Intel and Microsoft Team Up For Custom Chip Deal Worth Over $15 Billion

Intel has announced a new partnership with tech giant Microsoft for manufacturing custom computing chips. The chipmaker stated that Microsoft plans to use its services to manufacture and beat an internal deadline of 2025 to overtake its biggest rival, Taiwan Semiconductor Manufacturing Co (TSMC), in advanced chip manufacturing. The announcement was made during Intel’s foundry event. The company claims that Intel Foundry’s expected lifetime deal value is over $15 billion, Reuters noted.

Details of the Multi-Billion Dollar Deal

Intel said Microsoft will use its 18A technology to make an undisclosed chip. The new $15 billion value of the Foundry’s deal is up from the $10 billion that the company had earlier told investors to expect.

While it is not clear what the chips will be used for, Bloomberg noted that Microsoft has been planning in-house designs for both processors and AI accelerators. As a part of the deal, the custom chips will designed by Microsoft and for Microsoft.

For Intel, it plans to retake the title of making the world's fastest chips from TSMC with its Intel 18A manufacturing technology and extend that lead into 2026 with another innovation called Intel 14A.

With the announcement of the 14A technology, it is the first time that Intel has given details of its plans beyond 2025. The chipmaker also announced that it is partnering with Arm Holdings to make it easier to make chips with Arm technologies in its factories. Further, the firm will work with the University of California Berkeley and the University of Michigan allowing students access to its 18A manufacturing technology.

Intel’s special technology is expected to be useful for speeding up power-hungry artificial intelligence chips. So far, Nvidia has been the leader in the AI chip market, and Microsoft has been one of its biggest buyers.

Intel’s new foundry plans come at a time when more and more companies are looking to produce their self-designed chips. However, Intel has some challenges to overcome. The company recently pushed back the opening of a $20 billion Ohio chip plant to 2026 citing a slowdown in the market and delays in government grants.

Significance of the Deal

For decades, Intel made chips for itself and used its lead in manufacturing to charge a premium for its chips. This helped the company fund manufacturing advances for a long time before the company lost its lead.

Further, since the release of ChatGPT, tech companies, including Microsoft and Google, have scrambled to build their own AI models to compete. This has led to high demand for advanced chips which was fulfilled by Nvidia. However, tech giants are struggling to get enough of Nvidia’s advanced chips, as supply is far behind demand.

Now, Intel’s foundry plan comes as it potentially looks for billions of dollars in U.S. government subsidies and business from outside customers, to get back on track.

For Intel, partnering with Microsoft will boost its made-to-order chip business. A company spokesperson said the company is “delighted that Microsoft has selected a chip to design using Intel 18A process technology,” in a statement shared with Quartz.

On the other hand, Microsoft previously announced that it was rolling out two new chips to its data centers this year. The Azure Maia Accelerator is built for AI applications, and the Azure Cobalt CPU is for general-purpose computing. The firm also said it was testing its AI products, including Bing and Office AI, with its AI chip.

In a statement, Microsoft CEO, Satya Nadella said that the company is in the middle of a platform shift that will transform productivity. “To achieve this vision, 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 Foundry, and why we have chosen a chip design that we plan to produce on the Intel 18A process,” Nadella said.

Thus, by partnering with Intel Microsoft could see a boost to its chip options, and lead to progress in its development of AI products.