Apple, Intel In Talks Over Chip Manufacturing Deal

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By Kevin Parrish
published

Intel's quest to become a foundry business may include Apple.

Don't get your hopes up that an x86-based iPhone is on the way. A possible allegiance between Intel and Apple only means that the chip maker simply wants to manufacture chips for other companies to make up for revenue lost in a declining PC market.

Last week Intel said that it will open up its manufacturing plants to fellow chipmaker Altera, the first in Intel's new foundry business. That's big news considering Intel has spent decades hoarding its prized manufacturing technology to itself. But given that the PC market is declining and Intel's fabrication plants are operating at less than full capacity, it was only a matter of time before Intel decided to open those plants to other companies.

"Altera's FPGAs using Intel 14-nm technology will enable customers to design with the most advanced, highest-performing FPGAs in the industry," said John Daane, president, CEO and chairman of Altera. "In addition, Altera gains a tremendous competitive advantage at the high end in that we are the only major FPGA company with access to this technology."

Now there's talk that Apple plans to be the next customer. An unnamed source close to both companies told Reuters that top Intel and Apple executives have discussed a possible relationship over the past year. So far no actual agreement has been made.

"If you can have a strategic relationship where you're making chips for one of the largest mobile players, you should definitely consider that. And for Apple, that gets them a big advantage," said Pat Becker Jr., of Becker Capital Management. His firm owned about $39 million worth of Intel shares at the end of last year.

Reuters reports that Intel's plan to become a foundry business includes heavy capital spending while it continues to struggle in both the desktop and mobile CPU markets. Intel has yet to find enough new demand to fill future fabrication plans, and it will likely become highly vulnerable to economic swings given that it depends on volume to drive business.

News of an alliance with Apple arrives as the chip maker searches for a new CEO to replace retiring Paul Otellini. The talent search was announced back in November, and may for the first time include potential outside candidates. Otellini said that he expected to be replaced by one of his Intel colleagues instead.

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Kevin Parrish
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31 Comments Comment from the forums
  • mayankleoboy1
    Cant Intel see that Apple is the foremost reason why traditional PC market has declined ?
    Reply
  • Blarg44
    mayankleoboy1Cant Intel see that Apple is the foremost reason why traditional PC market has declined ?
    That is probably exactly what they see. Hence why they want to grow in the mobile processor market.
    Reply
  • ssd_pro
    Just remember OS X is still rocking that 7.15 percent total market share of all desktop and notebook systems - systems people actually use to get things done. In the gadget segment they have 54% so I guess that is good business since they only last a year or two before obsolete or broken.
    Reply
  • ericburnby
    Makes perfect sense. Intel would rake in billions of dollars every year just making Apples SoC processors for their iDevices. Apple recently bought Anobit (a fabless flash memory company) so they could also get Intel to build custom flash memory for everything from their mobile stuff to their Macbooks and desktops. More billions for Intel.

    Apple has often given money to companies it deals with so they can upgrade facilities or buy equipment. With Apples huge cash reserves they could aid Intel in expanding their fab capacity. Building a fab or two would be a drop in the bucket for Apple. Or Apple could build the fabs (and own them) but have Intel manage and operate them (and allow Intel to use some capacity to build their own stuff).

    There are so many possibilities it's a wonder they didn't hook up sooner.
    Reply
  • ipwn3r456
    So... Apple will rely Intel to produce their chips, and completely ditch Samsung for it?
    Reply
  • RazorBurn
    Does that mean Intel will be making ARM SoC?
    Reply
  • InvalidError
    RazorBurnDoes that mean Intel will be making ARM SoC?It only means that Intel may be baking Apple's custom-ARM CPU wafers just like how Intel will be baking Altera's wafers. Intel does not design the chips, they just put their customers' designs through their foundry process.

    I had been saying PCs were about to get hit hard by non-x86 smartphones, tablets and other devices for a while and Intel starting to look for external fab clients seems to indicate Intel expects things to get worse than I imagined earlier than I imagined.
    Reply
  • tomfreak
    I cant see the benefit of helping the patent troll. Wouldnt it be better(for intel) to only baking Nvidia consumer GPU chips and run AMD into ground? I know it is kinda bad for consumer, but if u are in Intel's shoe, it completely make sense to run AMD into ground.

    Reply
  • ta152h
    TomfreakI cant see the benefit of helping the patent troll. Wouldnt it be better(for intel) to only baking Nvidia consumer GPU chips and run AMD into ground? I know it is kinda bad for consumer, but if u are in Intel's shoe, it completely make sense to run AMD into ground.
    That's an excellent point. Well, not really, it's pretty ridiculous.

    Someone would buy AMD rather than let it die. Maybe Samsung? Maybe IBM? Both companies already produce products superior to anything Intel does in some markets. Samsung for phones, IBM for servers (Power 7+ rapes anything Intel makes). Imagine their design resources and manufacturing capability backing AMD. Ouch.

    More than that, imagine the scrutiny Intel would be under if AMD did not exist.

    Intel is not worried about AMD, they've been competing with them for nearly 50 years. They are far more worried about Samsung, which by the way has much higher profits than Intel, and can match them in development money if need be. Plus, they can offer a range of products to customers that Intel couldn't dream of. They have a lot of good technology to bundle. Intel? Not so.

    Also never forget, AMD owns x86-64, not Intel. Whoever owns AMD gets that leverage.

    Intel has no interest in destroying AMD, especially the castrated current version that has no fabs. There are much bigger fish to fry, and those fish have big teeth.
    Reply
  • Bricktop
    TomfreakI cant see the benefit of helping the patent troll. Wouldnt it be better(for intel) to only baking Nvidia consumer GPU chips and run AMD into ground? I know it is kinda bad for consumer, but if u are in Intel's shoe, it completely make sense to run AMD into ground.
    Intel can't run AMD into the ground. That would pretty much make Intel a monopoly in the desktop/server/laptop segments. I don't think Intel wants all the headaches that Microsoft experienced in the late 1990's with government lawsuits.

    Intel has a conundrum here. Intel's greatest strength is their manufacturing process. This was proven back during the GHz war when AMD proved it could design a more efficient processor than the Pentium 3 & 4. Intel kept pace because it had a more advanced manufacturing process. If they opened up manufacture of ARM-based SOC's with an Intel process, they would improve ARM's reputation of designing power-efficient SOC's. This would create even more competition for Intel-based SOC's. While that may sound like a win-win situation financially, it could eventually force Intel to split into two companies like AMD did, a design company and a foundry.

    I imagine if Intel opens its doors to the competition, they will deny access to the latest manufacturing processes. Giving Intel designs priority access to 14nm and 22nm processes. Then give any competing customers (Altera is not a competitor) access to the 32nm process. I imagine this has already been discussed and the reason no agreement has been made is because Apple is not accustomed to being denyed access to the latest and greatest tech.
    Reply