Intel has finally decided what to do about its foundry business, with plans to separate it and establish it as an independent subsidiary.

Under CEO Pat Gelsinger, Intel has made a major push into the foundry business, with plans to become a leading manufacturer of semiconductors for other companies. Unfortunately, the company’s efforts have failed to gain the needed traction. Instead, the foundry business has become a money pit for Intel, losing some $7 billion in 2023 alone.

Listen to an interesting conversation on Intel’s plan to separate its foundry business:

In a memo to employees, Gelsinger said the company would separate the foundry business, establishing it as a subsidiary in an effort to help it better compete.

To build on our progress, we plan to establish Intel Foundry as an independent subsidiary inside of Intel. This governance structure will complete the process we initiated earlier this year when we separated the P&L and financial reporting for Intel Foundry and Intel Products.

A subsidiary structure will unlock important benefits. It provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel. Importantly, it also gives us future flexibility to evaluate independent sources of funding and optimize the capital structure of each business to maximize growth and shareholder value creation.

Gelsinger emphasized that the Foundry’s leadership would continue as it has.

There is no change to our Intel Foundry leadership team, which continues to report to me. We will also establish an operating board that includes independent directors to govern the subsidiary. This supports our continued focus on driving greater transparency, optimization and accountability across the business.

A more focused and efficient Intel Foundry will further enhance collaboration with Intel Products. And our capabilities across design and manufacturing will remain a source of competitive differentiation and strength.

An interesting benefit of Intel’s plan is that it opens the door to outside investment in Intel Foundry, with AWS already signing a multi-year, multi-billion-dollar agreement to use its services.

Specifically, Intel Foundry will produce an AI fabric chip for AWS on Intel 18A. We will also produce a custom Xeon 6 chip on Intel 3 that builds on our existing partnership, under which Intel produces Xeon Scalable processors for AWS. More broadly, we expect to have deep engagement with AWS on additional designs spanning Intel 18A, Intel 18AP and Intel 14A.

This framework reflects the power of our “better together” strategy, anchored on our integrated portfolio across foundry services, infrastructure and x86 products. And with the 5N4Y finish line in sight, we are beginning to see a meaningful uptick in interest from foundry customers. This includes continued momentum in advanced packaging, which remains a meaningful differentiator for Intel Foundry as we have tripled our deal pipeline since the beginning of the year.

Only time will tell if Intel’s gamble pays off, but the company is certainly doing everything it can to make Intel Foundry a success.