Microsoft and Intel strike a custom chip deal that could be worth billions

Intel will be producing custom chips, designed by Microsoft for Microsoft, as part of a deal that Intel says is worth more than $15 billion. Intel announced the partnership during its Intel Foundry event today. Although neither company specified what the chips would be used for, Bloomberg noted today that Microsoft has been planning in-house designs for both processors and AI accelerators.

“We are in the midst of a very exciting platform shift that will fundamentally transform productivity for every individual organization and the entire industry,” said Microsoft CEO Satya Nadella in the official press release.

The chips will use Intel’s 18A process, which has been a big part of its road map since the company brought CEO Pat Gelsinger back to turn things around. The company is counting on its chip foundry services to put it back on top of the chipmaking world, and it seems that Microsoft will be the first major customer for this project.

Leaning on producing others’ designs is a playbook that’s worked well for competitor Taiwan Semiconductor Manufacturing Company (TSMC), which has lucrative partnerships with companies like Apple, Qualcomm, and AMD. Gelsinger told VentureBeat today that the company’s foundry is a big part of its strategy.

Intel’s new foundry plans come as more companies seek to produce their own self-designed chips, but it still faces challenges. Intel recently pushed back the opening of a $20 billion Ohio chip plant to 2026 — it was originally slated for 2025 — citing a slow chip market and delays in government grants.