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SoftBank held talks with Intel about producing an artificial intelligence chip to compete with Nvidia but the plan foundered after the US chipmaker struggled to meet the Japanese group’s requirements.
Negotiations to partner with Intel, which have not previously been reported, would have accelerated SoftBank’s efforts to combine the chip designs of its crown jewel Arm with the production expertise of its latest acquisition, Graphcore, to create a rival to Nvidia’s market-leading AI chips, said people familiar with the matter.
SoftBank chief executive Masayoshi Son plans to invest billions of dollars in an attempt to put the Japanese group at the centre of the AI boom. His ambitious scheme, which he has pitched to Big Tech companies, encompasses chip production and software through to providing power for the data centres that would house its processors.
The talks with Intel failed in recent months, in advance of the US chipmaker’s announcement of drastic cost-cutting plans, including thousands of lay-offs, in early August, these people said. SoftBank is now focusing on discussions with Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker.
Using Intel’s US foundry to manufacture AI chips could have allowed SoftBank to tap into the Biden administration’s Chips Act funding to boost domestic semiconductor production.
Intel chief executive Pat Gelsinger is attempting to put the Silicon Valley company back on the leading edge of global chipmaking. After receiving almost $20bn in funding and loans from the US government in March, Intel is investing heavily in an attempt to catch up to rivals TSMC and Samsung in chip manufacturing and land major new customers for the company’s foundry business.
SoftBank has blamed Intel for the collapse of the talks, these people said, claiming the chipmaker was incapable of meeting its demands for volume and speed. They also cautioned the talks could start again given the limited number of chip manufacturers with the capabilities needed to produce cutting-edge AI processors.
Intel declined to comment on “discussions we may or may not have with customers”. SoftBank and Arm declined to comment.
Undeterred by the uncertainties surrounding his production plans, Son has pitched some of the world’s biggest tech groups, including Google and Meta, as he tries to drum up support and financing for his latest venture. Some of the vast investment needed to build a new chip production business could be funded by advance orders from deep-pocketed Big Tech companies, said people familiar with his thinking.
Meta declined to comment. Google did not respond to a request for comment.
One element of Son’s pitch is that SoftBank could help counter the market power of Nvidia, which briefly became the world’s most valuable company earlier this year. Nvidia’s AI data centre chips are by far the most popular on the market, with its broad software platform, Cuda, underpinning its dominance.
Critics of Son’s plan have questioned whether moving Arm into chip production could damage its relationship with Nvidia, a key client, but the people familiar with the plan say SoftBank believes the risk is worth the reward.
Son, said the same people, still intends to design and produce an AI chip, with one ambitious estimate suggesting a prototype could be ready in a matter of months. His recent purchase of struggling UK AI chipmaker Graphcore was driven by its expertise in bringing a chip into production, they added.
However, chip production capacity remains a significant hurdle. The SoftBank boss has held talks with TSMC but has not reached an agreement, as the Taiwan-based chipmaker is struggling to meet demand from existing customers, including Nvidia, the people said. TSMC declined to comment.
One of the people familiar with the still-evolving plan suggested that if an agreement with TSMC can be reached, Son could need another partner to provide the expertise in chip design that Intel had offered.
The cost of Son’s latest venture could run into the tens of billions of dollars but people close to SoftBank cautioned that putting a figure on the total investment needed is not realistic at this stage. The chief executive has sounded out Saudi Arabian and United Arab Emirates investors about the plan but nothing has been agreed, they said.
Intel, which had been a cornerstone investor in Arm’s initial public offering last September, disclosed this week that it sold its entire stake in the UK chip designer during the second quarter of this year, raising about $150mn. The company recently suspended its dividend as it tries to conserve cash.
In April, Intel revealed a $7bn operating loss for its manufacturing business, causing shares to plunge. Reports of a design flaw in its PC chips followed. Then, during its latest results announcement earlier this month, it launched a plan to cut about 15 per cent of its workforce, amid declining revenue. Its shares shed a quarter of their value in a day, leaving its market capitalisation languishing below $100bn.
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