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Microsoft and Intel Forge $15 Billion Deal for Custom Chip Production

ByHuey Yee Ong

Feb 24, 2024
Microsoft and Intel Forge $15 Billion Deal for Custom Chip Production

Microsoft has entered into a strategic partnership with Intel, a deal valued at over $15 billion, aimed at producing custom chips designed by Microsoft using Intel’s cutting-edge 18A process technology. This alliance is a testament to Intel’s ambitious efforts to reclaim its throne in the semiconductor manufacturing arena, an industry where it once held undisputed dominance.

Inside the $15 Billion Microsoft-Intel Chip Partnership

Intel announced this partnership during its Intel Foundry event, highlighting a strategic move to diversify its business model by producing chips designed by other companies. This approach mirrors the successful strategies of Taiwan Semiconductor Manufacturing Company (TSMC), which has established lucrative partnerships with tech giants like Apple, Qualcomm, and AMD. By venturing into the foundry business, Intel aims to revitalize its competitive edge and reestablish its dominance in the chip manufacturing industry.

The collaboration with Microsoft marks a significant milestone for Intel as it embarks on this new foundry journey. The custom chips, which are to be designed by Microsoft for its exclusive use, underscore the evolving dynamics of the tech industry, where companies increasingly seek to design their own semiconductors tailored to their specific needs. While the precise applications of these chips remain under wraps, they are expected to play a crucial role in powering a range of technologies, from processors to AI accelerators, potentially revolutionizing productivity, organizational efficiency, and industry innovation at large.

Microsoft’s Strategic Move

This partnership is not just a business transaction; it represents a deep strategic alignment between Microsoft and Intel. Microsoft’s choice of Intel over other semiconductor manufacturers, including Nvidia, highlights a deliberate strategy to ensure a steady and reliable supply of the most advanced semiconductors. This need for high-quality chips has become particularly acute as Microsoft intensifies its focus on developing sophisticated AI models and technologies. In the wake of the global excitement around AI tools like ChatGPT, the demand for powerful AI chips has surged, with companies like Nvidia at the center of this booming market. Yet, Microsoft’s turn towards Intel indicates a broader vision for its technological infrastructure and AI ambitions.

Intel’s commitment to advancing its semiconductor technology is evident in its aggressive development schedule, including the 18A process and the announcement of the 14A technology. These advancements are part of Intel’s broader strategy to not only catch up with but also surpass its rivals, particularly TSMC, in the race to produce the world’s most advanced chips. Despite recent setbacks, including delays in the construction of a $20 billion chip plant in Ohio, Intel’s partnership with Microsoft could herald a new era for the company, one where it reclaims its status as the industry’s leading chipmaker.

For Microsoft, there are numerous benefits from this partnership.

  • Advanced Semiconductor Access: Securing access to Intel’s cutting-edge semiconductor technology empowers Microsoft to push the boundaries of AI and computing innovation.
  • Competitive Edge: This collaboration ensures Microsoft remains at the forefront of the rapidly changing tech landscape, providing a crucial advantage in developing sophisticated AI models and technologies.
  • Enhanced AI and Computing Capabilities: With recent initiatives like the Azure Maia Accelerator and Azure Cobalt CPU, Microsoft demonstrates its commitment to improving AI applications and general computing efficiency.
  • Strengthened Chip Arsenal: The partnership with Intel is set to enhance Microsoft’s portfolio of chips, opening doors to new advancements in AI, cloud computing, and more, thus solidifying its position in the tech industry.

This strategic alliance between Microsoft and Intel signifies a pivotal shift in the tech industry, promising to drive innovation and set new benchmarks in semiconductor technology and AI development.

In essence, the Microsoft-Intel partnership is more than a commercial deal; it’s a strategic alliance that could shape the future of technology. As these two titans join forces, the tech world watches with bated breath, anticipating the innovations and breakthroughs that this collaboration will bring to the industry and beyond.


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Featured Image courtesy of raigvi/Shutterstock

Huey Yee Ong

Hello, from one tech geek to another. Not your beloved TechCrunch writer, but a writer with an avid interest in the fast-paced tech scenes and all the latest tech mojo. I bring with me a unique take towards tech with a honed applied psychology perspective to make tech news digestible. In other words, I deliver tech news that is easy to read.