Report: Intel in Talks With Apple to Manufacturer iPhone, iPad Processors
March 7, 2013 2:11 PM
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Reportedly no definitive agreement has been reached, but Apple is keen on moving away from Samsung dependence
The Chicago Tribune
reports that Intel Corp. (
) has been in talks with Apple, Inc. (
) to establish a foundry relationship. The possible hookup could also see Intel co-design the company's next generation iPhone and iPad processors, based on a future Atom mobile processor.
I. New CEO, New Partnership With Apple?
Intel is in the process of finding a new CEO since
announced in November that he
would be retiring
after eight years in the position. The new Intel CEO is expected to face substantial pressure to
step up mobile efforts
, as device sales continue to move away from the traditional PC.
Intel's smartphone chips are currently
faster than some
, but not all ARM processors. While Intel enjoys approximately a two year edge in semiconductor manufacturing process over the market leaders -- ARM Holdings Plc (
) licensees Qualcomm, Inc. (
) and Samsung Electronics Comp., Ltd. (
) -- its smartphone chips aren't quite as far ahead, as they're currently on Intel's older 32 nm node.
Intel is rumored to be in talks to make chips for Apple devices.
[Image Source: Press Photographers Assoc. of Ireland]
latest Atom smartphone processors
are surprisingly decent in power consumption, but fail to beat the best of the ARM crop in speed. One issue is core-count; Intel only currently makes single-core smartphone chips. Most top ARM smartphone chips are quad-core. That should soon change as Intel is expected to launch multi-core x86 smartphone processors early next year.
Apple declined to comment on the report of smartphone processor talks. An Intel spokesman Chuck Mulloy commented that Intel is in constant talks with Apple, who is a top buyer of its PC processors, but refused to comment on the specific rumor of an iPhone/iPad tie-up.
II. Potential Deal Would Likely Begin Solely as a Contract Fab Business
A partnership with Apple could begin with a mere foundry relationship, according to the report's sources. Many of Intel's older foundries are still as advanced or more advanced than foundries of rival chipmakers like Samsung. And many operate at less than full capacity, raising the possibility of production for a third party.
Such a deal -- making Apple ARM processors on older Intel fabs -- might be attractive to Apple as it would reduce
dependence on arch-rival Samsung
Electronics, who currently manufactures most of Apple's smartphone and tablet processors.
Pat Becker Jr., of Becker Capital Management, whose firm owned $39M USD worth of shares of Intel stock last year, is quoted as commenting, "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."
The Brains of the iPhone are currently made by arch-rival Samsung at its new Austin, Texas factory. [Image Source: iFixIt]
Analysts and shareholders have been pushing Intel, not only to get more aggressive on mobile, but get into the contract foundry business as well. They argue contracts to make third-parties' chips can help Intel absorb the high cost of deploying new process technologies and weather the periodic downward swings of the device/PC market.
JMP analyst Alex Gauna comments, "This is potentially huge. The new CEO will have a very large opportunity to take this to the next level. Those discussions about taking on Apple as a foundry customer are going to be very complex and very contentious."
Macquarie analyst Shawn Webster estimates that Intel could make $4.2B USD extra in revenue a year by 2015, with a 50 percent gross margin, if it switches its idle capacity to producing iPhone and iPad chips.
III. Contract Manufacturing -- More Stability, But Lower Margins
But there are concerns. The 50 percent figure quoted by Mr. Webster is significantly lower than Intel's total overall margin of 60 percent. It's more typical of less profitable fab giants like Taiwan Semiconductor Manufacturing Comp., Ltd. (
) (TSMC), whose margin last year was 48 percent.
But slowing sales have forced Intel to already sign a number of contracts with smaller third-party terms to pick up a bit of the idle capacity.
And Intel just
for its first contract fabrication with a larger firm -- Altera Corp. (
), a top player in the field of programmable logic devices (including FPGAs) which are commonly used in automotive and other embedded applications.
Altera will make its FPGAs at Intel Fabs. [Image Source: Wikimedia Commons]
Financial terms of the deal were not publicly disclosed. Intel is expected to start making Altera's FPGAs on its
upcoming 14 nm node
, which will land in 2014.
The Chicago Tribune
This article is over a month old, voting and posting comments is disabled
RE: Intel better get smart
3/7/2013 11:48:33 PM
It might be good for Apple... but it will turn to be a curse and suicide for Intelfidals ... Intel no more will be able to protect its x86 exclusive jargon and companies will taunt them so hard that u make x86 but no ARM for Intel servers that at one stage in approx 1-2 years they will throw in towel and will also unwilingly launch ARM servers .. what AMD will be found doing for years. This wil be the point of x86 tech actually spitting on Intelfidals face and jump down the drain... Nature is called Nature because it keeps creating environment for the downfal of empires and bring weaker ones the new leaders...
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