Shares of Intel (INTC +12.93%) spiked to new all-time highs on Tuesday, following reports that Apple (AAPL +2.66%) was considering having the chipmaker build processors for its popular devices.
Image source: Intel.
The potential for a major chip supply deal
Apple is reportedly exploring ways to diversify its chip production network, according to Bloomberg. The tech titan has long relied on Taiwan Semiconductor Manufacturing as its main chip foundry partner.
Yet Apple, like many tech companies, has faced supply shortages that have resulted in lost sales. Adding another chipmaker to its vast supply chain network could help to alleviate some of those bottlenecks, though additional chip supplies would likely take years to materialize, given the long lead times required for high-end processor production.
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Apple, however, excels at thinking long-term. And given the awesome scale of its business, winning a deal from the iPhone and Mac maker can boost the bottom lines of its suppliers in a big way, even for a fellow tech giant like Intel.
Still, moving away from Taiwan Semiconductor for even a portion of Apple's chips is no easy feat. The dominant provider of chip foundry services has spent decades refining its manufacturing expertise and typically enjoys significant cost advantages over U.S. producers.
Successfully courting Apple would be a game changer
All told, it's unsurprising that Intel's stock is surging on the news. Apple would be the crown jewel of its fledgling foundry operations, which would benefit not just from the tech leader's potentially massive chip orders but also the vote of confidence they would imply to other chip designers.
