Intel Faces Hurdle in Turnaround Efforts After Broadcom Test Results

Intel’s (INTC.O) efforts to revitalize its contract manufacturing business have hit a snag after recent tests with chipmaker Broadcom (AVGO.O) fell short, according to three sources familiar with the situation.

The tests, which involved sending silicon wafers—large discs used to print chips—through Intel’s cutting-edge 18A manufacturing process, did not meet expectations.

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Broadcom received the processed wafers from Intel last month and, after evaluating the results, determined that the manufacturing process is not yet ready for high-volume production. This setback poses a challenge to Intel’s turnaround plans.

Reuters was unable to confirm the current status of the relationship between Broadcom and Intel or whether Broadcom had chosen to forgo a potential manufacturing agreement. An Intel spokesperson provided a statement saying, “Intel 18A is up and running smoothly, and we are on schedule to start high-volume production next year. While there is significant industry interest in Intel 18A, we do not discuss specific customer interactions as a matter of policy.”

A Broadcom spokesperson mentioned that the company is still assessing Intel Foundry’s product and service offerings and has not yet reached a conclusion. Intel’s contract manufacturing division, which was launched in 2021 as part of Chief Executive Pat Gelsinger’s strategic plan, is a significant component of the company’s turnaround efforts.

Although Broadcom may not be a widely recognized name, it plays a vital role in producing essential networking equipment and radio chips. In its most recent fiscal year, the company generated $28 billion in chip sales. It has also benefited from the surge in investment in artificial intelligence hardware. J.P. Morgan analyst Harlan Sur projected that Broadcom will earn between $11 billion and $12 billion from AI this year, a substantial increase from the $4 billion it made last year.

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