Intel: We could be a foundry if the fit was right

Intel CEO Paul Otellini said that the company is open to manufacturing chips for other companies if the situation isn't competitive. Would Apple fit?
Written by Larry Dignan, Contributor
An Intel manufacturing plant. Credit: Intel.


Intel CEO Paul Otellini said that the company would be open to being a foundry for a strategic partner that isn't a competitor.

The Intel as manufacturer for other companies thread has been picking up in recent months. For instance, Piper Jaffray analyst Auguste Gus Richard has said that Intel's best move would be to make processors for others. Apple and Microsoft are companies that are often named.

Speaking at a Sanford Bernstein investor conference on Wednesday, Otellini danced around the foundry business model. Otellini's bottom line:

For the right strategic relationship, with the right customer, we would be open to a foundry arrangement and that is as narrow as I would like to get right now.

Otellini also noted that Intel is running a fall foundry business now, but the goal isn't to compete with TSMC. But for the right types of products, Intel would make chips for someone else.

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There was a lot of nuance in what Otellini said about Intel's potential to be a foundry player. Theoretically, Intel could make chips for Apple and even Samsung, which competes to some degree. Investors and analysts primarily zeroed in on the foundry concept over topics like the Windows 8 upgrade cycle and smartphones.

Here are some snippets from Otellini's talk.

We sell to Samsung today. We sell modems. Samsung from my perspective always had a very pragmatic view of what component they put inside their devices. They are a big customer of PCs from us today. If we have a better chip than they can build, then their semiconductor company can build, they will use it and that's been true for now. I don't see any reason why it wouldn't continue to be true.

I would be a foundry for strategic relationships and not to enable our competitors. You can read what you want into that statement but Samsung -- it's hard to imagine Samsung as a -- a foundry in parts for Samsung would be -- would fit that model.

Regarding making chips for Apple, Otellini said:

That would be an interesting model.

He added more color to the Intel as manufacturer for others idea:

As you know it takes a while to move your designs over, to design them under our process, for us to be able to bring them in house and so forth and our foundry customers aren't going to announce that they've moved until they've moved because it would hurt them at their current suppliers.

So for obvious reasons this has been a lower profile deal than the kinds of things that you see with early announcements.

But no, I don't think that. I think it makes sense for us to have that kind of capability particularly as our semiconductor lead gets wider over the industry and that allows us to then consider and take business on a value pricing model versus cost-plus pricing model which is what the foundry industry in general uses. I don't think cost plus makes sense for us. We want to get paid for the value of the -- the performance of the transistors.

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