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SoftBank was in talks with Intel about making artificial intelligence chips to rival Nvidia, but the plans fell apart after the U.S. chipmaker struggled to meet the Japanese group’s requirements.
The previously unreported partnership talks with Intel were meant to accelerate the company’s efforts to combine chip designs from SoftBank’s flagship Arm with manufacturing technology from its recently acquired Graphcore to create products to rival Nvidia’s market-leading AI chips, people familiar with the matter said.
SoftBank Chief Executive Masayoshi Son plans to invest billions in putting his company at the center of the AI boom, as he pitches big tech companies an ambitious plan that includes everything from making chips and software to powering the data centers that house the processors.
Talks with Intel broke down for months before the chipmaker announced deep cost-cutting plans in early August that included cutting thousands of jobs, according to people familiar with the matter. SoftBank is now focused on talks with Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip maker.
By using Intel’s U.S. foundries to manufacture AI chips, SoftBank could have used funds from the Biden administration’s Chip Act to boost domestic semiconductor production.
Intel Chief Executive Officer Pat Gelsinger is trying to put the Silicon Valley company back on the cutting edge of global chip-making. After receiving nearly $20 billion in U.S. government funding and loans in March, Intel is investing heavily to catch up with rivals TSMC and Samsung in chip-making and win big new customers for its foundry business.
SoftBank has blamed Intel for the breakdown in talks, arguing that the company failed to meet volume and speed demands, according to people familiar with the matter, and has warned that talks could be reopened because of the limited number of chipmakers capable of building cutting-edge AI processors.
Intel declined to comment on whether it was in discussions with customers. SoftBank and Arm also declined to comment.
Undaunted by the uncertainty over his production plans, Son is pitching to some of the world’s biggest technology companies, including Google and Meta, to raise support and funding for his latest venture. The huge investments needed to build out new chip-making operations could be partly funded by advance orders from deep-pocketed big tech companies, according to a person familiar with Son’s thinking.
Meta declined to comment. Google did not respond to a request for comment.
Part of Son’s selling point is that it could help SoftBank counter the market dominance of Nvidia, which briefly became the world’s most valuable company earlier this year. Nvidia’s AI data center chips are the market leader, and its broad CUDA software platform underpins that dominance.
Critics of Son’s plan have questioned whether bringing Arm into chip-making would damage SoftBank’s relationship with a key customer, Nvidia, but people familiar with the plans said SoftBank believes the rewards are worth the risks.
Son still plans to design and build AI chips, with an ambitious estimate that a prototype could be ready in a few months, the people said. Son’s recent purchase of struggling British AI chip maker Graphcore was due to the company’s expertise in mass-producing chips, they added.
But chip production capacity remains a major hurdle. SoftBank’s CEO has held talks with TSMC but has not reached an agreement. The Taiwan-based chipmaker is struggling to meet demand from existing customers, including Nvidia, he said. TSMC declined to comment.
One of the people familiar with the still-developing plans suggested that if a deal with TSMC can be reached, Son may need another partner to provide the chip-design expertise that Intel has provided.
Son’s latest venture could cost tens of billions of dollars, but people close to SoftBank cautioned that it’s not realistic to quantify the total investment needed at this stage. Son has sounded out investors in Saudi Arabia and the United Arab Emirates about the plan but no deals have been reached yet, the people said.
Intel, which was a lead investor in Arm’s initial public offering last September, said this week that it had sold its entire stake in the British chip designer during the second quarter of this year, raising about $150 million. The company recently suspended its dividend to conserve cash.
In April, Intel revealed a $7 billion operating loss from its manufacturing business, sending its stock plummeting. Then came reports of design flaws in the company’s PC chips. Then, in its latest earnings report earlier this month, the company announced plans to cut about 15% of its workforce amid declining revenue. The company’s shares fell by a quarter in a single day, plunging its market capitalization to below $100 billion.
