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Intel Wins 2nd Phase of Contract to Help Pentagon Develop Chips

The Intel logo is shown at E3, the world's largest video game industry convention in Los Angeles, California, US June 12, 2018. (Reuters)
The Intel logo is shown at E3, the world's largest video game industry convention in Los Angeles, California, US June 12, 2018. (Reuters)
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Intel Wins 2nd Phase of Contract to Help Pentagon Develop Chips

The Intel logo is shown at E3, the world's largest video game industry convention in Los Angeles, California, US June 12, 2018. (Reuters)
The Intel logo is shown at E3, the world's largest video game industry convention in Los Angeles, California, US June 12, 2018. (Reuters)

Intel Corp on Friday said that it has won a second-phase contract in a project aimed at helping the US military make more advanced semiconductors within the United States.

Under the project, Intel will help the military develop prototypes of chips using its semiconductor packaging technology at factories in Arizona and Oregon.

The packaging technology allows pieces of chips called “chiplets” from different providers to be combined into one package, helping cram more features into a smaller finished product while lowering its power consumption.

Intel declined to disclose a dollar figure for its portion of the contract, which is being overseen by the Naval Surface Warfare Center, Crane Division. Intel won part of the first phase of the contract in 2019.

Intel’s work with the Defense Department comes as US officials focus on boosting domestic semiconductor manufacturing in response to the rise of China as a strategic competitor. About 75% of the world’s chipmaking capacity is in Asia, with many of the most advanced plants in Taiwan and Korea, within the reach of the Chinese and North Korean militaries.

“I think one of the areas where we can have the most impact on China broadly is re-shoring microelectronics,” Ellen Lord, the Pentagon’s chief weapons buyer, told the US Senate Armed Services Committee in a hearing on Thursday.

Intel is one of three companies in the world that can make highly advanced computer chips. The other two - Taiwan Semiconductor Manufacturing Co Ltd and Samsung Electronics Co Ltd - have packaging technology similar to Intel’s.

But Intel has been working on the technology longer and can perform the work in the United States, which the other two cannot, said Dan Hutcheson, chief executive officer of VLSI Research.

“There’s no one else with the mix of technology that they have in the United States,” he said. “Packaging is a big win for them.”

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Samsung Says Trade Turmoil Raises Chip Business Volatilities, May Hit Phone Demand

A man walks past the logo of Samsung Electronics displayed outside the company's Seocho building in Seoul on April 30, 2025. (Photo by Jung Yeon-je / AFP)
A man walks past the logo of Samsung Electronics displayed outside the company's Seocho building in Seoul on April 30, 2025. (Photo by Jung Yeon-je / AFP)
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Samsung Says Trade Turmoil Raises Chip Business Volatilities, May Hit Phone Demand

A man walks past the logo of Samsung Electronics displayed outside the company's Seocho building in Seoul on April 30, 2025. (Photo by Jung Yeon-je / AFP)
A man walks past the logo of Samsung Electronics displayed outside the company's Seocho building in Seoul on April 30, 2025. (Photo by Jung Yeon-je / AFP)

South Korean technology giant Samsung Electronics warned on Wednesday US tariffs could cut demand for products such as smartphones, making it difficult to predict future performance.
According to Reuters, Samsung said it expected its semiconductor business to encounter greater uncertainties throughout the year, while its smartphone shipments faced downward pressure in the second quarter.
The cautious outlook from one of the world's biggest electronics manufacturers reflects the uncertainties roiling global trade due to US President Donald Trump's tariff war, and comes a day after General Motors pulled its annual forecast.
The world's largest memory chipmaker reported a small rise in first-quarter operating profit as customers concerned about US tariffs rushed to purchase smartphones and commodity chips, mitigating the impact of its underperforming artificial intelligence chip business.
It reported 6.7 trillion won ($4.68 billion) in operating profit for the quarter ended in March, up 1.2% from a year earlier and in line with its earlier estimate.
Samsung shares, one of the worst-performing major tech stocks last year, fell 0.4% in line with the broader market.
Steep US tariffs on Chinese goods and toughening restrictions on AI chip sales to China, Samsung's top market, threaten to dampen demand for some of the electronics components the company produces such as chips and smartphone displays.
Trump's "reciprocal" tariffs, most of which have been suspended until July, threaten to hit dozens of countries including Vietnam and South Korea where Samsung produces smartphones and displays.
Samsung said it was considering relocating the production of TVs and home appliances in response to the tariffs.
Chip demand is expected to remain solid in the second quarter, driven by AI servers and preemptive purchasing activities after the pause in tariffs, Samsung said.
But it warned that the frontloading of chip shipments by some customers may have a negative impact on demand later this year.
“We believe that demand uncertainties are growing in the second half as a result of recent changes in tariff policies in major countries, and strengthening of AI chip export controls,” Kim Jae-june, a Samsung vice president in the memory division, said on an earnings call.
Samsung CFO Park Soon-cheol said however that "we cautiously expect the overall performance to gradually improve as we move into the second half, assuming the easing of current uncertainties".
Some analysts were unconvinced, saying the company did not give detailed guidance for its struggling AI chip business.
"With pull-in demand still ongoing and macro uncertainty lingering, the explanation for the 'first-half low, second-half rebound' outlook was lacking," Ryu Young-ho, a senior analyst at NH Investment & Securities said.
AI CHIPS
Samsung's mobile device and network business reported a 23% rise in profit to 4.3 trillion won during the period, reaching its highest level in four years, helped by the latest version of the flagship Galaxy S model with AI features.
Samsung has accelerated smartphone production in Vietnam, India and South Korea ahead of the US duties, a person familiar with the matter told Reuters earlier.
While mobile performed strongly, the chip division's operating profit slumped 42% to 1.1 trillion won from a year earlier despite chip stockpiling by some customers.
Samsung reported a fall in sales of High Bandwidth Memory (HBM) - used in AI processors - due in part to US export controls on AI chips.
Samsung said it had supplied samples of its enhanced HBM3E products to major customers and expected HBM sales, which have bottomed out in the first quarter, to "gradually" rise from the second quarter, without offering detailed targets.
Analysts estimate that about one third of Samsung's HBM revenue has come from China, and it lags behind cross-town rival SK Hynix in supplying such chips to Nvidia in the United States.
SK Hynix last week logged its second-highest quarterly operating profit in the first quarter with a 158% jump to 7.4 trillion won, boosted by strong AI-related demand.
Revenue rose 10% to 79.1 trillion won in the January-to-March period, in line with its earlier estimate of 79 trillion won.