Intel's Altera deal inaugurates shift into foundry business

By Graeme Burton
27 Feb 2013 View Comments
Intel Ivy Bridge processor

Faced with declining demand for its high-margin microprocessor products in PCs and laptops, while even server sales have stalled, semiconductor giant Intel is looking to cut foundry deals to keep its cutting-edge factories ticking over.

The first is with Altera to produce the company's FPGAs (floating point gate arrays) on Intel's 14 nanometre equipment, expected to start production this year.

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"These next-generation products, which target ultra high-performance systems for military, wireline communications, cloud networking, and compute and storage applications, will enable breakthrough levels of performance and power efficiencies not otherwise possible," said Intel in a statement.

There are very few foundries available for semiconductor intellectual property companies, such as Altera, in which to get their products manufactured on the latest technology. Intel's next-generation Ivy Bridge microprocessors, which have been in production for only about a year, are based on a 22 nanometre process.

Haswell and Broadwell code-named microprocessors will emerge this year and will migrate from this to a 14-nanometre process technology.

However, with demand for new PC and server technology moribund as consumers spend their money on smartphones and tablets running on ARM - not Intel - designs, Intel will have big-money investments in the latest plant and equipment not running at capacity and, therefore, losing money.

According to analysts, the move may therefore inaugurate a shift by Intel into the high-end foundry business hitherto dominated by TSMC, IBM, Samsung and, most recently, the Globalfoundries business spun-out of Intel's great rival AMD.

Rumours that have been circulating for some time suggest that Intel is also being lined up as a potential maker of Apple's A-series microprocessors, which are based on core designs from ARM, as Apple seeks an alternative manufacturing partner to Samsung.

At the same time, Apple is also rumoured to be mulling a shift from Intel i-series microprocessors in its laptops, desktops and servers to multi-core 64-bit ARM-based chips designed in-house.

ARM represents a growing threat to Intel as the centre of momentum in the technology sector shifts to mobile devices. Intel has raced to catch up with ARM in terms of the low-power-consumption of its products by producing the Atom. It claims that it will be able to match ARM this year.

But ARM's intellectual property model also offers lower cost to customers and business opportunities across the semiconductor business in areas that many big companies have otherwise been locked out of by Intel's long dominance in PCs and servers.

Nevertheless, Intel holds a comprehensive ARM licence retained when it spun out its own ARM-based design business in 2006 under the Marvell Technology moniker.

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