Intel's (NASDAQ:INTC) contract manufacturing business has suffered a setback after tests with Broadcom (NASDAQ:AVGO) failed, Reuters reported Wednesday, citing sources familiar with the matter.
The tests involved Broadcom sending silicon wafers—large discs on which chips are printed—through Intel’s advanced manufacturing process, known as 18A. Last month, Broadcom received the wafers back from Intel and, after reviewing the results, determined that the 18A process was not yet ready for high-volume production, the sources said.
Reuters said it was unable to confirm the current status of Broadcom's relationship with Intel or whether Broadcom has chosen to abandon a potential manufacturing deal.
Intel, however, maintains confidence in its 18A technology.
"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."
Broadcom, for its part, has yet to make a final decision.
"We are evaluating the product and service offerings of Intel Foundry and have not concluded that evaluation,” a company spokesperson commented.
Intel’s contract manufacturing arm, launched in 2021 as a key part of CEO Pat Gelsinger’s strategy to revitalize the company, is critical to Intel’s $100 billion investment in new factories and expansions across the U.S. Success hinges on attracting major clients like Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL) to utilize its production capacity.
The company’s foundry business reported a $7 billion operating loss in 2023, widening from $5.2 billion the previous year. Company executives expect the business to break even by 2027.
The chip production process is highly complex, requiring over 1,000 individual steps inside a fabrication plant (fab), with production timelines stretching over three months. A critical measure of success is the yield, or the number of working chips on each wafer, which determines whether production can scale to meet the demands of major chip designers.
Broadcom’s engineers raised concerns about the viability of Intel’s 18A process, specifically referring to the number of defects or the overall quality of the chips produced, according to Reuters.
For comparison, Taiwan's TSMC (TSM), a leader in advanced chip manufacturing, charges around $23,000 per wafer at high volume.
Switching a chip design from one manufacturer, such as TSMC, to another like Samsung or Intel, can be a lengthy process requiring months of work and a team of engineers, depending on the complexity of the chip and differences in technology.
Intel recently released its manufacturing tool kit for the 18A process to chipmakers, with Gelsinger noting that the company plans to be "manufacturing-ready" for its own chips by the end of this year and aims to begin high-volume production for external customers in 2025.