Intel and AWS to expand chip making collaboration, Intel shares surge

By Max A. Cherney

(Reuters) -Intel (INTC) and Amazon’s (AMZN) AWS said on Monday they would expand their collaboration, including a co-investment in custom chip designs, under a multi-year, multi-billion-dollar framework.

Intel’s shares were up 9% in extended trading.

Intel CEO Pat Gelsinger released a memo to employees announcing that the Amazon unit would be a multibillion-dollar customer, paying Intel for design services and manufacturing.

The memo also outlined a number of steps Intel would take to revive itself after a disastrous second quarter earnings.

Among the steps Intel’s board has decided to take is selling a stake in its programmable chip business Altera. It also said it would pause construction at its project in Germany for two years, a move Reuters had previously reported.

The company plans to keep its manufacturing business, or foundry, inside the company, confirming earlier Reuters reporting.

In the memo, Gelsinger said the foundry business would have greater independence, for instance being able to take outside capital. Intel plans to establish it as an independent subsidiary. The foundry unit separated its financial performance from the design business earlier this year.

Intel will produce an “artificial intelligence fabric chip” for AWS and use the company’s 18A process node, the most advanced version available for outside customers.

(Reporting by Max A. Cherney in San Francisco and Juby Babu in Mexico City; Editing by Krishna Chandra Eluri and David Gregorio)