Intel says new internal foundry model will help it achieve $8B-$10B savings goal

Intel said during a webinar that its transition to a new internal foundry model will be a key enabler to achieving its stated cost savings goal of more than $8B-$10B exiting 2025. In this new operating model, Intel’s internal product groups move to a foundry-style relationship with the company’s manufacturing group. As a result, company execs say they are projecting a broad class of increased efficiencies that will be reflected in greater profitability as Intel pursues its long-term ambition to achieve non-GAAP gross margins of 60%. The company said it is now making a fundamental shift in how its product business units work with technology development and manufacturing to ensure long-term growth while achieving efficiencies and cost savings. In this new “internal foundry” model, Intel’s product business units will engage with the company’s manufacturing group in a similar arm’s-length fashion that fabless semiconductor companies engage with external foundries. Intel’s internal foundry model is key to the company’s overarching IDM 2.0 strategy – with the aim to return margins to their historic range and ambitions to serve a far wider variety of chip customers worldwide. The internal foundry model is also integral to Intel’s multiyear cost efficiency effort, which includes reducing costs by $3B in 2023, and $8B-$10B in cost savings exiting 2025 – which is where the new model plays a significant role. Intel’s long-term ambitions are to achieve non-GAAP gross margins of 60% and operating margins of 40%. The internal foundry model will highlight new opportunities and lead to an optimized cost structure in furtherance of these goals.