Intel Foundry for iPhone/iPad?

Intel said last week it will venture into a contract manufacturing, or “foundry”, business, first making chips designed by fellow chipmaker Altera, using Intel’s 14 nm tri-gate transistor technology.

That has spurred talk of an Apple deal, reports Reuters. A source close to one of the companies says Intel and Apple executives have discussed the issue in the past year but no agreement has been reached.

Intel could be a foundry for future Apple A-series chips used in the iPhone and iPad. A chip foundry would separate Intel’s design from their manufacturing business.

Asus, Lenovo, ZTE, and others are building Android-based smartphones and tablets powered by Intel’s Clover Trail+ chips.

After Intel upped its capital spending budget by $2 billion to $13 billion this year, speculation grew that Apple could ink a deal to use Intel’s leading process technology to make better chips for its iPad and iPhone. Doing so could help Apple end its foundry relationship with Samsung, which has become a fierce competitor with its own smartphones and tablets.

Intel’s quad-core Atom-based Bay Trail processor, specifically meant for tablets, is a 22nm chip that promises double the performance of current-gen 32nm Atoms.

Intel’s plan entails heavy capital spending, even as it struggles in its core market and has yet to find enough new demand to fill future fabrication plants. It would also mean getting into a foundry sector that, because it depends on volume to drive business, is highly vulnerable to economic swings and could compress Intel’s industry-leading margins.

But it is a bet that analysts say is necessary if Intel wants to remain a top player. The company believes that taking on more contract manufacturing business will not only help fill an upcoming generation of production lines, but help pay for the cost of research to upgrade them.

Sunit Rikhi, vice president and general manager of Intel custom foundry, told Reuters last week his group is ready to take on a potential large, unidentified mobile customer, although he declined to discuss Apple specifically.

Smartphone sales are expected to top 900 million in 2013, with China’s smartphone shipments expected to top 300 million this year, or 32.8% of the global market, ahead of the 137 million in the US. IDC predicts by the end of 2017, 1.5 billion smartphones will be shipped worldwide, over two-thirds of the total mobile phone market.

Samsung’s Q4 2012 smartphone sales totalled 64.5 million handsets, up 85.3% on the previous year, while Apple’s sales reached 43.5 million, a 22.6% increase.

Posted by Sam Churchill on .

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