Chip giant intel landed a Defense Department contract to make advanced microchips through its contract-manufacturing unit. It's a big win in a year of turnaround attempts by the company.
ArisMessinis/AFP via Getty ImagesIntel said Monday it had landed a U.S. Department of Defense pact for an undisclosed sum to manufacture advanced microchips through its contract-manufacturing unit for the first phase of a broader program.
Intel (ticker: INTC) stock gained 2.4% to close at $53.23 in Monday’s regular session, as the PHLX Semiconductor index (SOX) advanced 2.6%.
The Intel contract is part of a Defense Department effort to use U.S.-based chip manufacturers to make chips needed by critical systems, which has received heightened interest amid a global chip shortage. The drought has exposed how reliant the U.S. and other countries are on a handful of manufacturers for chips that power everything from personal computers to various components in vehicles.
According to Intel, the company’s Foundry Services unit will join businesses such as International Business Machines (IBM), Synopsys (SNPS), and others, in the Commercial Rapid Assure Microelectronics Prototypes program, known as RAMP-C. The program’s goal is to support U.S. chip makers so there is an adequate supply of parts for critical Defense Department systems.
Intel CEO Pat Gelsinger said Intel is the only American company that can both design and manufacture the most advanced processors. “One of the most profound lessons of the past year is the strategic importance of semiconductors, and the value to the United States of having a strong domestic semiconductor industry,” Gelsinger said in a prepared statement.
Winning the Defense Department contract marks an early victory for the fledging the Foundry Services business at Intel. Intel launched the new initiative earlier this year, as a part of its wider commitment to tackle some of the manufacturing issues that have allowed rivals such as Taiwan Semiconductor Manufacturing (TSM) to usurp its one-time dominance. Intel’s plans include $20 billion to build two new factories in Arizona.
In recent weeks reports surfaced that Intel is in talks with U.S.-based chip manufacturer GlobalFoundries for a $30 billion acquisition—a deal that would boost Intel’s contract-chip business in several ways. However, Reuters reported the company’s owners, the Abu Dhabi government investment arm Mubadala Investment, is pursuing plans to take the company public.
Write to Max A. Cherney at max.cherney@barrons.com
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