The Ridiculously Nerdy Intel Bet That Could Rake in Billions

Sixteen miles north of Albuquerque, in Rio Rancho, New Mexico, an Intel chip plant sits on more than 200 acres of land. The site was established in the 1980s, part of it built on top of a sod farm. In 2007, as Intel’s business faltered, operations in one of the key fabs, Fab 9, came to a halt. Employees say families of raccoons and a badger took up residence in the space.

Then, in January 2024, the dormant fab was booted up again. Intel funneled billions into the facility, including $500 million it was granted from the US CHIPS Act. Now, Fab 9 and its neighbor, Fab 11X, are critical infrastructure for one of Intel’s quietly fast-growing businesses: advanced chip packaging.

Packaging involves combining multiple chiplets, or smaller components, onto a single, custom chip. Over the past six months, Intel has been signaling that its advanced packaging business, which operates within the Foundry chip-making arm of the company, is having a growth spurt. The company’s efforts around this have it going head-to-head with Taiwan Semiconductor Manufacturing Corporation, which far surpasses Intel’s production in terms of scale. But in an era where AI is driving demand for all kinds of computing power, and leading nearly every major tech company to consider making its own custom chips, Intel thinks this effort can help it grab a bigger slice of the AI pie.

During a quarterly earnings call in January, Intel CEO Lip-Bu Tan claimed that Intel’s packaging is a “very big differentiator” from competitors. Chief financial officer Dave Zinsner said on the same call that the company expects to see revenue from packaging “come in even before we start to see meaningful wafer revenue.” Zinsner said he had revised his packaging revenue projections over the past 12 to 18 months, from hundreds of millions of dollars to “well north of $1 billion.”

Zinsner elaborated on this in March at the Morgan Stanley Technology, Media, and Telecom conference, when he called Intel’s packaging “ironically, the more interesting part of the Foundry business today,” adding that the company was “close to closing some deals that are in the billions of dollars per year, in terms of revenue on packaging.”

Multiple sources say that Intel has been in ongoing talks with at least two large customers for its advanced packaging services: Google and Amazon, which both make their own custom chips but outsource parts of the fabrication process. These deals would be a boon for beleaguered chipmaker Intel, which is attempting a comeback—partially funded by the US government—after years of stagnation and missing out on mobile chips.

A spokesperson for Google, Lee Fleming, declined to comment, saying that Google doesn’t publicly discuss its supplier relationships. Amazon also declined to comment. Intel said it does not comment on specific customers.

Intel’s ambitions for its advanced packaging business depend largely on whether the company can secure outside customers like these tech giants. Since 2024, the company has effectively been split into two: There’s the long-standing “product” side, where Intel designs and sells cost-efficient CPUs to PC makers and data centers; and the aspirational Foundry side, where Intel makes advanced semiconductors.

Intel’s Foundry plans and the number of advanced chip systems it can yield are closely watched signals among tech analysts and investors, who in recent years have seen Intel cycle through CEOs and start and stop fab buildouts. Zinsner, for one, said at the Morgan Stanley conference that he now believes Intel Foundry’s packaging business can achieve the same 40 percent gross margins that it claims on the rest of its products.