Apple, Intel In Talks Over Chip Manufacturing Deal

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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  • mayankleoboy1
    Cant Intel see that Apple is the foremost reason why traditional PC market has declined ?
  • 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.
  • 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.