Intel's Chipmaking Dreams Hit a Snag: Broadcom Tests Raise Red Flags

In a blow to Intel's ambitious turnaround plans, its contract manufacturing business has hit a roadblock according to a report by Reuters. Chipmaker Broadcom's tests of Intel's most advanced manufacturing process, 18A, have yielded disappointing results, raising serious concerns about its readiness for mass production.

Broadcom, a key player in the chip industry, put Intel's 18A process through its paces by sending silicon wafers for processing. However, after careful evaluation, Broadcom's engineers concluded that the process isn't yet mature enough for high-volume chip production.

While the exact nature of the relationship between the two companies remains unclear, this setback casts a shadow over Intel's efforts to revive its fortunes through contract manufacturing.

Intel maintains a positive outlook, insisting that 18A is on track for high-volume manufacturing next year. However,Broadcom's cautious response, stating they are still evaluating Intel's offerings, adds to the uncertainty.

This setback comes at a critical juncture for Intel, which recently announced job cuts and reduced spending due to disappointing financial results. The company's contract manufacturing business, launched in 2021 as part of CEO Pat Gelsinger's turnaround strategy, is crucial for its future growth.

Attracting major clients like Nvidia or Apple is essential for Intel to fill the capacity of its new fabrication plants.However, the financial picture for its foundry business remains bleak, with a $7 billion operating loss reported this year.

The complexities of advanced chip manufacturing, involving over 1,000 steps and taking roughly three months, highlight the challenges Intel faces. Achieving high production yields is critical to meeting the demands of major chip designers.

Broadcom's concerns about the viability of Intel's 18A process, likely related to defects or chip quality, further underscore these challenges. Moving chip designs between manufacturers is a complex and costly process, making it even more difficult for Intel to win over potential clients.

Despite these setbacks, Intel remains optimistic about its 18A process, with plans to be ready for high-volume production for external customers in 2025. However, the Broadcom incident serves as a stark reminder of the hurdles Intel must overcome to achieve its ambitious goals.

This manufacturing process is also critical for its upcoming processors, as currently parts of its chipsets are being manufactured by rival TSMC, which is impacting the profitability of the chipset design business as well.