Intel Corporation (NASDAQ:INTC) is a unique entity in the semiconductor space.
While other big names in US chipmaking, namely Nvidia Corporation and Advanced Micro Devices (AMD), use Taiwanese or South Korean foundries to print their designs, Intel does it all in-house.
Very few companies have this ability to manufacture microchips, and for good reason—the average estimated cost of building a chip foundry ranges from one billion dollars to as much as $20 billion at the cutting edge.
This vertical integration has undoubtedly benefitted Intel, especially at times of global chip shortages and supply-chain issues.
But under chief executive Pat Gelsinger, Intel has changed tack.
Gelsinger has dedicated an exorbitant amount of capital to expand the seminal California tech company’s foundry business, with new plants across the US, Europe and Ireland.
Rather than just printing their own designs, Gelsinger thought, why not draw in third-party customers too?
Cue the launch of Intel Foundry Services in 2021, where Intel made the daring bid to start competing with the big hitters, Taiwan Semiconductor Manufacturing Company and Samsung.
New foundries began to spring up, and new zeros began appearing on Intel’s expense sheet.
A weighty task, reliant on drawing big-ticket customers away from the incumbents, but recent financial results suggest that the gamble might be paying off.
Intel Foundry Services was by far the stand-out business unit in Intel’s third quarter, with revenues soaring 299% and though it still remains the smallest segment by total revenues, foundry services managed to rake in $311 million in the three months alone.
Intel announced that a major customer committed a “meaningful” pre-payment, allowing the company to accelerate its plans to build two new leading-edge chip factories at its Ocotillo campus in Chandler, Arizona.
Who that major customer might be is anyone’s guess, but Intel has been vocal about winning a slew of new customers to its reinforced foundry business at a time when chipmaking demand is only going to climb higher.
While attaining these new clients comes with considerable capex commitments, the market appears optimistic that it will pay off.
When US markets open today, Intel stock, currently valued at $32.52 with a $136 billion capitalisation, is expected to surge a further 7.3%.
If you come at the foundry kings, you best not miss, and for the moment, Intel appears to be hitting targets left, right, and centre.