In July 2025, Intel’s new CEO, Lip-Bu Tan, signaled a potential seismic shift in the company’s contract manufacturing business, aiming to reposition Intel’s foundry to compete for major customers like Apple and NVIDIA. This move, reported by Reuters, involves de-emphasizing the heavily invested 18A process in favor of the next-generation 14A process, a strategic pivot that could reshape Intel’s trajectory in the semiconductor industry. This blog post delves into the reasons behind Tan’s bold strategy, its potential outcomes, and its implications for Intel’s role in AI, high-performance computing (HPC), and foundry services, drawing on publicly available information.

Why the Shift? The Context Behind Tan’s Strategy

Since taking the helm in March 2025, Lip-Bu Tan has moved swiftly to address Intel’s challenges as a struggling U.S. chipmaker. His decision to explore a shift from the 18A process—championed by former CEO Pat Gelsinger—to the 14A process stems from several critical factors:

1. Competitive Pressures and 18A’s Diminishing Appeal

Intel’s 18A process (1.8nm, equivalent to TSMC’s N2) was a cornerstone of Gelsinger’s vision to transform Intel into a world-class foundry, manufacturing chips for external clients like NVIDIA and Apple alongside its own processors. However, delays in 18A’s development have eroded its competitiveness. TSMC’s N2 technology, already on track for production, has captured major customers, leaving Intel struggling to attract external clients for 18A. By June 2025, Tan voiced concerns that 18A was losing appeal to new customers due to these delays and TSMC’s lead in process technology.

Tan’s strategic review, initiated after his appointment to oversee Intel’s manufacturing in late 2023, revealed execution challenges under Gelsinger’s tenure. Former executives noted that Intel fell short of TSMC’s customer service and technical support, with delays and failed tests hampering 18A’s rollout. This has led to a lack of confidence among potential customers, who fear Intel’s foundry might not deliver for high-stakes products like iPhones or AI accelerators.

Sources: Reuters, July 2, 2025; Reddit r/intel discussion, July 2, 2025.

2. Financial Strain and Cost-Cutting Imperatives

Intel’s foundry ambitions, backed by tens of billions in investments for U.S. and European factories, have strained its balance sheet. The company reported a $19 billion loss in 2024, its worst in decades, amid weak PC sales and a shrinking data center CPU market share (down 4% in Q3 2024 to AMD). The high cost of developing 18A, estimated in the billions, has not yielded the expected external customer contracts, prompting Tan to prioritize cost efficiency.

Shifting focus to 14A could avoid further sunk costs in marketing a less competitive 18A process to external clients. However, this pivot requires a write-off of 18A development costs, potentially costing hundreds of millions to billions of dollars, a bitter but necessary pill to restore financial health and redirect resources to a more promising technology.

Sources: Reuters, July 2, 2025; Reuters, January 29, 2025.

3. Targeting Major Customers with 14A

Tan’s strategy hinges on positioning Intel’s 14A process (expected post-2025) as a competitive alternative to TSMC’s future nodes. Analysts believe 14A could offer advantages in performance, power efficiency, and yield, making it attractive to major clients like Apple and NVIDIA, who currently rely on TSMC. By focusing on 14A, Intel aims to leapfrog TSMC’s N2 and align with the needs of hyperscale AI and HPC markets, where high-volume chip production is critical.

This shift reflects Tan’s urgency to win at least two large customers to make Intel’s foundry viable, as emphasized by industry analysts. Intel’s failure to secure significant external commitments for 18A, as noted by CFO David Zinsner in May 2025, underscores the need for a process that can compete head-on with TSMC.

Sources: Reuters, July 2, 2025; Reuters, May 13, 2025.

4. Aligning with Intel’s Internal Needs

Intel remains the primary customer for 18A, with plans to ramp production of its Panther Lake laptop chips in late 2025, touted as the most advanced processors designed and manufactured in the U.S. However, external customer hesitancy has prompted Tan to prioritize 14A for foundry clients while continuing 18A for internal products like Panther Lake and Clearwater Forest (data center CPUs). This dual-track approach ensures Intel leverages its 18A investments internally while redirecting foundry efforts to a more competitive node.

Sources: Intel Newsroom, July 2, 2025; Intel Foundry Direct Connect 2025.

Technical Implications of the Shift

18A’s Role and Limitations

The 18A process, part of Intel’s advanced node roadmap, incorporates PowerVia (backside power delivery) and RibbonFET (gate-all-around transistors), offering a 30% reduction in IR drop and 10% efficiency gains. It supports Intel’s Foveros technology, enabling 3D chiplet stacking with sub-10 µm hybrid bonding for processors like Gaudi 3 (AI) and Clearwater Forest (HPC). However, delays have made 18A less appealing to external clients, who prefer TSMC’s proven N2 process for reliability and faster time-to-market.

14A’s Promise

The 14A process (1.4nm) is Intel’s next-generation node, expected to offer superior transistor density, power efficiency, and yield. By tailoring 14A to customer needs, Intel aims to improve process design kits (PDKs) and live support, addressing criticisms of 18A’s execution. This could position Intel to compete for high-volume AI chip contracts, leveraging Foveros Direct (9 µm pitch in 2025, targeting 3 µm by 2030) and glass substrates for advanced packaging.

Sources: Intel Foundry Direct Connect 2025; AnandTech, 2025.

Potential Outcomes of the Shift

1. Financial Impact

1. Short-Term Write-Off: Abandoning external sales of 18A and 18A-P could lead to a write-off of hundreds of millions to billions of dollars, impacting Intel’s financials in 2025. This loss, while significant, may be offset by cost savings from restructuring and focusing resources on 14A.
2. Long-Term Gains: Securing major clients like Apple or NVIDIA for 14A could generate high-volume foundry revenue, potentially surpassing Intel’s $500 million Gaudi AI chip target (scrapped in 2024). Success here could boost Intel’s market cap, currently at $85 billion, closer to Northland Capital’s $120 billion projection.

Sources: Reuters, July 2, 2025; Reuters, January 29, 2025.

2. Competitive Positioning

1. Foundry Market Share: By focusing on 14A, Intel aims to challenge TSMC’s dominance in the foundry market, where TSMC’s Arizona Fab 21 is booked for two years. Improved PDKs and customer support could rebuild confidence among clients wary of Intel’s past execution issues (e.g., 10nm and 7nm delays).
2. AI and HPC Leadership: 14A’s advancements could position Intel to capture AI chip contracts, aligning with Tan’s goal of an annual AI chip release schedule by 2027, similar to NVIDIA’s cadence.

Sources: Reddit r/intel, July 2, 2025; Reuters, March 17, 2025.

3. Operational and Structural Changes

1. Streamlined Operations: Tan’s cost-cutting measures, including flattening middle management and divesting non-core assets (e.g., partial Altera stake), will fund 14A development. Intel’s foundry will remain a separate entity, ensuring operational focus on external clients.
2. U.S. Manufacturing Strength: The shift aligns with U.S. government priorities to bolster domestic chip production. Intel’s U.S. factories (e.g., Arizona, Ohio) could benefit from CHIPS Act funding, supporting 14A’s rollout.

Sources: Reuters, March 17, 2025; Intel Newsroom, September 17, 2024.

4. Risks and Uncertainties

1. Execution Risk: Delivering 14A on time is not guaranteed, as Intel’s history of delays (10nm, 7nm, 20A cancellation) raises concerns. Failure to match TSMC’s pace could further erode customer trust.
2. Market Reaction: Intel’s stock fell nearly 6% on July 2, 2025, reflecting investor concerns over the write-off and strategic uncertainty. Sustained losses could pressure Intel’s valuation, already down 60% in 2024.

Sources: Yahoo Finance, July 2, 2025; Reuters, January 29, 2025.

Implications for Intel and the Industry

For Intel

1. Foundry Viability: Winning major customers for 14A could validate Intel’s foundry model, reversing years of market share losses to TSMC and AMD. Success with Panther Lake (18A) and Clearwater Forest (18A) internally will maintain momentum while 14A ramps up.
2. AI and HPC Focus: Enhanced Foveros integration with 14A could strengthen Intel’s AI portfolio (e.g., Gaudi 4), positioning it against NVIDIA’s H100 and Blackwell GPUs.
3. U.S. Leadership: As a key player in U.S. chip manufacturing, Intel’s pivot could secure government support, reinforcing its role in national tech strategy.

For the Industry

1. Increased Competition: A competitive 14A process could pressure TSMC to accelerate its N1.4 node, benefiting customers with better pricing and innovation.
2. Chiplet Ecosystem: Intel’s UCIe-compliant chiplets, paired with Foveros, could drive broader adoption of multi-foundry designs, fostering collaboration with AMD and NVIDIA.
3. Supply Chain Resilience: Strengthening Intel’s U.S.-based foundry reduces reliance on TSMC’s Taiwan and Arizona fabs, mitigating geopolitical risks.

Sources: Intel Foundry Direct Connect 2025; UCIe Consortium 1.0 specification.

Conclusion

Intel’s potential shift from 18A to 14A under CEO Lip-Bu Tan reflects a strategic response to competitive pressures, financial strain, and the need to win major foundry customers. By addressing 18A’s delays and execution issues, Tan aims to position Intel’s 14A process as a TSMC challenger, leveraging advanced packaging like Foveros and PowerVia to attract clients like Apple and NVIDIA. While the write-off poses short-term financial pain, the long-term potential for high-volume foundry revenue and AI/HPC leadership could revitalize Intel. The outcome hinges on execution, with 2025–2027 being pivotal years for Intel’s foundry ambitions. For deeper insights, refer to Intel’s 2025 Foundry Direct Connect, Reuters’ July 2025 coverage, and IEEE IEDM papers on 18A and 14A technologies.