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Intel’s 18A Foundry: Microsoft Deal, Google & NVIDIA Talks, and the Race to Rival TSMC

5/08/2025

Intel's 18A Foundry: Microsoft Deal, Google & NVIDIA Talks, and the Race to Rival TSMC

 https://www.intel.com/content/dam/www/central-libraries/us/en/images/2024-07/18a-process-node-badge.png

Overview

Intel's foundry division has achieved a pivotal milestone by securing a large-scale contract with Microsoft to manufacture chips using its advanced 18A process node, a 1.8nm technology marketed as 2nm-class. The company is also in discussions with Google and NVIDIA for potential partnerships, signaling growing industry confidence in its manufacturing capabilities. Under the leadership of new CEO Lip-Bu Tan, Intel is positioning itself as a formidable competitor to TSMC and Samsung in advanced semiconductor production. However, challenges such as achieving high yields, scaling production, and overcoming past financial and technical setbacks remain critical hurdles.

Key Developments

  1. Microsoft Foundry Deal:

    • Intel has finalized a major agreement with Microsoft to produce chips using the 18A process. Described as "large-scale," the deal likely involves significant production volume, though financial details and specific chip types are undisclosed.

    • Microsoft's demand for custom silicon, likely for Azure cloud infrastructure or AI accelerators, aligns with its strategic focus on AI, bolstered by partnerships like OpenAI. This contract validates Intel's 18A technology and strengthens its foundry credentials.

    • The deal could provide substantial revenue, helping Intel address recent financial challenges, including a 50% stock decline in 2024 and layoffs of approximately 17,000 employees (15-20% of its workforce).

  2. Potential Partnerships with Google and NVIDIA:

    • Google: Intel is negotiating with Google, potentially for custom chips such as Tensor processors for Pixel devices or Tensor Processing Units (TPUs) for AI workloads. A partnership would reduce Google's reliance on TSMC and Samsung while leveraging Intel's U.S.-based facilities for geopolitical stability.

    • NVIDIA: NVIDIA's interest in 18A, initially for gaming GPUs, may extend to AI GPUs, reflecting its need to diversify from TSMC amid U.S. export restrictions on AI chips to China. Earlier reports from Tom's Hardware confirm NVIDIA's exploration of 18A, adding credibility to these talks.

    • Discussions with both companies remain ongoing, with no finalized agreements, introducing uncertainty about their near-term impact.

  3. Broader Industry Traction:

    • Companies like Broadcom and AMD have shown interest in Intel's 18A process, signaling a broader industry trend toward diversifying foundry partners. However, a September 2024 X post highlighted Broadcom's concerns about 18A's readiness for high-volume production, underscoring potential technical risks.

    • Intel's ability to attract multiple high-profile clients suggests it could challenge TSMC's 70% foundry market share, though execution remains key.

  4. 18A Process Technology:

    • The 18A node, Intel's most advanced process, is in risk production as of May 2025, with volume manufacturing targeted for late 2025. Intel claims a 25% speed increase and 36% power efficiency improvement over its 20A node, with SRAM density matching TSMC's 2nm (N2) process.

    • Features like backside power delivery (PowerVia) and advanced packaging (Foveros) enhance 18A's performance for AI and high-performance computing. Intel's roadmap includes enhanced variants: 18A-P (2026) and 18A-PT (2028).

    • Initial 18A wafers are being produced at Intel's Arizona facility, with additional capacity in Oregon, positioning Intel to meet growing demand.

  5. Strategic Leadership and Partnerships:

    • Lip-Bu Tan: Appointed CEO in late 2024, Tan's semiconductor expertise, including roles at TSMC and Cadence, is driving Intel's foundry revival. Concerns about his past ties to Chinese tech firms, mentioned by Chosun Biz, lack substantive evidence and appear speculative.

    • TSMC Collaboration: Intel is exploring a joint venture with TSMC to operate its U.S. factories, a pragmatic move to enhance capacity and credibility while leveraging TSMC's manufacturing expertise.

Geopolitical and Market Context

  1. U.S.-China Trade Tensions:

    • U.S. export restrictions on advanced AI chips, affecting Intel's Gaudi accelerators and NVIDIA's H20 GPUs, have elevated the strategic importance of Intel's U.S.-based manufacturing. A Reuters report from October 2024 notes these restrictions as a catalyst for domestic production.

    • Intel's Arizona and Oregon facilities offer a hedge against supply chain risks in Asia, appealing to U.S. companies navigating trade policies.

  2. Tariff Impacts:

    • In Q1 2025, Intel's CFO reported that anticipated U.S. tariffs influenced customer purchasing, boosting demand for domestic manufacturing. This aligns with industry shifts toward U.S.-based supply chains, supported by the CHIPS Act's $8.5 billion allocation to Intel in 2024.

  3. Market Challenges:

    • Intel's foundry division reported $7 billion in operating losses in 2023, compounded by past node delays (e.g., 10nm). These challenges necessitate rapid 18A success to restore investor confidence and financial stability.

    • Positive sentiment on X from May 2025 frames the Microsoft deal and potential Google/NVIDIA partnerships as a turning point, though TSMC's dominance remains a formidable barrier.

Critical Evaluation

  1. Strengths:

    • Technological Edge: The 18A node's performance, bolstered by PowerVia and Foveros, positions Intel as a viable competitor to TSMC's N2 process, particularly for AI and cloud applications.

    • Strategic Wins: The Microsoft deal and interest from Google, NVIDIA, Broadcom, and AMD reflect market confidence. U.S.-based production aligns with geopolitical priorities, enhancing Intel's appeal.

    • Leadership: Tan's industry expertise is a critical asset, driving Intel's foundry strategy forward.

  2. Challenges:

    • Manufacturing Risks: With 18A in risk production, achieving high yields and scalability is unproven. Past delays with 10nm and 7nm nodes raise execution concerns.

    • Speculative Partnerships: Talks with Google and NVIDIA lack confirmation, and Broadcom's prior skepticism about 18A readiness highlights technical uncertainties.

    • Financial Strain: Foundry losses and recent layoffs underscore the urgency of 18A success to stabilize Intel's financial position.

    • TSMC's Dominance: TSMC's scale, proven yields, and client base (e.g., Apple, NVIDIA) pose significant barriers. Intel must match TSMC's reliability and pricing to gain market share.

  3. Corrections and Clarifications:

    • Both articles inaccurately describe 18A as a "2nm" process; it is 1.8nm, marketed as 2nm-class for competitive parity with TSMC's N2.

    • The 36% power efficiency improvement is relative to Intel's 20A node, not TSMC's N3, as industry reports clarify.

    • Concerns about Tan's Chinese ties are speculative, with no credible evidence of significant controversy as of May 2025.

Implications

  1. For Intel:

    • Foundry Growth: The Microsoft deal and potential Google/NVIDIA partnerships could establish Intel as a leading foundry, reducing reliance on its own chip designs (e.g., Core, Xeon).

    • Financial Recovery: Successful 18A adoption could reverse foundry losses and stabilize Intel's stock, but failure to deliver risks further setbacks.

    • Reputation: Proving 18A's reliability is critical to overcoming skepticism from past delays and competing with TSMC's track record.

  2. For the Semiconductor Industry:

    • Increased Competition: A stronger Intel foundry could drive innovation and cost efficiencies in the 2nm market, benefiting chipmakers and consumers.

    • Supply Chain Diversification: Reduced reliance on TSMC enhances global supply chain resilience, particularly for U.S. firms navigating export controls.

    • Geopolitical Shift: U.S.-based manufacturing may gain prominence, supported by trade policies and the CHIPS Act.

  3. For Microsoft, Google, and NVIDIA:

    • Strategic Benefits: Partnering with Intel offers supply chain diversification and geopolitical alignment, enabling Microsoft to scale Azure and Google/NVIDIA to secure chip production.

    • Risks: These companies will demand proven performance, given Intel's relative inexperience as a third-party foundry compared to TSMC.

Conclusion

Intel's 18A process has reached a turning point with a large-scale foundry deal with Microsoft and ongoing discussions with Google and NVIDIA. Supported by interest from Broadcom and AMD, Intel's advanced technology, U.S.-based manufacturing, and Lip-Bu Tan's leadership position it to challenge TSMC's dominance in the 2nm market. Geopolitical factors, including U.S.-China trade tensions and tariffs, further enhance Intel's strategic relevance. However, Intel must overcome significant challenges, including achieving high yields, scaling production, and addressing financial pressures from past losses and layoffs. While the Microsoft deal signals strong market confidence, unconfirmed partnerships and TSMC's entrenched position underscore the risks ahead. Intel's success with 18A could reshape the semiconductor industry by fostering competition and diversifying supply chains, but its ability to execute will determine the outcome of its ambitious foundry vision.