According to reports, Intel's Foundry, or contract manufacturing business, has signed up Amazon's cloud services unit as a customer for making custom artificial intelligence chips.

After CEO Pat Gelsinger released a memo to employees announcing that Intel has secured the Amazon unit as a multi-billion dollar customer and will pay the Santa Clara, California-based company for design services and manufacturing, Intel's stock price extended and rose about 8 percent. The memo also outlines Intel's planned cost reductions.

Amazon's AWS cloud computing division has already designed several chips for use in its data centers and has asked Intel to package at least one version. Intel will produce an ‘artificial intelligence fabric chip’ for AWS, using the chipmaker's 18A process (the most advanced version available for external customers).

Intel expects to make additional designs from Amazon on the company's forthcoming 18AP and 14A manufacturing processes.

The memo also outlines several steps Intel should take to revive itself. Last month, Intel announced disastrous Q2 results.

"The board and I agreed that we have a lot of work ahead to drive greater efficiency, improve our profitability, and enhance our market competitiveness," says Pat Gelsinger.

Among the measures decided by the board, Intel will sell its stake in the programmable chip business Altera. The company also announced a two-year moratorium on a chip factory construction project in Germany, previously reported by Reuters. The company plans to suspend its project in Poland as well.

As per reports, Intel's plans to expand manufacturing in the U.S. remain unchanged.

Intel plans to keep its manufacturing operations (foundry) in-house. The foundry business is crucial to the company's turnaround plan, which Gelsinger outlined in 2021.

Pat Gelsinger says, “The foundry business would have greater independence, for instance being able to take outside capital. Intel plans to establish it as an independent subsidiary, with an operating board overseeing the foundry operation. The foundry unit separated its financial performance from the design business earlier this year.”