Intel has announced it is to outsource the manufacturing of its Atom processor to the Taiwan Semiconductor Manufacturing Company.
The deal forms part of a long-term strategic technology collaboration between Intel and TSMC, announced on Monday. Under the memorandum of understanding (MOU) that forms the basis of the collaboration, Intel will port its Atom processor cores to TSMC's technology platform, including processes, intellectual properties, libraries and design flows.
According to a statement from the companies, the aim of the collaboration is to expand the availability of Atom, Intel's smallest processor, into mobile internet devices (MIDs), smartphones, netbooks, nettops and consumer electronics devices.
"We believe this effort will make it easier for customers with significant design expertise to take advantage of benefits of the Intel architecture in a manner that allows them to customise the implementation precisely to their needs," said Intel's president and chief executive, Paul Otellini, in the statement.
In a press conference on Monday, the head of Intel's ultra-mobility group, Anand Chandrasekher, said the collaboration was "not about capacity", but was about "expanding mutual market influence into new growth opportunities".
Rick Tsai, TSMC's president and chief executive, said the deal came at a "very difficult time for everybody in [the semiconductor] industry".
"It is paramount to the industry that people… must collaborate more so that we can all share the benefits," Tsai said. "TSMC has been proposing this collaboration for several years [and we are] extremely happy and excited that we are now working with Intel. We will continue to invest in our platform, our capacity and... our design infrastructure."
Sean Maloney, Intel's head of sales and marketing, said Monday's announcement followed "two to three years of intense discussion" between the two companies. "This is something we pulled together in the last few weeks," he added.
Maloney insisted that Intel remained a manufacturing company. "In the last few years, when people have questioned whether we should continue to invest in manufacturing, we have always answered it's a central core competency in the company," he said. "Two weeks ago we [announced an additional] $7bn in manufacturing capacity in the US to drive a rapid move to 32nm."
"We will maintain full control of who we sell to," Maloney said of the TSMC deal. "We are maintaining the control of the process [and are] not randomly throwing things out and seeing what happens."
David Manners, blogger and senior journalist on UK trade journal Electronics Weekly, told ZDNet UK on Monday that the tie-in came about because "Intel can't do low-power, can't do low-cost, and is scared of erratic consumer markets where demand can fluctuate wildly and, by outsourcing its production, TSMC can be made to bear the brunt of that".
Calling the deal "a direct attack on competing processors, especially the ARM processor, which is trying to move upstream from phones and embedded gadgets", industry analyst Jack Gold said in a statement that both Intel and TSMC "win".
"Intel gets a vast new market potential for Atom since TSMC has connections to many consumer and lower end PC-type products (eg, MIDs, webtop devices, netbooks, media servers/set-top boxes, etc), especially in the important Far East markets (Taiwan, Japan)," Gold said. "TSMC gets to offer a high performance processor they did not have to design, but that they can customise for the clients who will take volume products. It also adds the ability to merge the work TSMC is doing on WiMax enabled devices and couple it with Atom processors."
Gold added that Intel would get "a large potential for embedding chips in products they might not be able to reach, and generating revenues from the licensing fees".