of semiconductors come out of Asia, which could be cut off from the western world if geopolitical issues take a bad turn.

Will the Microsoft and Intel partnership be profitable?

Image of Intel's plan for to be #2 Foundry by 2023
Image of Intel's plan for to be #2 Foundry by 2023

I don't have a crystal ball, but this partnership has all of the signs of becoming a powerhouse in the future.

Intel wants to be the number #2 foundry in the world by 2030. While the United States government has been lagging behind in giving up money as part of the CHIPS act, the advent and demand for AI data centers by huge corporations like Microsoft, Google, Amazon, and X could be enough of a cash infusion for Intel Foundry Services to realize this vision.

I live in Arizona, where there is a large Intel plant. I personally know several people who have worked or are currently working at Intel. They enjoy their careers and make good salaries.

Stuart Pann, the SVP and GM of Foundry Services, stood and talked during the IFS Direct Connect event and discussed the people of Intel. While talking about Intel's employees, Pann said, "They know that you don't need to be in Tawaiin to build the world's most advanced semiconductors. [...] It's an honor to represent the 52,000 [people at intel], we are ready to earn the right to be your foundry supplier."

I think Intel has a winning business model here, and we all know that as long as Microsoft can weather the storms circling OpenAI and Copilot with the multiple lawsuits and privacy concerns, Microsoft will continue to lead the pack in AI.