Intel has sold a new customer on its domestic foundry push, the latest lifeline for a venture that engineered massive losses in the one-time semiconductor giant and led many industry analysts to believe that it would be abandoned or spun off.
After months of speculation, the WSJ reported Friday that Apple and Intel have reached a “preliminary chip-making agreement” which will see the firms collaborate on chips for Apple devices. Specifics on the deal were not disclosed but led to an explosive 19% increase in the stock, which hit fresh all-time highs.
While terms weren’t discussed, it’s likely to have something to do with “supply constraints” that outgoing Apple CEO Tim Cook referenced in the latest quarter. The consumer technology giant’s supply chain is heavily reliant on Taiwan Semiconductor (TSMC), the primary manufacturer of the Apple Silicon chips now commonplace across its ecosystem.
However, even though TSMC is the biggest semiconductor company in the world, it has its limits. To that end, Apple is looking to diversify to meet demand. Intel finally meets the mark, setting up a reunion years in the making.
Intel and Apple finally reunite
For 15 years, Intel made the processors in Apple’s Mac computers, which provided billions in annual revenue to the chipmaker. Apple called it quits on the Intel x86 architecture around 2020, moving to its own in-house Apple Silicon chip, an ARM-based chip which offered the company considerable cost savings.
This came to the detriment of Intel, which now counted its one-time ally as a competitor; a formidable one at that. Apple Silicon quickly proved that the ARM architecture could hang with the x86 market. Locked out of the Apple ecosystem, Intel was forced to focus on the x86 market, where long-time competitor Advanced Micro Devices had closed the gap in both performance and cost.
The divorce from Apple and fresh competition from AMD forced Intel to reckon with its aging manufacturing footprint and reduce its own reliance on foreign manufacturers like TSMC. It would later spin off its foundry separate from chip design, opening the door for the possibility of winning the business of other companies like Amazon and Apple.
Apple sees the promise of Intel nodes
None of this has come easy for Intel. It spent years underwater, facing delays on key programs, remaining handily behind its overseas competition. It faced delays and financial hardship in getting here, but the long-awaited Intel 18A node is finally in mass production.
Intel is shipping 18A on its own Panther Lake consumer chips and improving its yield to compete with the industry leader. Soon, partner Amazon will begin production of its Trainium 4 chips on Intel 18A silicon, pending yield improvements.
Microsoft is reportedly waiting for an improvement on the process, which is expected to come in the performance-optimized 18A-P node, offering significant power savings and better thermals, ideal for high-performance computing and AI.
However, Apple might be holding out for the successor to that: Intel 14A, which is expected to begin production in 2027 and launch widely by mid-2028. It has the potential to place Intel at the top of the industry, taking advantage of the latest semiconductor manufacturing equipment that nobody else is using yet.
At this stage, we don’t know how Apple might use 14A. They might use it exclusively for their entry-level MacBook, the new MacBook Neo. They could also consider it for components in other Macs, or even the iPhone A-series processors.
If the relationship does bear fruit though, there is a chance that Intel could make billions more than they ever did designing and providing their own chips for Apple hardware. As the recent semiconductor boom has shown, making the pickaxes might be even more profitable for Intel.
The state of Intel’s comeback
After years at the forefront of the consumer semiconductor industry, Intel began to seriously struggle after its hardware divorce from Apple, which itself was brought on by “falling behind” in the foundry game.
But rather than help the company, its aspirational investments in domestic chipmaking backfired on the company as it spent billions to stand up the operations. The quality of the product was also not fantastic initially, with lower yields leading to delays of various processes.
The declines in its stock saw it languish at the bottom of the S&P 500 in back-to-back years, while the Dow Jones Industrial Average simply kicked it out in favor of rising starNvidia.
For a period of time, Intel considered spinning off its foundry division. Had it done that, it might have not seen the redemption arc it is on now. In Feb. 2024, Microsoft announced that it would use Intel’s 18A process for chip design, leading to renewed excitement around the platform. Later, in Sept. 2024, Amazon Web Services signed a deal with Intel to build custom chips on 18A.
American manufacturing became the selling point
One of the key selling points was “domestic manufacturing”, a point that would set the stage for the company’s recent explosion in value.
The semiconductor firm also signed a deal which afforded it $3 billion in U.S. government funding in exchange for building semiconductor products for the military. Later, as its stock continued to sag, the U.S. government took out a 9.9% stake in the business for $8.9 billion, which later saw co-investment from Nvidia in the form of a $5 billion equity investment.
That lit the match that kickstarted the latest leg up in Intel, with recent earnings supporting its turnaround efforts, foundry efforts attached. The foundry is now expected to break even in 2027, thanks to deals with Amazon, Microsoft, the U.S. Government, and Tesla. The Apple deal represents the latest win for the one-time laggard.
Up over 220% this year, it has leapt from nearly dead last among S&P 500 performers to one of its best performers.
