Intel Corp. shares declined Wednesday following reports that Nvidia Corp. has discontinued testing of Intel's advanced 18A chip manufacturing process, dealing a setback to the struggling chipmaker's foundry ambitions. The stock fell as much as 3.8% in early trading before closing 0.5% lower, marking its third consecutive loss and eighth decline in the past 10 sessions.
AI Generated Image
Nvidia recently tested the 18A production process but stopped moving forward, according to Reuters, citing two people familiar with the matter. An Intel spokesperson told Reuters that the company's 18A manufacturing technologies are "progressing well."
The development underscores challenges facing Intel's foundry business as the company attempts to compete with Taiwan Semiconductor Manufacturing Co., (TSMC) and win outside customers for its manufacturing services. Intel's manufacturing struggles have been a significant factor behind the company falling behind rivals in recent years.
The news carries particular weight given Nvidia's September investment in Intel, which raised hopes of deeper collaboration between the two companies. However, that deal included no commitment for Nvidia to manufacture chips at Intel facilities.
Advanced Technology Central to Turnaround
The 18A process represents Intel's bid to return to manufacturing its best offerings in-house after years of relying on TSMC for some production. The technology contains two features Intel describes as industry breakthroughs: gate-all-around transistors that allow finer control over switching, and backside power delivery that separates data connections from power routing.
In October, Intel announced that its Panther Lake processor designs, made with 18A technology, are in full production and will go on sale in laptops next year. The company also opened a new factory at its Ocotillo site in Arizona, known as Fab 52, marking the first facility to begin mass production with the 18A technique. Intel says 18A is the most advanced chip production technology developed and deployed in the U.S.
However, Intel Chief Financial Officer (CFO) David Zinsner acknowledged in October that 18A yields were "not where we need them to be to drive the appropriate level of margins," and that it could be 2026 or 2027 before that changes.
Partnership Terms Remain Unchanged
Nvidia agreed in September to invest $5 billion in Intel, following the U.S. government's decision to take a roughly 10% stake in the company. The investment by the world's most valuable company was seen as a boost for Intel as it struggles to stem losses and catch competitors.
The deal included plans to co-develop chips for PCs and data centers, with Intel using Nvidia's graphics technology in upcoming PC chips and providing processors for data center products built around Nvidia hardware. Intel CEO Lip-Bu Tan called the investment a help for his priorities to improve the balance sheet and field products that will delight customers.
However, the September agreement included no commitment for Intel to manufacture Nvidia chips. "Right now we are focused on collaborations," Tan told reporters while announcing the deal with Nvidia CEO Jensen Huang. Huang said the engineering teams had been working on the agreement for about a year and the deal wasn't prompted by the Trump administration.
Foundry Challenges Persist
Getting the new 18A chips to market will be the first step toward reestablishing Intel's credibility, according to Kevin O'Buckley, general manager of the company's foundry business. "Don't trust us until we can do that," said the executive, who is tasked with persuading other companies to use Intel's factories. "We know we have a long way to go to deliver trust for our customers."
Intel's push to become a foundry means competing against TSMC, the dominant company in that category, and South Korea's Samsung Electronics Co. While Intel can make 18A-equipped factories pay for themselves by producing chips for its own needs, the next phase—a technology called 14A—will require outside customers and high-volume orders to be cost-effective.
Intel shares have risen around 17.4% since closing at a 20-month high of $43.76 on December 3, but the stock remains under pressure as the company enters its second year of losses. Analysts don't expect a return to profitability before 2027.
