NextFin News - Intel has secured a preliminary agreement to manufacture chips for Apple, a milestone that marks the most significant validation of Chief Executive Pat Gelsinger’s "IDM 2.0" strategy since its inception. The deal, reported by the Wall Street Journal and Bloomberg on May 8, sent Intel shares surging 19% in a single session to close at $124.90. This partnership effectively ends a period of strategic estrangement that began in 2020 when Apple ditched Intel processors in favor of its own in-house designs manufactured by Taiwan Semiconductor Manufacturing Co. (TSMC).
The agreement is not a return to the old "Intel Inside" era of PC processors but a foundry win, where Intel acts as a contract manufacturer for Apple’s proprietary silicon. According to reports, Apple is exploring the use of Intel’s 18A-P node for future M-series laptop processors, with production potentially slated for 2027. The market reaction has been explosive; Intel’s stock has now rallied roughly 240% year-to-date, a dramatic reversal for a company that was trading as low as $18 in April 2025.
This turnaround is inextricably linked to U.S. industrial policy. In August 2025, the U.S. government took a 10% stake in Intel through an $8.9 billion investment under the CHIPS Act. That stake has since ballooned to approximately $55 billion, providing the federal government with a massive paper profit and Intel with the political cover to aggressively court TSMC’s biggest clients. The Apple deal suggests that geopolitical pressure to reshore semiconductor manufacturing is finally outweighing the technical risks associated with Intel’s manufacturing roadmap.
However, the financial reality of Intel’s foundry business remains stark. While the Apple news provided a sentiment boost, Intel’s external foundry revenue was a mere $174 million in the first quarter of 2026, compared to total foundry revenue of $5.4 billion. The segment continues to lose roughly $2.4 billion per quarter as it scales up. Analysts at UBS, who have maintained a cautiously optimistic stance on Intel’s manufacturing pivot, noted that while the Apple deal is a "massive psychological win," the actual revenue contribution will not materialize until the 18A node reaches high-volume manufacturing.
Skeptics point to the valuation gap. Intel is currently trading more than 30% above the average analyst price target of $82. The company’s reliance on "preliminary agreements" rather than firm purchase orders leaves room for disappointment if Intel fails to meet the rigorous yield and performance benchmarks Apple demands. Historically, Apple has been a ruthless customer, and any delay in Intel’s 18A or 14A nodes could see the iPhone maker pivot back entirely to TSMC’s upcoming 2nm and 1.4nm processes.
The broader implications for the industry are profound. If Intel successfully executes for Apple, it could trigger a domino effect among other "fabless" giants. Reports indicate that AMD, Nvidia, and Google are also weighing deals for Intel’s advanced packaging and silicon manufacturing. For now, the Apple deal serves as the ultimate proof of concept, signaling that the "new" Intel is no longer just a legacy chipmaker, but a viable domestic alternative to the Asian manufacturing giants that have dominated the sector for decades.
Explore more exclusive insights at nextfin.ai.
