Intel is going all-in on advanced chip packaging

Intel is making a massive strategic pivot, pouring billions into reviving its advanced chip packaging capabilities to become a major player in the AI hardware supply chain. The company has restarted its long-dormant Fab 9 facility in Rio Rancho, New Mexico, fueled in part by $500 million from the US CHIPS Act. This effort is central to Intel Foundry's plan to compete with Taiwan's TSMC by offering a crucial service: combining multiple specialized "chiplets" from different manufacturers into a single, high-performance package. CFO Dave Zinsner has revised revenue projections for this business from hundreds of millions to "well north of $1 billion," calling it the "more interesting part" of the foundry operation today.

Intel's ambitions hinge on securing external customers, with sources indicating ongoing talks with Google and Amazon for multi-billion dollar annual packaging deals. Both tech giants design their own AI chips but outsource manufacturing and packaging. Success here would mark a significant turnaround for Intel, which has struggled in recent years. The company is also expanding its packaging operations in Malaysia, signaling confidence in future demand. While promising, analysts caution that scaling packaging is complex and depends entirely on winning these major contracts, which would provide the revenue needed to achieve the 40% gross margins Intel targets for its foundry business.