Intel is now trying to keep up with AI demand by using scrap dies

Intel just had a very strong Q1 2026 earnings call, reporting $13.8 billion in revenue, up 7.2% year over year and well above industry experts' expectations. Much of this revenue came from Intel's datacenter and AI divisions, which brought in $5.1 billion, but another division that flew under the radar was Intel Foundry. Intel's in-house manufacturing facilities brought in $5.4 billion in revenue, which was also higher than expectations.

It was widely known that the Foundry, despite a very solid long-term plan, was struggling to get off the ground in its early days. Intel CEO Lip-Bu Tan even expressed grave concerns about low yields and the Foundry's future. However, as reflected in the earnings call, the Foundry is now an integral part of Intel's business, and yields have slowly but surely improved.

Turns out, Intel has been managing its yields very effectively amid the ongoing chip shortage. While demand for AI and data centers is skyrocketing, Intel is cutting costs and increasing yields by making the most of its silicon wafers. Ben Bajarin, CEO of Creative Strategies, says that Intel is salvaging what would be "scrap" or low-end dies and turning them into binned-down SKUs to improve yields.

This strategy has led to an unexpected increase in yields, which in turn has boosted Intel's profit margins and revenue, as reflected in its Q1 2026 earnings. Intel has been salvaging chips that would normally be lower-value edge dies on the silicon wafer and turning them into usable SKUs targeted for low-end use. Generally, chips around the edge of the wafer are "lower value," while the middle of the wafer is where the higher yield is expected.

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Amid the boom in Agentic AI, Intel is making moves on all fronts. Recently, their Foundry has secured a major win by signing Tesla as the first major external customer for their next-gen 14A node. They have also signed a deal with Google to use Xeon processors in their AI infrastructure. Their 18A node is also (finally) churning out chips, with Panther Lake and Wildcat Lake now hitting the market.