Back in 2011, Intel (NASDAQ: INTC ) picked up a small, fabless semiconductor company called Fulcrum Microsystems. Fulcrum developed Ethernet switches for data-center applications, so this was a natural acquisition for Intel as it sought to capture more content within the data-center space. While Intel has a nontrivial market share in merchant switch silicon today, its best offerings still lag those from market leader Broadcom (NASDAQ: BRCM ) in a number of key ways and its revenue share is much smaller. This suggests Intel and Broadcom could enter into a very interesting foundry collaboration for these types of products.
Intel's FM6764 faces Broadcom's Trident II
Intel launched its FM6764 Ethernet switch In the first quarter of 2013. This switch silicon offered a maximum port bandwidth of 640 G (with support for 64 x 10 GbE ports or 16 x 40 GbE ports). The part is built on a 65 nanometer process (likely external foundry given the Fulcrum legacy) and is rated at a max thermal design power of 195 watts. The switch is targeted toward data center, high-performance computing, and financial services.
Broadcom's latest and greatest is a beautiful piece of silicon known as Trident II. This is built on a 28-nanometer manufacturing process (which gives Broadcom density and power advantages), and the highest-end SKU offers maximum port bandwidth of twice that of the Intel solution at 1280 G. This allows the Broadcom silicon to support up to 104 x 10GbE ports or 32 x 40GbE ports. In fact, the absolute lowest SKU in the Trident II family offers 720 G maximum port bandwidth (which means either 72 x 10GbE ports or 18 x 40GbE ports) -- still well ahead of the latest that Intel appears to offer.
The market-share picture
Broadcom offers leadership in the industry, which is reflected in this chart on market share (as of the end of 2012):
Broadcom's revenue here was well ahead of any of its competitors. Marvell (NASDAQ: MRVL ) was in second place (albeit at about a third of Broadcom's revenue), but a glance over at the feature sets offered by its switch silicon suggests that Broadcom is well ahead there. Broadcom has done a tremendous job maintaining and extending its lead with the Trident II family of products.
Broadcom a potential Intel foundry customer?
Now let's look at Broadcom as a potential Intel Custom Foundry customer. While Intel has its own in-house solution and would probably like to capture as much of this content as it can organically, there may be a case here for Broadcom as an Intel foundry partner. While Intel and Broadcom do compete in a number of areas (and with Broadcom's success with multicore network processors, this hits closer to home), these kinds of large, high-margin pieces of silicon are exactly the kinds of products that Intel should be looking to get into its factories.
Broadcom's broader portfolio -- which contains knowledge-based processors, network processing unit, microwave backhaul, and much more -- would very much benefit from a strategic partnership with Intel. Not only does Intel capture more of the data-center and network infrastructure market as a foundry, this is one of the key high ASP markets in which Intel's manufacturing lead could be worth paying a premium for, from Broadcom's perspective.
Foolish bottom line
It'll be interesting to see how competitive Intel's switch silicon becomes over time, particularly as the company presumably moves those products to its leading-edge manufacturing technology. However, given the sheer dominance of Broadcom in this area in terms of both technology and revenue share, a foundry partnership may be an option that ultimately delivers better return on investment for Intel than trying to outgun Broadcom.
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