Inside Intel’s new Arizona fab, where the chipmaker’s fate hangs in the balance
Intel was once the world’s largest semiconductor company, but its market cap plummeted in recent years as the chipmaker fell behind Taiwan Semiconductor Manufacturing Co. and spent billions of dollars trying to catch up.
Now, Intel has entered high-volume production of 18A, the new chip node it says will turn things around.
The biggest problem? Convincing a big chipmaker to trust Intel with manufacturing on the new node. For now, Intel’s only major customer is itself. The company’s long-awaited Core Ultra series 3 PC processor, code-named Panther Lake, will come to PCs in January as the first major product made on 18A.
“It’s become an internal node for now,” said Daniel Newman, CEO of Futurum Group. “So many companies have made such massive investments into TSMC to ensure yield, to ensure capacity wafers that they just will not make the switch just yet.”
Intel is pinning its hopes of attracting customers on a new chip fabrication plant, Fab52, in Chandler, Arizona, where CNBC got an exclusive on-camera tour in November. Some 50 miles north, in Phoenix, TSMC also has a new fab, where it’s making chips with 4 nanometer technology. Its most advanced 2nm tech is currently only made in Taiwan.
Intel’s 18A is generally on par with TSMC’s 2nm node in some metrics such as transistor density. But as Intel works out the kinks after years of delays on previous nodes, some 18A wafers have had defects, making for a lower number of usable chips per wafer, typically referred to as yield.
“Yields are always an issue at the advanced node. This is not an uncommon problem,” said Harvard Business School professor David Yoffie, who served on Intel’s board from 1989 to 2018. He pointed to early yield issues with Nvidia‘s Blackwell GPUs at TSMC that were quickly fixed.
Intel’s renewed focus on foundry — manufacturing chips for outside clients — came when Pat Gelsinger took the helm as CEO in 2021. Gelsinger was pushed out last December and replaced by Lip-Bu Tan in March.
“Over the past several years, the company invested too much, too soon – without adequate demand,” Tan wrote in a memo in July.
Intel’s campus in Chandler, Arizona, now includes five chip fabrication plants, with Fab52 being the newest addition, shown here on November 17, 2025.
Tony Puyol
With Intel awaiting a big outside customer, the U.S. government stepped up in August, taking a 10% stake in the company with an $8.9 billion investment, primarily coming from grants promised under the CHIPS Act signed by President Joe Biden in 2022.
Days earlier, SoftBank invested $2 billion in Intel, followed by a $5 billion investment in September from Nvidia, which agreed to use some Intel technology but didn’t commit to using its foundry.
Here’s a look behind the curtain of Intel’s new chip factory where it hopes to find major foundry customers and, with them, redemption.
Fall of a giant
Founded in 1968 by Silicon Valley chip pioneers Robert Noyce and Gordon Moore and legendary investor Arthur Rock, Intel brought the world’s first commercially available microprocessor to market just three years later.
From the late 1970s through the early 2000s, Intel pumped out increasingly advanced process nodes at a rapid pace, leading to the term “Moore’s Law” — the doubling of components on a chip every couple years.
“The 1990s was a period of wonder and excitement at Intel,” Yoffie said. “We were the world’s largest semiconductor company, the world’s most profitable.”
But Intel largely missed the mobile revolution, famously turning down a deal to make Apple’s processors for the original iPhone. Then came a whiff in AI.
In 2024, Intel saw its worst year ever, losing about 60% of its value. The plunge came after two of its previous chip nodes, 10nm and 7nm, were delayed by several years. Analysts say the delays may have been triggered by an earlier choice to hold off on using ASML’s costly Extreme Ultraviolet Lithography machines.
“I think we lost the discipline of cycle time,” said client computing head Jim Johnson, who joined Intel more than 30 years ago. “Cycle time requires you to commit and deliver, and we started talking ourselves into, hey, we can have longer cycle times and try and lift more or do more.”
As it hustles to get back on track, Intel told CNBC there will be at least 15 EUV machines in Fab52.
Intel 18A production manager Lea Tensuan shows CNBC’s Katie Tarasov the EUV machines inside Fab52 in Chandler, Arizona, on November 17, 2025.
By 2021, TSMC had become the node leader, and Intel began to outsource some leading-edge chip production to the Taiwanese giant. Around the same time, Apple began replacing Intel chips in Mac computers with its own M-series chips, also manufactured primarily at TSMC.
In his earlier stint at Intel, more than a decade before rejoining as CEO, Gelsinger “was given the responsibility to build a GPU to compete with Nvidia,” Yoffie said. “Unfortunately, that project failed and that ultimately meant we ended up not playing a significant role in the AI revolution.”
Intel may now be considering a deal to buy custom AI chip design startup SambaNova for $1.6 billion, though the company declined to comment on the matter.
‘Changing our culture’
The trademark of Gelsinger’s tenure as CEO was Intel’s focus on chip manufacturing. His ambitious roadmap had Intel catching back up to TSMC by releasing five nodes in four years.
Now, Tan is CEO and Naga Chandrasekaran is in charge of foundry.
“We are making yield improvements, defect density improvements, month-over-month and hitting our goals,” Chandrasekaran told CNBC in an interview in November. “So I believe we have turned the corner.”
Chandrasekaran joined Intel last year after more than two decades at leading memory maker Micron. He said his top goal is finding foundry customers.
“I have to become part of their team and convince them that they can trust Intel Foundry to execute,” Chandrasekaran said. “That’s number one. And to do that, we are changing our culture. We are bringing a huge execution focus internally into Intel Foundry.”
Chandrasekaran told CNBC that Fab52 is capable of more than 10,000 18A wafer starts per week. There’s more than a million square feet of manufacturing cleanroom space in Arizona, with five fabs all connected by 30 miles of overhead track moving wafers between them. A sixth fab, Fab62, is expected to be ready around 2028.
18A also uses RibbonFet, Intel’s gate-all-around architecture that improves power control by fully surrounding the transistor, unlike previous designs that only contact the top and sides. Chandrasekaran said 18A offers “more than 15% performance per watt improvement” over Intel 3.
Perhaps the biggest way Intel stands out is in advanced packaging, the assembly and connections of chips onto the final systems where they appear in real-world applications.
Intel engineer Shripad Gokhale shows CNBC’s Katie Tarasov its next Xeon data center chip in Intel’s advanced packaging lab in Chandler, Arizona, on November 17, 2025.
Tony Puyol
CNBC went to Intel’s advanced packaging lab in Chandler to see several steps in the process, such as protecting chips with a polymer-based seal, and exposing them to a liquid that detects any defects. Yoffie said Intel’s advanced packaging “can help mitigate some of the power consumption problems.”
“One of the biggest problems today for everybody making chips for data centers is the power that it consumes,” Yoffie said.
Chandrasekaran said the Arizona fab is on almost 100% renewable energy. As for water, Intel’s Arizona facilities used more than 3 billion gallons in 2024 and returned 2.4 billion gallons to the local supply through a water recycling plant it has on site.
‘No blank checks’
Tan’s message to employees when it comes to spending on future foundry nodes is clear: “No more blank checks.” The company needs customers.
Intel’s big new Ohio chip fab is delayed until at least 2030, and Tan has made major cost cuts by slashing 15% of the workforce in July and axing projects in Germany and Poland.
“That’s what the company needed,” said Newman of Futurum. “It needed to be faster. It needed to be leaner. It needed to be more focused. It needed someone that would be a little bit more shrewd.”
Tan is waiting to see how demand shapes up before giving solid details about Intel’s next node, 14A. Chandrasekaran told CNBC it will first be developed in Oregon, with a goal of volume production in 2028.
Finding customers for 18A won’t be easy. Unlike TSMC which only makes chips for outside clients, Intel also makes devices powered by its chips, positioning it as a competitor to some of the customers it hopes to land.
“If I’m an Nvidia or AMD or Qualcomm or Broadcom, do you really want to put your secret sauce into a manufacturing operation where you’re giving Intel access to that secret sauce?” Yoffie said.
He suggests breaking out foundry into a different company.
“If you actually separated the two, I think you’d give Intel a much better shot at being successful,” Yoffie said. “And you’d also give the United States a much stronger position for being the home of a major semiconductor manufacturing organization.”
Intel client computing head Jim Johnson gives CNBC’s Katie Tarasov an early look at its Panther Lake CPU in Santa Clara, California, on November 12, 2025.
Marc Ganley
For now, Intel hopes Panther Lake will be a big proof point when it debuts in PCs from major companies like Samsung, Dell, HP, Lenovo, Asus and Acer in January. Intel’s next data center chip, Xeon 6+, is also made on 18A.
“If you’re a major company that wants to bet on a process node, you’re going to feel a lot more comfortable if you see Intel ramping the heart of their client product line to high volume on that process node,” Johnson said.
Microsoft and Amazon signed early deals last year committing to use Intel’s foundry for some of their in-house custom chips.
“It’s a good sign, but of course their volumes are very small relative to Nvidia and the other major chip companies,” Yoffie said.
Recent reports suggest AMD is considering manufacturing at Intel, and one analyst predicts Apple may once again make some Mac chips at Intel by 2027.
In the meantime, Intel got a lifeline with the U.S. government’s 10% stake.
“It shows the confidence that the U.S. government has in Intel and the belief that we need to have leading edge R&D and manufacturing on U.S. soil,” Chandrasekaran said.
The government investment came days after President Donald Trump called for Tan to resign, then reversed course.
“I worry sometimes about the scope creep here and how the U.S. could decide to take stakes in all kinds of things,” Newman said. “But you have industries that we have let leave the U.S. to an extent that put us into indefensible risk, and we need to bring them back.”
Some 92% of the world’s most advanced chips are made in Taiwan, following a decades-long decline in the percentage of chips made in the U.S.
“The stakes are incredibly high for Intel, for the U.S. and for the world,” Yoffie said. “The whole idea that the world’s most advanced products are dependent on a single location in an island a few miles off the Chinese coast is a terrible situation for the whole world to have to deal with.”
Chandrasekaran, for his part, is committed to turning Intel into a manufacturer of advanced chips.
“As a semiconductor community, we have to enable this solution for the world to move forward with AI,” he said. “There’s no other option than to be successful.”
WATCH: Inside the Arizona chip fab key to Intel’s redemption
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The Xbox booth during the Gamescom video games trade fair at the Trade Fair Center in Cologne, Germany, Aug. 20, 2025.
Ina Fassbender | Afp | Getty Images
Microsoft’s Xbox has had a tumultuous year.
A slew of layoffs, price hikes and studio closures have led many to declare — not for the first time — that the Xbox is dead.
Laura Fryer, former executive producer at Microsoft Game Studios, said in June that the company seems to have “no desire or literally can’t ship hardware anymore.”
Former Microsoft executive and ex-Blizzard Entertainment president Mike Ybarra slammed Xbox’s “confusing” strategy in a now-deleted X post in October, saying the company is potentially heading for a “death by a thousand needles.”
The company’s overall gaming revenue decreased 2% year-over-year, with a 29% dip in Xbox hardware sales, according to Microsoft’s first-quarter earnings for fiscal 2026.
The broader console industry has been in a major slump, with hardware spending down 27% year-over-year in November, which is typically a busy shopping month, according to a recent report from research firm Circana.
It was the worst November in two decades, IGN reported, citing Circana data.
Combined Switch and Switch 2 unit sales were down more than 10% during the month and PS5 sales were down more than 40%, IGN said. But the Xbox Series hardware took the biggest beating, with a dramatic 70% drop in sales.
In console sales, Xbox can barely see the leaders this year.
Nintendo‘s Switch 2 has sold 10.36 million units since its debut in June, the company said in its latest earnings report. Sony‘s PlayStation 5 had 9.2 million units sold in 2025, according to its most recent financial results.
Microsoft’s Xbox Series S and Series X, at 1.7 million units, couldn’t outsell the original Nintendo Switch, which launched in 2017 and has sold 3.4 million units so far this year, data from game sales tracking site VGChartz estimated.
Microsoft declined to comment on Xbox sales or numbers.
The company stopped reporting console unit shipments in 2015 as the gap between Xbox and PlayStation widened.
The Series S, Series X and PS5 all originally released in 2020, with some updates being released since then.
In November, Valve made a splash with its next-generation Steam Machine, which is set to launch next year.
The reveal of its console-PC hybrid generated buzz across the gaming landscape, with The Verge declaring that “Valve just built the Xbox that Microsoft is dreaming of.”
The mini cube will be able to run Windows PC games through Valve’s own Linux-based SteamOS as a television console or as a gaming computer. Gamers will have access to Steam’s extensive library of thousands of games.
But Microsoft doesn’t seem too worried about falling behind.
“We’re not in the business of out-consoling Sony or out-consoling Nintendo. There isn’t really a great solution or win for us,” Microsoft Gaming CEO Phil Spencer said in a 2023 podcast.
In congratulating Valve on the release, the Xbox boss gave a nod to the movement to expand gaming access “across PC, console and handheld devices.”
As Sony and Nintendo have firmly established themselves as hardware companies, Microsoft is pushing toward Bill Gates’ original vision of an all-encompassing entertainment hub in the living room.
“Ultimately, the addressable market is anybody who wants to play games, and Microsoft wants to serve that market,” Wedbush analyst Michael Pachter told CNBC.
Microsoft CEO Satya Nadella said in a recent interview with the TBPN podcast that the company’s gaming business model will look to be “everywhere in every platform,” from consoles to TV to mobile.
His comments also hinted that the next Xbox may function more like a PC.
“It’s kind of funny people think about the console and PC as two different things,” Nadella said. “We built a console because we wanted to build a better PC, which could then perform for gaming. So I kind of want to revisit some of that conventional wisdom.”
Xbox President Sarah Bond echoed the idea, saying in a recent interview with Mashable that the company’s next-generation console will have “some of the thinking” seen in the Xbox’s new handhelds, which were built by hardware manufacturer Asus in partnership with Microsoft.
Launched in October, those devices support cross-platform gaming and can run PC games bought from Epic Games, CD Projekt and Valve stores.
Xbox has already incorporated that approach into the latest Backbone Pro, which rolled out in November.
Designed in partnership with Backbone Labs, the portable gaming controller offers access to cloud gaming on mobile, PC, smart TV and other streaming devices.
So what will Microsoft’s new-gen console look like?
Little is known about where the company is at in its development.
A source familiar with Xbox strategy told CNBC that the company is looking at creating an open system that enables players to jump between console, PC and cloud gaming — and any form of entertainment beyond gaming.
Gaming in the cloud
Pachter said that while Microsoft is not completely abandoning hardware, the company is splitting its audience into existing buyers interested in specialized consoles and everyone else.
In a 2019 interview with The Verge, Spencer said that he was not concerned with focusing on console sales as much as making games accessible.
“I do think as we look at the next decade of gaming, as we think about reaching the over 2 billion people on the planet who play games, many of those people won’t be buying consoles and gaming PCs,” Spencer said.
Xbox Game Pass subscription service, which gives subscribers access to games from a variety of publishers, is a clear example of this strategy.
Microsoft has been steadily expanding its title offerings on the service.
The platform’s most basic tier, Game Pass Essential (previously Game Pass Core), which costs $9.99 and launched in 2023 with 36 games, now offers over 50 titles.
Ultimate tier members have access to over 500 titles.
Sarah Bond, head of Xbox partnerships, speaks about Xbox Game Pass during the Microsoft Corp. Xbox event ahead of the E3 Electronic Entertainment Expo in Los Angeles, June 9, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
The growth in cloud gaming has been blistering.
Xbox reported a record 34 million Game Pass subscribers in 2024 and a total Game Pass revenue of almost $5 billion over the last fiscal year.
Xbox said in a November blog post that the number of cloud gaming hours from Game Pass subscribers was up 45% compared to the same time last year. The Microsoft subsidiary also said console players are “spending 45% more time cloud streaming on console and 24% more on other devices.”
In announcing the benchmark, the platform added that Xbox Cloud Gaming is now in 30 countries with the expansion into India, which it called “the fastest-growing gaming market in the world,” home to more than 500 million gamers this year.
Although Microsoft faced heavy criticism from subscribers after increasing the cost of its Ultimate tier by 50% from $19.99 to $29.99 in October, the company is reportedly testing an ad-supported version of Xbox Cloud Gaming.
Omdia senior principal analyst George Jijiashvili told CNBC that a free Game Pass tier would likely act as a user-acquisition tool, especially for gamers who have not invested in consoles yet.
However, due to the high costs associated with cloud gaming, an ad-supported tier would likely not be able to actually drive a meaningful amount of revenue, he said.
Cloud gaming is inherently difficult to scale since it needs to balance computing power and operating costs with user affordability.
“With console-grade cloud gaming, you need to essentially run every single instance of the game in a server,” Jijiashvili said. “You need a dedicated hardware for every single person that’s streaming the game, meaning it just doesn’t scale.”
Despite gaming’s scaling limitations, Microsoft seems committed to doing what it has done with the rest of its products — moving it to the cloud.
“They’ve evolved into a primarily cloud services company,” Pachter said. “So everything they’ve done since they started acquiring studios at Xbox has been toward the connected experience in the home to view entertainment.”
Game studio bonanza
Microsoft has spent the past few years building out its entertainment hub with a catalog of original games through an acquisition blitz.
In 2018, the software giant more than doubled its game studios with a string of acquisitions that included Ninja Theory, inXile Entertainment and Obsidian Entertainment.
Two years later, Microsoft bought ZeniMax Media, which owned Bethesda, for $8.1 billion. It was the company’s largest gaming acquisition until its 2023 purchase of Activision Blizzard for $75.4 billion.
Pachter said that the software giant’s gaming spree was also a move to collect “enough content” to bolster its cloud gaming services.
Yet Microsoft’s approach to using its roster of exclusive titles has seen a stark shift recently.
As Xbox exclusives still struggled to compete with wildly successful PlayStation games like “Marvel’s Spider-Man” and “God of War,” the company has made a definitive pivot away from its original-content strategy.
Bond recently said in an interview with Mashable that the idea of exclusive games is “antiquated” as the company has leaned into cross-platform gaming.
Microsoft announced in October that the upcoming “Halo” game will be available on Sony’s PlayStation 5, marking the first time the major franchise has become accessible on a competing console.
In 2024, Xbox opened four formerly exclusive games to other consoles.
Spencer said at the time that the move did not indicate a change in Xbox’s exclusive strategy, but the company has since continued to bring several former exclusives to rival platforms.
In a January interview, Spencer said that the company won’t “put walls up” where users can engage with Xbox games.
“What we’ve learned is put the games first, make sure the games can be as great as they can,” he said. “We love the experience on our own hardware, on our own platform, but our games will show up in more and more places.”
Cuts and price jumps
Microsoft laid off 1,900 workers, around 9% of its gaming division, in January and slashed another 650 jobs from Xbox in September.
In May, the company also shut down several studios under game publisher Bethesda, including “Redfall” maker Arkane Austin and “Mighty Doom” developer Alpha Dog Games.
The gaming unit was hit again when company-wide layoffs in July led to Microsoft shelving “Perfect Dark” and “Everwild,” games that have reportedly been in development for at least seven years, as well as multiple unannounced projects.
Some have attributed the cost-cutting measures to mounting pressure to hit lofty profit goals.
The company reportedly asked its gaming division in 2023 to target profit margins of 30%, according to Bloomberg, which cited people familiar with the matter.
The goal was a significant jump from the 12% profit margin Xbox reached in 2022, as revealed in court documents, and well above the average video-game industry standard of 17% to 22%, analysts told Bloomberg.
Microsoft told CNBC that while the company does set ambitious goals, the reported 30% profit margin target was incorrect.
Microsoft has raised prices on its aging lineup of flagship consoles twice over the past year. Nintendo and Sony also announced price hikes for their respective consoles in August.
The PS5 currently starts at $549.99, and the original Nintendo Switch and Nintendo Switch 2 cost $399.99 and $499.99, respectively.
Xbox’s new ROG Xbox Ally and ROG Xbox Ally X were priced at $599.99 and a staggering $999.99, respectively.
With a growing number of consoles and handhelds in the market, competition is fierce for a dedicated group of customers that will always be interested in owning hardware.
But Xbox is betting that cloud and cross-platform gaming are the future.
For a decade, claims have been made about the death of the Xbox, and what comes next could fully spell the end, or bring a metamorphosis.
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