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Intel vying for Apple foundry business

Mark LaPedus
5/2/2011 1:36 PM EDT

http://www.eetimes.com/electronics-news/4215650/Intel-vying-for-Apple-foundry-business-?cid=NL_EETimesDaily

SAN JOSE, Calif. - At present, Samsung Electronics Co. Ltd. is making the Apple-designed A4 and A5 processors on a foundry basis for Apple Inc.

That could soon change. As reported, Apple and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) have entered into a foundry relationship for the A5 and follow-on chips, sources said.

Now, according to an analyst, another player is pursuing Apple's foundry business: Intel Corp. Intel is already supplying x86-based processors for Apple's PC line. Intel is also dabbling in the foundry business and has recently struck a deal with Achronix Semiconductor Corp.

''Based on a number of inputs, we believe Intel is also vying for Apple's foundry business,'' said Gus Richard, an analyst with Piper Jaffray & Co., in a new report.

''It makes strategic sense for both companies. The combination of Apple's growing demand and market share in smart phones and tablets gives Intel a position in these markets and drives the logic volume Intel needs to stay ahead in manufacturing,'' Richard said.

''Intel's manufacturing lead gives Apple an additional competitive advantage in these markets and distances it from Asian competitors that are knocking off its products,'' he said. ''Furthermore, it would also serve to weaken Samsung who is a significant competitive threat to both companies.''

Samsung will remain Apple's main foundry-at least for now. ''While it will take a few years for Apple to shift foundry suppliers, we believe Apple is shifting away from Samsung,'' he said. ''We believe TSMC will start getting revenue from Apple in Q4 of this year. We believe the recent patent lawsuit between the two companies is further evidence to support our belief that Apple is moving its silicon needs elsewhere.''

Samsung and TSMC each have the fab capacity to support Apple. The question is clear: Does Intel have the capacity?

''Samsung has just completed a 30K-40K wafer start per month logic plant in Austin Texas to support its foundry business of which Apple is its largest customer,'' he said. ''Based on the die size of Apple's A5 processor, Apple needs roughly 23K wafers a month for the A5. We believe that Apple moving its foundry business away from Samsung is what has recently driven Samsung to reduce equipment orders, as it will likely repurpose this capacity for memory.''