Maximize Your Salesforce ROI with Premier Success. Learn More >
Welcome Guest | Sign In

Samsung, Apple Rift Could Throw Intel Into ARM's Arms

Samsung, Apple Rift Could Throw Intel Into ARM's Arms

Apple may be negotiating a deal that would free it from reliance on patent foe Samsung for its mobile processors, but as its new partner, Intel would have to grit its teeth and agree to manufacture rival ARM's chips for the iPhone. Apple would redesign the iPad to run on Intel's x86 processors, though, and Intel would take home a sweet $2 billion per year of additional business.

By Erika Morphy MacNewsWorld ECT News Network
12/03/12 10:41 AM PT

Apple and Intel are in talks that could lead to Intel taking over Apple's chipset manufacturing, according to a report from Doug Freedman of RBC Capital.

The scope of the deal is significant and would require a major about-face on the part of Intel, Freedman indicated. Intel would use rival ARM Holdings' structure for the iPhone design. Apple would redesign the iPad to base it on the x86 processor.

The deal would be worth a hefty US$2 billion a year, making the accommodation worth it for Intel, despite its acrimonious history with ARM. Apple would likely be willing to meet Intel's requests, Freedman said, because alternative sources of chip-making capacity in the global market are scant.

Cutting the Ties With Samsung

Apple's driving motivation to strike a deal, of course, is its intense and bitter rivalry with Samsung. Reducing its processor supply dependence on Samsung makes common sense. In addition, Apple's demand for chips is only expected to grow, and it needs to make sure enough capacity in the global market is devoted to its needs, Freedman noted.

"It is an interesting rumor and it makes perfect sense for all the parties -- even to a certain extent Samsung," Charles King, principal analyst with Pund-IT, told the E-Commerce Times.

Unless Apple has a development agreement in place with Samsung, which is unlikely given their relationship, it is a relatively simple matter to transfer the manufacturing operations to Intel, he said.

Even leaving aside the bitter warfare between Samsung and Apple, this might be a move Apple would consider anyway if it felt Intel could better meet Apple's growing demand for chips, King added.

The $2 billion a year business Intel would secure from the arrangement is enough to make it overlook the association with ARM Holdings, in his view. "$2 billion is not a chunk of business you dismiss lightly."

Samsung Should Be Fine

Even Samsung, which would lose some or all of that business if the reported agreement should go through, might find itself relieved to be free of its tie to Apple, King suggested.

"No company wants to see billions of dollars disappear from its manufacturing chain, but given the ongoing wrangling between the two, a break might be less painful" than it would be under other circumstances, he said.

Although Samsung clearly makes money from manufacturing chips, that activity is not central to its business the way it is to third-party manufacturers that do little else, Nathan Brookwood, a research fellow at Insight 64, told MacNewsWorld.

Intel's New Direction

Intel and Apple are not competitors, and Apple already has business ties with Intel.

"Apple is a big customer of Intel's mainstream chips used in its MacBook and iMacs. In that regard, the two companies have a positive relationship," Brookwood pointed out.

Intel would also stand to benefit from a greater presence in the mobile world, he added. "The mobile market is growing by leaps and bounds, and Intel's position in terms of selling standard chips in it is still very small."

Finally, an agreement between Intel and Apple along the lines Freedman laid out would expand Intel's manufacturing prowess -- a focus that the company has not had under CEO Paul Otellini's regime, Brookwood said.

Otellini is stepping down, however, and his departure could open the doors to new opportunities for Intel.

"Otellini has been adverse to this concept of Intel manufacturing products for other companies because Intel has historically wanted to be able to profit from both its manufacturing and design prowess," noted Brookwood. A new CEO might look at the company's resources and come to a different conclusion.


Facebook Twitter LinkedIn Google+ RSS
Faster Results. 80% Higher ROI. Salesforce Premier Success.