Intel’s manufacturing business hits a snag as Broadcom tests fail

Intel’s (NASDAQ: ) contract manufacturing business has suffered a setback after tests with Broadcom (NASDAQ: ) failed, Reuters reported on Wednesday, citing sources familiar with the matter.

The tests involved Broadcom sending silicon wafers — large discs on which chips are printed — through Intel’s advanced manufacturing process, known as 18A. Last month, Broadcom received the wafers back from Intel and, after analyzing the results, determined that the 18A process was not yet ready for high-volume production, the sources said.

Reuters said it could not confirm the current status of Broadcom’s relationship with Intel or whether Broadcom has opted out of a potential manufacturing deal.

Intel, however, is keeping faith with its 18A technology.

“The Intel 18A is up, healthy and performing well, and we remain on track to begin high-volume production next year,” an Intel spokesperson said in a statement. “There is a lot of interest in Intel 18A across the industry, but as a matter of policy we do not comment on specific customer conversations.”

Broadcom, for its part, has yet to make a final decision.

“We are evaluating Intel Foundry’s product and service offerings and have not completed that evaluation,” a company spokesperson commented.

Intel’s contract manufacturing arm, launched in 2021 as a key part of CEO Pat Gelsinger’s strategy to revitalize the company, is central to Intel’s $100 billion investment in new plants and expansion in the US. Success depends on attracting major customers like Nvidia (NASDAQ: ) and Apple (NASDAQ: ) to use its manufacturing capacity.

The company’s foundry business reported an operating loss of $7 billion in 2023, up from $5.2 billion a year earlier. Company executives expect the business to break even by 2027.

The chip manufacturing process is extremely complex, requiring over 1,000 individual steps within a manufacturing facility (fab), with production lead times spanning three months. A critical measure of success is yield, or the number of working chips on each wafer, which determines whether production can scale to meet the demands of major chip designers.

Broadcom engineers have expressed concern about the viability of Intel’s 18A process, specifically referring to the number of defects or the overall quality of the chips produced, according to Reuters.

By comparison, Taiwan’s TSMC ( TSM ), a leader in advanced chip manufacturing, charges about $23,000 per die at high volume.

Moving a chip design from one manufacturer, such as TSMC, to another, such as Samsung or Intel, can be a lengthy process, requiring months of work and a team of engineers, depending on the complexity of the chip and the differences of technology.

Intel recently released its 18A process manufacturing toolkit to chipmakers, with Gelsinger noting that the company plans to be “production ready” for its own chips by the end of this year and aims to begin high-volume production for external customers in 2025.