Image Source: Pexels

• Broadcom has reportedly rejected Intel's 18A manufacturing process, delaying high-volume production plans.
• Intel's chip quality issues with Broadcom could jeopardize major future deals with tech giants.
• A mid-September meeting is likely to determine the future path for the chip maker.

Intel’s (INTC) problems continue to worsen with each passing day. After losing technology lead to AMD over the past few years, the company’s plans to diversify its business are also not going well.

According to Reuters, the news agency was informed by people familiar with the matter that Broadcom was not impressed by the quality of Intel’s manufacturing process.

As a result, the tests conducted by the two companies, intended to lead to a high-volume production, have failed.

A significant failure in chip manufacturing
 

As part of the ‘test’, Broadcom (AVGO) had asked Intel to use its most advanced manufacturing process, also referred to as 18A, on its silicon wafers.

Last month, Broadcom received the wafers back, which were inspected by its engineers.

The specialists concluded that the quality of the manufacturing process wasn’t up to the mark and moving to a high-volume production wasn’t viable.

This development comes amid plans by CEO Pat Gelsinger to cut costs and shed assets. The CEO and his team will present these plans in a meeting scheduled to be held in two weeks.

The intention is to make the company leaner and focus on areas where the company has realistic chances of a business turnaround.

There were also rumours that the company would be split and the manufacturing part of the business would be sold off.

However, if the rumours of the Broadcom tests failure are true, the company now has to deal with a big problem.

A manufacturing facility that isn’t up to the mark is unlikely to be of any manufacturer’s benefit, so a sale could be problematic.

What Intel and Broadcom are saying
 

The details of the tests aren’t yet clear, as the company does not comment on such issues as a policy. However, here is what the Intel spokesperson had to add:

Intel 18A is powered on, healthy and yielding well, and we remain fully on track to begin high volume manufacturing next year. There is a great deal of interest in Intel 18A across the industry but, as a matter of policy, we do not comment on specific customer conversations.

Broadcom has responded similarly, saying that the evaluation is still going on and the company hasn’t yet reached a conclusion.

However, judging by the urgency of the management to re-evaluate business priorities, it seems the issues run deeper than what the public knows.

Intel plans to invest over $100 billion in the coming years in new factories.

These investments are intended to attract customers like Apple (AAPL) and Nvidia (NVDA) to manufacture their chips at Intel’s facility. If the above-mentioned setback is true, Intel can say goodbye to attracting these tech giants.

Broadcom isn’t as big a player as Nvidia and Apple. But the firm brought in $28 billion in chip sales last year, making it a significant player in the industry.

Once the news is confirmed and becomes public, it is unlikely that any big company would want to work with Intel.

A disastrous year continues for Intel.

More By This Author:

The $35-Trillion Elephant In The Room: US Debt Is Sinking America
‘September Effect’ Explained: Why It’s A Tough Month For Stock Markets
US Stocks Plunge As Tech Shares, Including Nvidia And AMD, Decline Amid Economic Concerns