Intel Ramps Up New Process, Snags Nintendo's GPU Foundry Business
Finally, there are some new and positive signs for IFS.
By Mark LaPedus
In recent times, Intel has been hit hard by losses, layoffs and product setbacks. But suddenly, the troubled semiconductor giant is beginning to see some positive signs in the marketplace.
In one example, Intel’s next-generation process technology, called 18A, has moved into “risk production” and is on track for mass production later this year. This in turn could provide a major boost for the company’s separate chip and foundry businesses. Then, Intel’s foundry unit, called Intel Foundry Services (IFS), has apparently snagged a major customer—Nintendo. It appears that IFS will manufacture the graphics processing unit (GPU) for Nintendo’s next-generation Switch 3 game machine.
These are positive developments, but they won’t solve all of Intel’s woes in the near term. Still, it’s a step in the right direction. “We are hearing positive feedback on Intel’s 18A process, including that current yield rates are at 50% and that defect densities are currently at acceptable levels. Given the KPIs (key performance indicators) that we are hearing, this would put INTC on track to ramp manufacturing in 2H25 with Panther Lake,” said John Vinh, an analyst with KeyBanc Capital Markets, in a research note. Panther Lake is Intel’s next-generation processor built on its advanced 18A (1.8nm) process node.
There is another major development as well. “We are hearing INTC IFS has won the gaming GPU socket for the Nintendo Switch 3. We estimate this would represent ~$8B in revenues for IFS. While this win is not as heralded as data center GPUs or even RTX gaming GPUs, we view this win as a significant step forward for INTC, and it gives it an opportunity to prove to NVDA that it is potentially a viable option in foundry that could ultimately lead to additional wins in the future,” Vinh said.
Today, Nintendo is in the process of shipping its new game machine, dubbed the Switch 2. The Switch 2, which was unveiled on April 2, is powered by a custom GPU device from Nvidia. Going forward, it’s likely that Nvidia’s GPUs will be incorporated in Nintendo’s next-generation Switch 3 game machine, which is apparently is still in R&D. And it looks like Intel’s foundry unit will manufacture the GPU for the Switch 3.
If that is indeed the case, that’s a major win. Nvidia is the dominate supplier of GPUs in the market. GPUs are complex chips, which are used for high-end graphics applications in PCs and game machines. GPUs are also used to speed up complex AI algorithms in systems.
Nonetheless, the positive outlook regarding Intel’s 18A process, combined with the apparent foundry win at Nintendo, are welcomed news for Intel. To be sure, it’s been a difficult period for Intel. Late last year, Pat Gelsinger, chief executive of Intel, was forced out from the semiconductor company amid a series of losses, layoffs and product setbacks.
Then, in March 2025, Intel appointed Lip-Bu Tan, a semiconductor industry veteran, as its new chief executive. In a recent keynote, Tan promised to reinvigorate the company with a major focus on engineering and customers.
Meanwhile, there are also several rumors swirling around Intel, including reports that the company and TSMC have reached a preliminary agreement to form a joint fab venture, according to The Information, a news site. The joint venture would operate Intel’s fabs, according to the report. Taiwan’s TSMC, the world's largest foundry vendor, will take a 20% stake in the new venture. No other details are known about the venture.
18A or bust
Nonetheless, Intel, one of the world’s largest semiconductor companies, is a supplier of microprocessors, FPGAs and other chips. The company produces these chips in large facilities called fabs. Intel also outsources some of its chip production to foundry vendors, namely TSMC. Foundry vendors make chips for other companies in fabs.
Intel also has its own foundry unit, which competes with TSMC and Samsung. It’s complex arrangement. Intel outsources some of its chip production to TSMC, but it also competes with the Taiwan foundry giant.
Nonetheless, for years, Intel was the undisputed leader in process technology. A process is a term used in the semiconductor industry that describes the design rules and recipes used to manufacture a given chip line. In the semiconductor world, there are different processes. Each process has a name.
Intel was riding high until around 2017, when the company introduced its so-called 10nm process. Over time, Intel encountered several problems with its 10nm technology and didn’t release the process until around 2019 or so. Intel’s processor lines and other chips based on its 10nm process were also late.
Then, in 2018, TSMC moved into mass production with its 7nm process. With the move, TSMC became the leader in process technology, surpassing Intel. That was an important event for other reasons. TSMC’s foundry customers include AMD, Apple, Broadcom, MediaTek, Qualcomm and many others. Those customers now had access to the world’s most advanced processes.
With TSMC’s technology, AMD began taking market share away from Intel in the x86-based microprocessor business. AMD is making major inroads in the high-margin processor market for data centers, at the expense of Intel.
To reverse those trends, Intel hired Gelsinger, a former Intel technologist, in 2021. Under Gelsinger’s leadership, Intel reentered the foundry business in 2021. In addition, Intel hoped to develop five processes in four years in an effort to regain the leadership position in technology. And if that wasn’t enough, the company also announced a number of new fab projects.
Anticipated sales from the foundry business were supposed to fill the new fabs and help fund the development of its next-generation processes. That strategy failed to materialize. Gelsinger’s strategy was too ambitious, if not flawed. The company fell short of its goals, and Gelsinger was eventually forced out.
Now, Intel has a new CEO with an ambitious plan. “Together, we will work hard to restore Intel’s position as a world-class products company, establish ourselves as a world-class foundry and delight our customers like never before,” Tan said in a letter to employees in March.
As it stands today, Intel is moving full speed ahead with its current product roadmap. Then, on the process front, Intel and its foundry unit are betting the farm on its next-generation 18A technology. This process combines a gate-all-around (GAA) transistor architecture with a backside power delivery technology. Intel refers to its GAA transistor technology as the RibbonFET. Intel refers to its backside power delivery technology as the PowerVia.
In the second half of 2025, Intel hopes to ship its first processor line based on its 18A process. This processor is codenamed Panther Lake. Intel also hopes to win some foundry business with the help of 18A.
18A is an important technology for Intel. The company hopes 18A will help bring the company back into a leadership position in the process technology race. With 18A, Intel in theory could reach parity, if not slightly surpass, TSMC in process technology.
In recent times, though, Intel has struggled with its execution and it’s still unclear if the company can release 18A on time. Even if Intel can deliver it on time, the technology won’t be cost competitive for some time.
Even so, 18A could boost the company’s competitiveness in the x86-based processor market for both PCs and servers. “With INTC making good progress on 18A, we are concerned that Intel will be able to close the competitive gap with AMD on both client and server and that it will be increasingly more difficult for AMD to gain additional share,” KeyBanc’s Vinh said.
Where about IFS?
To be sure, Intel has a long history in the processor business. It is well entrenched in the market. It’s a different story for Intel’s foundry business. Here, it is a relative newcomer with a shaky track record. And the company continues to struggle in the competitive foundry business.
In the fourth quarter of 2024, the company’s foundry unit posted sales of $4.5 billion, down 13% from the same period a year ago. The foundry unit also posted an operating loss of $2.3 billion for the quarter. Intel is working with several foundry customers, including Amazon, Microsoft and the U.S. Department of Defense. But most of Intel’s foundry sales are generated from the company’s own product groups.
All told, Intel is barely on the radar screen in the foundry market. Today, TSMC is the world’s largest foundry vendor with a dominating 67.1% market share, according to TrendForce. Samsung Foundry is in second place, followed in order by SMIC, UMC, GlobalFoundries (GF) and others, according to TrendForce (See chart below).
As seen above, Intel is not in the top-10 rankings in terms of worldwide foundry sales. Going forward, Intel hopes to become a bigger factor in this market.
At present, Intel’s foundry unit, IFS, offers several processes for potential customers, including 16nm, 7nm, 4nm and 3nm. Intel is also working on a 12nm finFET process with UMC. Each process is designed for a different chip application. IFS also offers an advanced packaging service.
These process offerings won’t move the needle for IFS. In reality, IFS is banking on the new 18A process to drive future growth. IFS hopes that potential foundry customers will adopt the technology, but it faces several challenges here.
Intel and its 18A process will face some stiff competition in the leading-edge foundry sector. It will compete against the new 2nm processes from TSMC and Samsung. TSMC is expected to ship its 2nm process in the second half of 2025. Apple and others are expected to adopt the technology. In addition, Samsung is also expected to ramp up its 2nm process in the second half of 2025. But Samsung is apparently struggling with its yields here.
Based on its past track record, TSMC will likely dominate the 2nm foundry business. Still, there is room for Intel and Samsung in the 2nm foundry arena. Foundry customers want more choices when it comes to leading-edge foundry processes. Today, TSMC makes roughly 90% of the world’s leading-edge logic chips. That gives TSMC a major advantage in pricing power and delivery.
For leading-edge foundry customers, it’s always a safe bet to rely on TSMC. But it also appears that some foundry customers are willing to give Intel a shot. And it also appears that Intel’s foundry unit has garnered a major customer—Nvidia/Nintendo.
“We believe INTC IFS has won the GPU for the Nintendo Switch 3,” according to KeyBanc. As stated, Nintendo is ready to ship the new Switch 2 game machine. It’s unclear when Nintendo will ship the Switch 3.
Winning some GPU business from Nvidia/Nintendo is still a major boost for IFS. The video game console market is a huge business. However, this market saw a major decline in 2024, but there are signs of a recovery.
“A lack of permanent price cuts and the continued viability of older platforms took their collective toll on the video game console market in 2024 as shipments fell an estimated 25.4% year over year to 37.7 million units,” said Neil Barbour, a research analyst in the Kagan media research group within S&P Global Market Intelligence. “Console vendors have been challenged by flat or growing upstream component costs, particularly for CPUs and graphics processing units (GPUs), preventing them from pursuing permanent price cuts to sharpen the value proposition of their hardware.”
However, there are signs that things are changing in 2025. Sony has a new system. “Another factor that may help the industry bend back toward growth in the year ahead is the release of the Switch 2. The successor console will put attention back on Nintendo after a slow year for the industry stalwart,” Barbour said.
Nintendo’s Switch 2 console “enables up to 4K gaming in TV mode and up to 120 frames per second at 1080p in handheld mode,” according to Nvidia, the GPU supplier for the Switch 2. “Nintendo Switch 2 also supports high dynamic range and AI upscaling to sharpen visuals and smooth gameplay.”
Nintendo’s Switch 2 is powered by a custom Nvidia processor, featuring Nvidia’s GPU with dedicated RT Cores and Tensor Cores. RT Cores bring real-time ray tracing, delivering lifelike lighting, reflections and shadows. Tensor Cores power AI-driven features, boosting resolution for sharper details without sacrificing image quality.
Nonetheless, the gaming GPU business is a relatively small but important market for Nvidia. For its most recent quarter, Nvidia’s gaming GPU sales were down 11% year-over-year to $2.5 billion.
Nvidia’s largest, and most profitable, business are GPUs for servers in the data center. For its most recent quarter, Nvidia’s data center sales were up 78% year-over-over to $39.3 billion.
For now, TSMC manufactures most of Nvidia’s GPUs. That includes Nvidia’s GPUs for AI servers in data centers, which is an enormous business. That won’t change anytime soon.
Conclusion
Meanwhile, Intel and its foundry unit have finally seen some positive news. But IFS has a long way to go before it reaches critical mass. It’s still unclear if it will ever succeed in the foundry business.
There are other challenges for Intel, namely gaining a foothold in the AI chip business. To be sure, Intel’s new CEO faces a daunting set of challenges.