Intel’s stock value and its hopes for the future got a big boost this week when the troubled semiconductor firm announced a “multi-year, multi-billion-dollar” expansion of its existing relationship with Amazon Web Services, including a plan to produce custom AI and Xeon 6 chips for the cloud colossus.
The expanded collaboration between two companies that have done business together for almost two decades calls for Intel to create a custom AI fabric chip for AWS on Intel’s 18A fabrication technology, which the company has described as its most advanced process node. The custom Xeon 6 chip will be produced on Intel 3 process node technology.
The AI-focused work is a major endorsement of Intel’s 18A process, the promising final piece of Intel’s “five nodes in four years” strategy, and one that Jeff Koch, analyst at SemiAnalysis, previously described as “critical” to Intel’s future success. In recent weeks, Reuters reported that Broadcom had experienced a disappointing test of the 18A technology.
According to Jack Gold, president and principal analyst at J. Gold Associates, the expanded agreement “means that AWS believes that Intel can make their 18A and follow-up processes work, or AWS wouldn’t make a commitment. Of course they can change course if the process doesn’t prove itself out. But I suspect it will.”
AWS CEO Matt Garman said in a statement provided by Intel,. “By co-developing next-generation AI fabric chips on Intel 18A, we continue our long-standing collaboration, dating back to 2006 when we launched the first Amazon EC2 instance featuring their chips. Our continued collaboration allows us to empower our joint customers with the ability to run any workload and unlock new AI capabilities.”
The plan for a custom Xeon 6 chip comes as AWS and other major cloud providers have increasingly turned their attention toward developing custom chips with their semiconductor partners. AWS already gets custom Arm chips made by TSMC, and may be looking to diversify its supply chain “in case something bad happens in Taiwan,” Gold said.
Intel’s creation of a custom Xeon server chip specific to AWS needs also “means it will probably run better/more efficiently/more closely to AWS services than would a standard off-the-shelf Xeon chip,” Gold added. “That gives AWS an advantage in selling their cloud services. It also gives them something that the competition (Microsoft Azure, Google Cloud Platform) doesn’t have with their own use of Xeons in their clouds.”
Gold continued, “Finally, AWS needs to obtain a lot of chips to keep their data centers working. By doing custom designs it gives them the possibility to go to the head of the line, rather than just buying commodity chips. It's probably not a huge advantage, but any advantage they can get at their scale is important.”
The announcement lifted Intel’s share price to $22.10 around midday Tuesday, the day after the news broke. That is the highest mark for Intel’s stock since early August, when it plummeted after Intel announced terrible second quarter earnings and a $10 billion cost-cutting program that included massive job reductions
“This expansion of our longtime relationship with AWS reflects the strength of our process technology and delivers differentiated solutions for customer workloads,” said Pat Gelsinger, Intel CEO. “Intel’s chip design and manufacturing capabilities, combined with the comprehensive and broadly adopted cloud, AI and machine learning services of AWS, will unleash innovation across our shared ecosystem and support the growth of both businesses, as well as a sustainable domestic AI supply chain.”
Intel and AWS also said the expanded collaboration underscores their commitments to the state of OHio as a major center of AI chip manufacturing. Intel said it continues to be committed to the New Albany area, though it did announce a delay in the construction of that plant earlier this year. AWS is planning to invest $7.8 billion to expand its data center operations in Central Ohio, in addition to the $10.3 billion it has invested in the state of Ohio since 2015, the company said.