Under the agreement, microchip giant Intel will share its technology with TSMC, the world’s largest dedicated semiconductor foundry, to allow the company to produce microprocessors using the recently developed Atom circuitry. The move marks a departure for Intel, which rarely transfers its microelectronics know-how for manufacture elsewhere.
“The compelling benefits of our Atom processor combined with the expertise and technology of TSMC is another step in our long-term strategic relationship,” said Paul Otellini, Intel president and chief executive officer. His TSMC counterpart, Rick Tsai, stated the partnership “will foster overall semiconductor growth.”
The deal is part of Intel’s efforts to push its ultra-low-power Atom-based chips into devices beyond budget laptops, or netbooks. TSMC will now be able to use the Atom architecture to create customized chips for a wide range of applications, such as nettops, mobile Internet devices, smart phones and various consumer electronics products.
This is precisely what Intel needs in order to take on its rival ARM Holdings Plc. The intellectual property processor giant is dominant in the mobile Internet device and electronics market thanks to its competing technology. The U.K.-based firm, which regularly licenses its IP to companies, has many processor design customers that rely on TSMC to produce customized devices.
Industry experts hailed the TSMC-Intel collaboration as a win-win strategy. Intel will stand to significantly broaden opportunities for its Atom, while TSMC can extend its technology platform to serve the Intel architecture market sphere. “It will allow [the two companies] to go after new market segments together,” said Anand Chandrasekher, senior vice president and general manager of Intel’s Ultra Mobility Division.
During the talks leading up to the MOU, many analysts had expected a deal on outsourcing some Atom production to TSMC as a cost-saving move. But no such contract materialized. Intel will continue to manufacture the microprocessors at its own fabrication facilities. Neither company has provided any details regarding the timeframe or products to be produced at TSMC.
Following the announcement, TSMC shares dropped 0.34 percent March 4, underperforming the Taipei stock exchange index which rose 0.21 percent. Intel shares also slipped on U.S. markets the same day. Analysts said investors were holding off because of the lack of details.
Nevertheless, the new partnership has been viewed as a positive for the Taiwan firm down the road. “We see this as long-term positioning for TSMC to expand processes and its IP portfolio by offering Atom cores for foundry customers in all kinds of mobile Internet devices,” said Andrew Lu of Citigroup Global Markets Inc.
According to Morgan Stanley Asia Ltd. analyst Bill Lu, the deal could create US$1.5 billion in extra revenue per year for TSMC once it begins to employ the advanced 32-nanometer process technology to manufacture Atom-based products, probably in 2010.
Intel and TSMC have maintained a relationship as both business partners and competitors for nearly two decades. TSMC is also contracted by major integrated circuit design houses to make chips, including Advanced Micro Devices Inc., Nvidia Corp. and Qualcomm Inc., all based in the United States, and Taiwan’s VIA Technologies, Inc.
Write to Meg Chang at meg.chang@mail.gio.gov.tw