Who will build Apple's processors for its mobile devices? The current maker is Samsung. But analysts suggest that Cupertino may be looking to additional sourcing and some unlikely new foundry partner: Intel.
Intel CEO Paul Otellini this month suggested that acting as a foundry to Apple's ARM-based processors "would be an interesting model." http://www.zdnet.com/intel-we-could-be-a-foundry-if-the-fit-was-right-7000008427/ Analysts are doubling down on the idea.
A recent EE Times piece by Rick Merritt says that Intel could be the new partner. While it has its own low-power processor aimed at mobile devices, it may be facing declining production in the desktops computer segment.
Face it, the market has shifted from the desktops Intel dominates to tablets and smartphones where it barely participates. But world-class semiconductor manufacturing is as valuable as ever, even as Moore’s Law slows.
Here, Intel is still tops. First with high-k metal gate transistors. First with FinFETs. Tons of capacity in leading-edge fabs all over the world. There’s little doubt it will be first to field the extreme ultraviolet lithography that is key to next-generation processes.
Merritt points to rumors that Intel will make high-end router chips for Cisco. Apple could be another customer. However, he says this will take some major reformulation of Intel's corporate identity.
Expanding on the idea, Jean-Louis Gassée at Monday Note says that market issues with Windows transitions haven't helped Intel much and that an Intel-Apple partnership makes sense.
This wouldn’t be an easy decision for Intel: the volumes are high — as high as 415M ARM chips for 2013 according to one analyst — but the margins are low. And Intel doesn’t do low margins. Because of the Wintel duopoly, Intel’s x86 chips have always commanded a premium markup. Take Windows out of the picture and the margin disappears.
Also, Intel would almost certainly not be Apple’s sole supplier of ARM chips. Yes, Apple needs to get out of its current and dangerous single source situation. But Tim Cook’s Supply Chain Management expertise will come into play to ensure that Apple doesn’t fall into a similar situation with Intel, that the company will secure at least a second source, such as the rumored TSMC.
Gassée also refutes the rumor floated in November that Apple would ditch ARM for an Intel processor. He points to speculation by another analyst that Intel would act as a foundry for an ARM-core processor for future iPhones if Apple would take up an Intel processor for the iPad. Crazy talk.
The speculation by an RBC analyst that Intel will offer its services to build ARM chips for the iPhone on the condition Apple picks an x86 device for the iPad is nonsensical: Apple won’t fork iOS. Life is complicated enough with OS X on Intel and iOS on ARM.
There were also rumors in November that Apple would switch to an ARM processor for its Macintosh lines. I suggested that this rumor was likely a bargaining tactic to get Intel to give up a bit of margin. Now, with these other rumors of Intel acting as a foundry for Apple's ARM-based processors, we uncover another potential twist in the negotiations.
This story keeps getting more complicated. As my colleague Adrian Kingsley-Hughes points out, Apple could decide to go with Taiwan Semiconductor Manufacturing Company (TSMC) instead.
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