Global chip giant Intel's (INTC.O) foundry business has secured Amazon's AWS as a customer for custom artificial intelligence chips, the companies announced on Monday (Spet.16). The deal, seen as a significant vote of confidence for Intel, pushed the chipmaker's shares up by 8% in after-hours trading.

Intel CEO Pat Gelsinger shared the news in a memo to employees, confirming AWS as a multibillion-dollar customer. Intel will provide design services and manufacture custom AI chips for Amazon using its 18A process, the most advanced technology available to external clients. AWS, which already designs chips for its data centers, has tapped Intel to package at least one version and will also utilize Intel's AI fabric chip technology.

Intel expects to handle additional designs from AWS on its upcoming 18AP and 14A manufacturing processes.

In the memo, Gelsinger also outlined Intel's broader recovery plans following disappointing Q2 earnings. He acknowledged that the company has significant work ahead to increase efficiency, boost profitability, and improve competitiveness.

Among the key steps, Intel is selling a stake in its programmable chip division Altera and pausing construction at its chip factories in Germany and Poland for two years. However, the company reiterated that its U.S. manufacturing expansion remains on track.

Intel’s foundry business is a crucial part of Gelsinger's turnaround strategy, first laid out in 2021. While Intel has struggled to secure high-profile customers, the AWS deal marks a breakthrough. Gelsinger revealed that Intel plans to give the foundry business more independence, potentially allowing it to take outside capital. The company will establish the foundry unit as an independent subsidiary with its own operating board. Earlier this year, Intel began separating the financial performance of its foundry operations from its design business.

Additionally, Intel is focusing on its core CPU technology and reorganizing divisions such as automotive and edge computing.

On Monday, Intel also announced it had been awarded up to $3 billion in direct funding under the U.S. CHIPS and Science Act, as part of the Secure Enclave program. The company is also preparing to send layoff notices to around 15,000 employees in mid-October, following an announcement made in August.