Intel (NASDAQ: INTC) to fabricate ARM chips

Brian Hicks

Written By Brian Hicks

Posted October 31, 2013

“Intel Inside.” What a brilliant piece of marketing that was.

With the campaign, consumers suddenly began to care about the brand of the processor in their home computers, and it propelled Intel into the dominant position in computer processing for more than a decade.

But for the last decade, Intel has been a fading star.

Intel has long supported the x86 architecture, which does what is known as “complex instruction set computing” (CISC). This architecture allows software code to be simpler and less demanding on memory and storage.

The demand for complex computer processors waned, and with the smartphone era, the demand shifted to processors that could balance power with energy efficiency.

This is where Intel has floundered.

All smartphones and tablets use reduced instruction set computing (RISC), and one of the most popular architectures is known as ARM, after its parent company ARM Holdings, Inc. (NASDAQ: ARMH).

ARM is nearly ubiquitous in mobile technology.

On Tuesday it was revealed that Intel, after a few abortive attempts at creating smartphones running on its x86 chips, will begin producing ARM chips.

What they’re doing

At the ARM developers conference, Altera (NASDAQ: ALTR) announced that Intel will be fabricating a 64-bit ARM Cortex A53 processor for its Stratix 10 system-on-a-chip. This is significant for a number of reasons.

Most of the currently available ARM chips are 32-bit. Apple broke out with the announcement that its A7 processor was 64 bit, but with this announcement, Intel is promising the first 64-bit quad-core ARM processor.

On its face, it looks like Intel is caving into competitive pressures from the likes of Nvidia, Qualcomm and Samsung by jumping over to the most popular mobile architecture.

But this announcement is not a new attempt on the smartphone market just yet. These Altera chips are generally used in communications infrastructure and network appliances, where the power supply is constant, and applications single.

Intel’s weak x86 mobile strategy is not changing yet.

Instead, it’s a sign that Intel’s foundry business is a potential winner in spaces where Intel itself has traditionally done poorly.

What it means

Intel can be hired to manufacture chips for other semiconductor companies. For a long time, the only chips Intel produced were its own.

Now, major “fabless” semiconductor companies like Qualcomm, Nvidia, and Broadcom can contract Intel to build their chips for them. This is known as the foundry model in chipmaking, and leading companies TSMC, Samsung, and Globalfoundries all participate.

Intel does not have the largest semiconductor fabrication facilities in the world. What it does have is a 14 nanometer chipmaking process, which puts Intel ahead of most other companies in terms of transistor density and cost effectiveness.

Taiwan Semiconductor Manufacturing Co. (TSMC) is the world’s highest grossing foundry, but it still hasn’t released its own 20nm process, The company expects to make more than 30 designs using this process in 2014. At that point, Intel’s 14nm Broadwell processor family is expected to begin rolling out.

In other words, Intel is now positioned as an alternative ARM foundry for the major hardware providers in the smartphone world, even though it hasn’t actually started making the chips yet.

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