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Intel Corporation Message Board

  • paul.ottelini paul.ottelini Mar 14, 2013 9:32 AM Flag

    Can Intel make mobile chips for Apple? Article:

    There is still much speculation as to who might win Apple, Inc.'s (NASDAQ: AAPL : 428.33, -0.02) mobile processor business for 2014.

    Intel Corporation (NASDAQ: INTC : 21.65, 0.01) might be the front runner for manufacturing Apple's next-generation mobile chips (tentatively called A7) after it got a high volume foundry customer in Altera Corporation (NASDAQ: ALTR : 34.975, -0.065).

    Since Intel already makes chips for MacBooks, it won't be difficult for Apple to shift its mobile chips supply to Intel.

    Intel, whose chips power about 80 percent of PCs, is trying to diversify from its core business and sharpened its focus on foundry business, which has been in the back burner as Intel predominantly made its own chips rather than making them for others.

    Moreover, the consumer shift from PC to tablets and smartphones have resulted in weak demand for PC, which is Intel's forte. With Altera deal in place, Intel may be eyeing Apple, which is one of the largest semiconductor consumer.

    Intel is highly regarded for its manufacturing capabilities and its technology advantage should help the chip giant make gains in foundry services and perhaps more significantly in mobile devices. Moreover, Altera deal in itself is a validation of Intel's manufacturing advantage.

    As Intel has publicly stated it has yet to commit material capex to its foundry business, any mobile products sold to Apple would need to be a standard product or customized variant thereof.

    "As Intel's business model preference is to get paid for both process and architecture, we believe an arrangement with Apple near-term and even longer-term may be based on Intel selling offshoots of its base mobile platforms," UBS analyst Stephen Chin said in a client note.

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    • Although, there is one hiccup. Apple designs its mobile chips via technology licensed from ARM Holdings, a key rival to Intel's x86 architecture. While, ARM-based chips are found in almost every mobile device, Intel's own technology has lagged behind mobile chips.

      If Intel manages to convince Apple to deploy x86 architecture on Apple chips, then it would be a killer deal for the semiconductor giant.

      For Apple, it is high time to diversify its supply chain from Samsung, which is the lone supplier of microprocessors used in the iPhone and the iPad. But, the Korean technology giant has become Apple's biggest competitor in both smartphone and tablet categories. In addition, both technology giants are fighting out in courts alleging of patent infringement against each other.

      Korea's Samsung is expected to widen its lead over Apple in global smartphone sales this year. Samsung is estimated to capture 33 percent share of the 2013 smartphone market while Apple will hold 21 percent, according to research firm Strategy Analytics.

      With Samsung's smartphone sales growing at a rapid pace, Samsung may prioritize the supply of its own parts over Apple's in case of supply shortage. In this scenario, it would be wise enough for Apple to move its mobile chips manufacturing away from Samsung, and Intel would be a perfect replacement.

      Also, the high demand for Apple's devices makes it a must to have additional suppliers. Pressure on the existing supply chain would be higher given Apple's expansion in China and India and rumors of a cheaper iPhone. So, having an additional supplier gives more choices for Apple and mitigates the risk of not meeting the demand.

      If Intel wins Apple's chip business, it could be a significant revenue boost as analysts expect Apple to ship 180 million iPhones and 110 million iPads in 2014. In fiscal 2012, Apple sold 125 million iPhones and 58.3 million iPads.

      Sentiment: Strong Buy

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