There is a possibility of disappointment and retreat in intel's contract manufacturing business and broadcom's testing.

Intel's contract manufacturing business (NASDAQ: INTC) is at risk of failure in testing with Broadcom (AVGO), as reported by Reuters citing sources.

In Broadcom's test, they were manufacturing silicon wafers using Intel's advanced manufacturing process called 18A. Last month, Broadcom received wafers from Intel and upon evaluation, they found that this manufacturing process is still impractical for mass production.

It is unclear whether the current relationship between the two companies or if Broadcom has decided to withdraw from potential manufacturing contracts.

The Intel spokesperson stated, "Intel 18A has generated a lot of interest in the industry, but as a policy, we will not comment on specific customer conversations."

On the other hand, Broadcom's spokesperson stated, "We are currently evaluating Intel Foundry's products and services, and the evaluation is not yet complete."

Broadcom engineers had concerns about the feasibility of Intel's process. Typically, this refers to the number of defects on each wafer and the quality of the chips manufactured.

In the advanced manufacturing process used by Taiwan Semiconductor Manufacturing Company (TSM), Taiwanese companies charge approximately $0.023 million per wafer for mass production, according to a person familiar with wafer pricing quoted in the same report.

The report mentioned that TSM could not determine the wafer price for Intel and that TSM avoided commenting on the pricing mechanism.

In 2021, Intel began its contract manufacturing business as a key part of CEO Pat Gelsinger's turnaround strategy. The company had previously announced in an earnings call last month that it had opened up the 18A process manufacturing toolkit to other chipmakers during the summer.

Gelsinger stated that Intel aims to have its chip manufacturing ready by the end of this year and to start mass production for external customers by 2025. During an investor conference last week, Gelsinger mentioned that multiple customers are actively involved with the toolkit.

At the end of this month, Gelsinger and other key executives are planning to present a plan to the Board of Directors to reduce unnecessary businesses and restrain capital expenditures. Intel (INTC) is said to be struggling with its business recovery while losses continue to mount, and they are exploring options such as spinning off the foundry business and discontinuing factory projects.