Intel, the struggling chipmaker, announced on Monday its decision to establish a separate entity for its foundry business. The move aims to restructure the company and potentially attract external investments. In recent years, Intel has invested approximately $25 billion into its foundry business, which has witnessed mounting financial losses. The announcement resulted in an immediate 8% surge in Intel's shares during after-hours trading.

As part of the restructuring efforts led by CEO Pat Gelsinger, the company unveiled its intention to sell a portion of its stake in Altera, a step in the direction of reviving the chipmaker's fortunes. The establishment of an independent unit for the foundry business brings with it the opportunity to explore alternative sources of funding. These developments come in the wake of a board meeting held by Intel to assess the company's future direction.

Intel's foundry business is primarily meant for manufacturing chips for other customers, but it has posed significant challenges and negatively impacted the company's financial performance. Considering various options, including the possibility of spinning off the foundry business into a publicly traded company, Intel aims to streamline its operations and create a more efficient corporate structure. This approach would facilitate a separation by establishing a dedicated "operating board." However, the company has not confirmed any decision in this regard.

The decision to establish an independent entity for the foundry business comes as Intel struggles to regain its market share in key sectors such as PCs and data centers. The rise of competitors like Nvidia in the domain of artificial intelligence (AI) workloads has further added to Intel's woes. The company recently reported disappointing quarterly results, leading to a drastic drop in its stock value. In light of this, Intel initiated a $10 billion cost-reduction plan, including significant layoffs, which CEO Pat Gelsinger stated as being approximately halfway complete.

Amidst these developments, Intel also announced a collaborative deal with Amazon Web Services (AWS) to produce customized chips for AI purposes. The agreement marks an extension of the longstanding partnership between the two companies, as AWS has been a major customer of Intel chips for powering its server infrastructure. This move presents an opportunity for Intel to tap into the growing AI server chip market, which has been largely dominated by Nvidia. The production of custom Xeon processors for AWS will take place at Intel's Ohio plant, currently under construction.

Furthermore, Intel secured funding of up to $3 billion under the CHIPS and Science Act, supported by the Biden Administration. The funding will be allocated to the "Secure Enclave" program, a joint initiative between Intel and the Department of Defense. This injection of funds aligns with the ongoing efforts to strengthen semiconductor production in the United States, given the rising geopolitical risks associated with Taiwan, home to Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker.

Intel's bold restructuring plans and strategic collaborations aim to address the company's current challenges and regain its competitive edge in the market. The establishment of an independent entity for the foundry business, along with the AWS partnership, presents opportunities for Intel to diversify and expand its offerings, particularly in the AI sector. As Intel moves forward, all eyes will be on the company's ability to execute its strategies effectively and deliver the results it aspires to achieve.

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