Intel pondering becoming a chip foundry

The company is opening up its manufacturing facilities to more third-party customers

Intel is exploring whether it can branch out as a foundry by opening its chip manufacturing facilities to more third-party customers, the company said on Tuesday.

Intel has expanded its chip-to-order business by signing up additional customers to take advantage of its 22-nanometer process facilities, company spokesman Chuck Mulloy said. Intel's upcoming PC chips are already being made using the 22-nm process, and laptops and desktops with the chips are expected to become available in a few months.

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Intel in the past has exclusively retained manufacturing facilities for its own chips, but late last year said it would make FPGAs (field-programmable gate arrays) for Achronix Semiconductor. Another FPGA product designer, Tabula, on Tuesday said it would have its products made on Intel's 22-nanometer process. Intel's Mulloy said the company has even more customers, but couldn't reveal their names.

"We think we've got a world-class process. We also understand we are an integrated device manufacturer, but we don't have experience as a foundry," Mulloy said. "It's very much about us learning how to do this."

Intel formed a team two years ago to see whether it was feasible to expand its manufacturing process to other products, Mulloy said. The company doesn't expect to be a large-scale foundry company like its rivals, but Mulloy said there could be strategic advantages in opening up its manufacturing facilities.

Intel advances the manufacturing process every two years and invests billions of dollars to upgrade factories. Intel's 22-nm manufacturing facilities are considered more advanced than its top contract manufacturing rivals including TSMC (Taiwan Semiconductor Manufacturing Co.), UMC (United Microelectronics Corp.), and GlobalFoundries.

It's becoming increasingly difficult for companies to own and operate their own facilities and to develop the latest and greatest process technologies, said Trevor Yancey, vice president at semiconductor market research firm IC Insights.

Intel is a chip powerhouse and may feel it has a manufacturing edge over rivals, which could make its 22-nm plants attractive to customers, Yancey said.

Intel is the only company offering chips with power-efficient 3D transistors, which could be attractive to third parties because it is more power-efficient than planar transistor designs. TSMC is expected to implement 3D transistors eventually, Yancey said.

Intel's only announced manufacturing customers are makers of FPGAs, which are reprogrammable circuits that do specific tasks faster than CPUs. The major FPGA companies Altera and Xilinx are getting products made from TSMC and UMC, Yancey said.

"UMC is falling behind the curve on process technology. Intel may be seeing that as an advantage," Yancey said.

Intel could also be taking on contract manufacturing on a selective basis to better utilize extra factory capacity, said Jim McGregor, chief technology strategist at In-Stat. The higher the factory utilization rates, the more cost effective it is to make chips, McGregor said.

Intel could be following the model of Samsung, which has implemented the foundry model over the past few years as an effective way to fill capacity during slack economic times, McGregor said. It would take a long time for Intel to catch up with the likes of TSMC, which has assets such as intellectual property and libraries necessary to take on contract manufacturing.

The volume of third-party chips from Intel's factories may initially be insignificant, McGregor said. Intel's focus will remain on its own processors, but in the future, it may be possible for the company to make chips based on processor technologies such as ARM.

"They are taking on small guys to test the waters" of the foundry business, McGregor said.

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