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Will Intel Help Apple Finally Ditch Samsung?

Chip giant Intel (NASDAQ: INTC  ) badly needs to find a new growth driver, as it attempts to diversify its business away from the struggling PC market. And in that vein, Intel recently announced a deal that could do just that. However, if true, Intel's deal could have far-ranging ripple effects through tech, specifically in the growing rivalry between Apple (NASDAQ: AAPL  ) and Samsung.

Source: Intel.

Intel's chip fabrication capabilities are among the best out there. It's long been speculated that Intel could attract substantial new business by building advanced chips for third-party names like Apple with its own foundries. This would be a historic move for Intel, which, in assisting names like Apple, would be in a way helping its rival ARM Holdings also expand its presence as the dominant name in mobile semiconductors.

That aside, Intel's possible move would be a boon for Apple in particular. Apple is currently the single largest purchaser of electrical components from Samsung. Apple pays Samsung $5 billion alone to simply construct its A-series chips. However as tech and telecom analyst Andrew Tonner discusses in the following video, Intel's potential opening of its foundries to new business could help Apple ditch Samsung once and for all.

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Read/Post Comments (7) | Recommend This Article (4)

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  • Report this Comment On November 02, 2013, at 4:10 PM, twolf2919 wrote:

    One of Intel's main advantages over everyone else is the sophistication of its foundry. If it started producing chips for Apple, it might as well forget about getting into the mobile market with its own chips!

    Intel won't give away the farm like that - unless it's desparate.

    What Intel really needs is a successful smartphone maker willing to try its mobile processors! The obvious choice would be Apple - but that ship has sailed when Apple began designing its own chips - with the A7 seemingly showing that they can do so quite successfully.

    So who could Intel partner with? Nokia would be another choice, given that Microsoft is already a great partner of Intel's and their tablets are already using Intel's chips. Since Nokia/Microsoft are not exactly successful, they might be open to such a partnership if they feel that Intel can finally give them a leg up on the competition.

    Intel needs a partner that can develop a phone so compelling (in terms of performance and battery life) that the public will notice. I'm not sure Intel x86 chips are up to the job - despite the foundry's work-class manufacturing capability - because nobody will care to use the new chips if the benefit is "only" a 10-20% improvements.

  • Report this Comment On November 02, 2013, at 6:15 PM, thethreestooges wrote:

    Intel is not really in the "foundry business". They design, manufacture and sell its own chips. The investment in the fab is so huge with the state of the arts tool sets, they will be losing money if they start using a foundry model. Their fab model is to sell or shutdown outdated fab if there are unutilized capacity and upgrade tools to move ahead with their roadmap.

    The foundry people are more like Global Foundry, TSMC, UMC or others with excess capacity to fill up their fab to reduce their capital expense.

    Intel used to have a huge technology lead in their manufacturing capability, but the "technology" had been given away to other countries. AMD was their punching bag. Intel probably own huge patent portfolio, but I don't hear them going after any companies. If the mainstream computing business continues to dwindle, Intel may have to slim down to survive. Who know, may be this time, APPLE can buy Intel.

  • Report this Comment On November 02, 2013, at 6:41 PM, demodave wrote:

    twolf, you clearly don't understand the difference between a foundry and a fab. A fab simply manufactures, either on its own, using the integrated device manufacturing (IDM) model, or it can produce chips designed by other sources, following the foundry or "pure-play" model. Intel is currently an IDM. (At least so far as I know ...) They only manufacture chips that they have designed.

    Global Foundry, TSMC, etc., do not design the chips, the masks, the layouts, etc. They "only" make what their customer requests. My own employer has a few business models, the the prevalent model is Customer Owned Tooling, which means that we define processes that we can perform, and the resolution/dimensions that go with them, and then we push them to design their layouts to accommodate those limits (through design kits). But we are always manufacturing other companies' *designs*. We are truly Pure Play. (See wikipedia)

    Intel *could*, like Samsung, start to manufacture both their own designs and other companies' designs. Then they would be a mixed fab. That is not at all out of the question. And it could be potentially beneficial from a manufacturing equipment utilization standpoint. The difficulty comes to separating intellectual property of customers from one's own. Not easy, but not impossible, either.

    twolf, further, your description of Intel's business relationships is basically just cocked up. Intel has strong relationships with Apple, because Apple buys hardware. Microsoft just *programs* for it.

    ThreeStooges, partnering with another company to utilize assets can easily be a winner for Intel. The most important thing to do with all those high cost fixed assets is *use them*. It doesn't much matter who you use them for, as long as you use them. More wafers through the tools reduces the cost per wafer. That's a winning proposition. The problem becomes whether or not your "customers" trust you to protect their IP. But that is not a technological problem. That's a business problem, and from a business perspective, more wafers through the tools is just good business.

    What Intel needs to do is fatten up its sales (not sails, sales). Slimming down from a Lean perspective is always good, but that's a slightly different lecture!

  • Report this Comment On November 02, 2013, at 7:28 PM, SnarfJabroni wrote:

    @demodave - Intel has already started acting as a foundry, using their own fabs to produce other company designs, including a most recent announcement of ARM chips for comms/networking chips for chip design house Altera.

  • Report this Comment On November 03, 2013, at 12:10 AM, makelvin wrote:

    @twolf2919, "...One of Intel's main advantages over everyone else is the sophistication of its foundry. If it started producing chips for Apple, it might as well forget about getting into the mobile market with its own chips!..."

    Not that I disagree with your point about Intel's main advantage over others is their foundry, but if Intel is to allow their foundry to be used by anyone else, Apple would be one of the best choice.

    This is because unlike Qualcomm and others, Apple will never sell their A series chips to anyone else. Apple only produce chips for its own use. So making chips for Apple, Intel will never have to worry about Apple selling their chips to other OEM that makes Android and/or Windows phones and tablets which is ultimately what Intel will be targeting for their mobile chips anyway. In another word, they do not have to worry about Apple stealing Intel's core customers away from them. You cannot say that for too many other companies that want to produce their own ICs.

  • Report this Comment On November 03, 2013, at 12:44 AM, makelvin wrote:

    Actually, after thinking over the possibility of Intel producing chips for Apple a little more, I actually can think of a scenario where it can help Intel's own mobile chip strategy.

    Let suppose if Intel using its highly sophisticated foundry working closely with Apple in producing their A series chip. If they could help Apple make their ARM chip better in both performance and power consumption than anyone else out there making a similar ARM chips. It would make other OEMs who are producing Android and Windows phones and tablets looking for any edge they can to try to catch up and match with Apple's mobile chips.

    As I have said before, Apple will never sell their chipset to anyone else. So at this point, if Intel is to introduce a mobile chip that just have similar equivalent performance and power consumption as Apple, everyone except Apple will be snatching them up in a hurry in order to compete with Apple.

    For Android, changing chip architecture while maintaining compatibility with existing Android apps is not that difficult. Since Androids apps are essentially JAVA apps, all OEM has to do is provide a JAVA-like virtual machine that runs on the new Intel mobile chips.

    For Windows devices, if Intel's new mobile chips is similar enough to the current Intel x86 architecture, then it would be a no brainer for Microsoft to adapt quickly to use these new Intel mobile chips as well.

    Since it is unlikely Apple will completely dominate the entire mobile market with their mobile devices no matter how powerful their A series chips get, there will always be a lot of OEMs looking for ways to compete with Apple. All of these OEMs are potential Intel customers that will always want to have a leg up. So there you have it; at the end, Intel could actually produce chips for Apple as a viable strategy to get back into the mobile market share.

  • Report this Comment On November 29, 2013, at 6:09 PM, mycardbrokedown wrote:

    @makelvin... android apps are written in a java *derivate* but porting them to x86 still requires a recompile & lots of libraries changes + a rethinking of the app in most cases. Android offers certain patterns of programming that are just not compatible with the windows ecosystem. Building a java application in windows/linux(read pure java in a an actual JVM) is quite different from building an android app.

    x86 can compete with ARM both on performance and battery life and both combined. To say X86 is inherently inefficient is just plain ignorant... AMD is on the way of proving exactly that with it's HSA. They will start shrinking the x86 core and move functionality to the gpu which is a risc type cpu... Eventually maybe by 2020 x86 will only be a decoder, likewise arm and all the computation will be done on a farm of little GPGPU cores like the GCN or CUDA and another farm of little DSPs all communicating uniformly and accessing the same memory pool & eventually cache too...

    Intel building ARM chips or even custom x86 for others for others is good however you might slice&dice it... They have excelent fab capacity (and excess of it) why not share for a premium? If I were Intel I would just offer up all the unused fab capacity to whoever offers more money pure and simple... they have the best fabs out there, they can charge whatever OEMs are willing to pay for it, doing this they fill up the fabrication line and get cash with 0 R&D... using resources they themselves can't use... so it's a win-win situation

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