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Intel Inside iPhones, iPads Would Let Apple Kick Samsung Out

By John P. Mello Jr. MacNewsWorld ECT News Network
Mar 8, 2013 5:00 AM PT

Intel's reported plans to provide more contract manufacturing of processors are renewing speculation that it will seek a deal with Apple to make chips for its iPads and iPhones, according to published reports. That could leave Samsung, which makes chips for iOS devices, out of the picture.

Intel Inside iPhones, iPads Would Let Apple Kick Samsung Out

"This is very good news," said Trip Chowdhry, managing director for equity research Global Equities Research. "It should have happened two years ago."

Negotiations between Apple and Intel about a mobile chip deal are ongoing, Reuters reported Thursday, citing people who have knowledge of the talks.

The report appeared a week after Sunit Rikhi, vice president and general manager of Intel's custom foundry division, said the chipmaker would be ramping up operations to accommodate a major mobile customer.

Apple did not respond to a request for comment for this story.

"The Reuters piece is highly speculative including the assertions about Apple," Intel spokesperson Chuck Mulloy told MacNewsWorld. "As is our normal practice, we don't comment on speculation like the Reuters piece."

Faster Time to Market

A move to Intel would speed up the time it takes to manufacture chips for its iPhones and iPads, said Doug Freedman, an analyst with RBC Capital Markets in New York City.

Freedman stirred the rumors about an Apple-Intel pact two months ago. In a research note, he said the deal would involve Intel making Apple's iPhone chips in exchange for Apple using Intel processors in the next generation of iPads.

"When you move to Intel's manufacturing process, it is, at a minimum, nine months ahead of anything available in the general purpose foundry market," Freedman told MacNewsWorld.

Not only would that improve Apple's time-to-market for its mobile products, Freedman said it would also give Apple a nine-month head start on using technology like 14 nanometer chip design.

Filling the PC Gap

Intel is a recent possible option for Apple; in the past, it didn't allow outside companies access to its manufacturing processes. However, the ailing PC market may be forcing Intel to change its ways.

"Intel is looking for ways to leverage the investment it's made in leading edge manufacturing technologies," Freedman said.

Another factor making Intel a more attractive mobile partner for Apple is the chip maker's increased focus on power efficiency for its products.

"In the past, Intel's processor technology was tailored to high performance computing and not applicable to low-powered, battery-operated devices," Freedman said.

"As the PCs and ultrabooks are pushed into lower and lower power form factors, Intel's processor technology is now well-suited for battery-powered devices," he added.

Lower Costs

Delivering its mobile business to Intel would relieve another pain point for Apple: Doing business with rival Samsung.

"Why should Apple be funding their prime competitor's R&D?" Chowdhry asked.

By having Samsung make processors for its iOS devices, Apple is putting its intellectual property at risk, he added. That won't be the case if Apple's chips are produced in the United States by Intel.

Apple could also reduce the cost of producing its chips with an Intel deal. "Costs will be five to 10 percent lower than they are now," Chowdhry estimated. "You don't have to incur the costs of flying your executives half-way around the world and you don't have to spend on transportation costs to bring the chips back to the United States."

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