Did Intel Just Get Shut Out at Apple?

With Intel (NASDAQ: INTC  ) continuing to face a struggling PC market, investors have been pinning hopes on the chip giant opening up its foundries as a new way to monetize idle capacity. Altera was just the first high-profile foundry deal; investors have been hoping that Intel would score Apple's (NASDAQ: AAPL  ) foundry business as the Mac maker continues to distance itself from Samsung.

The one that got away
Not partnering with Apple for the original iPhone was one of ex-CEO Paul Otellini's biggest regrets. With reports that Apple has now officially inked a partnership with Taiwan Semiconductor (NYSE: TSM  ) , is Intel getting shut out again?

Piper Jaffray analyst Gus Richard, who rates Intel at "underperform," thinks Intel's foundry business may struggle if it truly missed the boat with Apple. TSMC is supposedly set to make chips for Apple over the next three years with its 20-nanometer, 16-nanometer, and 10-nanometer processes. Richard doesn't think Intel will earn any foundry dollars from Cupertino in 2014 or 2015 as a result.

Apple's foundry business is estimated at $5 billion to $6 billion per year, which makes up a good chunk of Samsung's component segment. Samsung just announced an Atom-powered Galaxy Tab 3 10.1, which is a big vote of confidence. However, it's unlikely that Samsung will adopt Atom processors throughout its product lineup in any meaningful way.

The analyst finds it curious that Apple has seemingly partnered with TSMC, considering the chip manufacturer's high-profile missteps in recent memory. TSMC struggled with 28-nanometer production last year, causing problems for big customers like NVIDIA and Qualcomm. TSMC has also been struggling with power consumption issues, which could similarly threaten Apple's schedules.

Other companies like IBM and STMicroelectronics are also quickly catching up with process technology in their own respective foundry businesses. Intel may have a lead in manufacturing technology, but ultimately the company needs to be scoring more mobile design wins to put its factories to use -- which it's not.

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  • Report this Comment On July 02, 2013, at 8:26 PM, marv08 wrote:

    Geez. Evan. To quote Liam Neeson: "Watch your surroundings".

    Apple did just release MacBook Air updates, the best selling "Ultrabook" in existence, using Intel's Haswell chips.

    Apple has, since 2006, been the biggest buyer of Intel's top of the line CPUs.

    Apple will release Haswell MacBook Pros, iMacs and eventually Minis, all this year and all using top of the line CPUs.

    So. Does Apple shut out Intel? (Insert farting noise here.)

    Intel did everything possible to upset Apple, even going as far as releasing the so-called Ultrabook specs, a blatant and amateurish copy of the MacBook Air, the best light notebook in existence, and even offered Apple's direct competitors immediate price cuts... Result? The MacBook Air is still the only Ultrabook creating relevant margins, and Apple does still give business to Intel's shameful bunch of thieves.

    So. Did Intel get shut out? F@ck, no. But they deserve it. Maybe the next time around.

  • Report this Comment On July 02, 2013, at 10:24 PM, Henry3Dogg wrote:

    @marv 08

    The article, and the $5 - $6 B is for Apple's foundry business, which Intel looks shut out of.

    The x86 processor is a separate but large issue.

    But I expect that over the next few years, much of that will go ARM too.

  • Report this Comment On July 02, 2013, at 11:07 PM, marv08 wrote:

    @Henry3Dogg

    True, but Intel did not get "shut out of" anything here.

    They had their own line of ARM processors in 2007 (called XScale) and sold it to Marvell, despite Apple wanting to collaborate with Intel on the iPhone, as Intel thought it is not a good business to be in.

    (And no, I did not make that up, Otellini confirmed that recently.)

    Mr. Niu presents nothing else than revisionist history here.

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