Intel announced that it would begin full-scale competition with external foundry companies in its internal foundry business and set a goal to become the world's second-largest foundry by 2024.

Intel held a webinar for analysts and investors on the 22nd and announced that the transition to an in-house foundry model will be a key driving force in achieving its goal of saving between $8 billion and $10 billion by 2025.

Based on this new operating model, Intel's product groups are expected to establish foundry-style relationships with manufacturing groups.

Accordingly, Intel management stated that it expects to achieve extensive efficiency improvements and consequently improved profitability in achieving its long-term goal of a non-GAAP gross profit margin of 60%.

Based on its newly announced 'internal foundry' operating model, Intel plans to establish cooperative relationships between its internal product groups and manufacturing groups in a manner similar to how fabless semiconductor companies collaborate with external foundries.

Intel's in-house foundry model is the core of Intel's IDM 2.0 strategy to realize its ambition to restore profit margins to past levels and serve diverse semiconductor customers around the world.

In addition, the in-house foundry model will save $3 billion in costs in 2023 and by 2025 It will be an essential element in Intel's multi-year cost efficiency efforts to achieve its goal of $8 billion to $10 billion in cost savings.

With the implementation of the internal foundry model, the Intel Manufacturing Group will manage independent profit and loss (P&L) for the first time.

Intel plans to add the Manufacturing Group segment, which includes Manufacturing, Technology Development, and IFS, as well as the product groups Client Computing, Data Center & AI, and Network & Edge, to its earnings reports starting in the first quarter of 2024.

The internal foundry model provides significant business value in addition to billions of dollars in cost savings.

Intel plans to apply market-based pricing to its internal business units as well, providing the same level of certainty and stability as it does to external customers.

Intel will maintain its competitive edge as an Integrated Device Manufacturer (IDM) by continuously maintaining close relationships between product groups and technology development teams.

In addition, the new model will have a positive impact on IFS by effectively establishing the industry's second-largest foundry (based on internal customer volume), allowing external customers to reduce process adoption risks based on Intel's internal scale.

Due to the internal foundry operating model, Intel's manufacturing group is placed in a competitive relationship with external foundry companies, and must secure product performance and price competitiveness to win large-scale product orders.

This also includes Intel's internal customers who can secure the flexibility to collaborate with third-party foundries.

However, this method of operation is not a completely new concept, and currently about 20% of Intel silicon is manufactured at external foundries.

Intel's long-term goal is to achieve a non-GAAP gross profit margin of 60% and an operating profit margin of 40%. The internal foundry model will highlight new opportunities and lead to an optimized cost structure to achieve these goals.

Intel has expressed its ambition to grow into the second-largest external foundry by 2030, and that goal remains unchanged. With a new model based on internal volume, it is expected to become the second-largest foundry next year, recording manufacturing revenue of over $20 billion.