06:40 AM EDT, 09/17/2024 (MT Newswires) -- Intel ( INTC ) shares climbed early Tuesday as the chipmaker disclosed plans to turn its manufacturing business into an independent subsidiary and expand its partnership with Amazon.com's ( AMZN ) cloud computing unit to produce custom artificial intelligence chips.

In a message sent to employees late Monday about the next phase of the company's transformation efforts, Chief Executive Pat Gelsinger said the firm aims to establish Intel Foundry as an independent unit within the company. The move will allow the chipmaker to "evaluate independent sources of funding" and optimize the capital structure of the business to maximize growth, according to Gelsinger. Intel's ( INTC ) shares rose 7% in premarket activity.

The foundry unit will have its own operating board of independent directors. "This supports our continued focus on driving greater transparency, optimization and accountability across the business," Gelsinger said in the memo. Earlier in the year, the chip giant said it would implement a new operating model to enable the foundry business to "achieve profitable growth" and "unlock unrealized value."

"A key priority for Intel Foundry is to increase our capital efficiency," Gelsinger wrote. The company remains committed to its manufacturing investments in the US and move forward with projects in Arizona, Oregon, New Mexico and Ohio. It will pause fabrication projects in Germany and Poland for two years. Intel ( INTC ) plans to complete its advanced packaging factory in Malaysia but will align its launch based on market demand.

Intel ( INTC ) will look to streamline its Intel Products portfolio and transfer its edge and automotive businesses into its client computing group segment. The company plans to move integrated photonics solutions into the data center and AI segment and incorporate its software and incubation operations into its core business units.

In a separate statement, Intel ( INTC ) said it will co-invest with Amazon Web Services to produce custom AI chip designs under a multi-year and "multi-billion-dollar" framework. The company will produce an AI fabric chip for AWS on its Intel ( INTC ) 18A process node, as well as a custom Xeon 6 chip on Intel ( INTC ) 3 technology, building on their current partnership in which Intel ( INTC ) makes Xeon scalable processors for Amazon Web Services business.

Last month, Intel ( INTC ) unveiled a $10 billion cost-cutting program alongside second-quarter results that declined annually and missed market estimates. The program includes laying off more than 15% of the company's workforce. "We are more than halfway to our workforce reduction target of approximately 15,000 by the end of the year," Gelsinger said late Monday. "We still have difficult decisions to make and will notify impacted employees in the middle of October."

Meanwhile, Gelsinger said Intel ( INTC ) secured up to $3 billion in direct funding from the US government for its Secure Enclave program under the CHIPS and Science Act. The company will manufacture semiconductors for the Department of Defense.

Price: 22.50, Change: +1.59, Percent Change: +7.60