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Why Intel enters into partnerships to expand its foundry business

Why Intel's strategy and products help it gain market share (Part 4 of 8)

(Continued from Part 3)

Intel’s foundry operations

Under its foundry operations, Intel (INTC) offers foundry services to its customers. The services involve silicon and manufacturing technology. It includes:

• Semi-custom services—Intel architecture and silicon are used with the company’s customer intellectual property (or IP)
• Fully custom foundry services

Partnership with Panasonic

In July 2014, Intel announced its manufacturing agreement with Panasonic (PVRFY) Corporation. Under the agreement, Intel would build Panasonic’s future system-on-chips (or SoCs) using its 14nm low-power manufacturing process.

Intel’s 14nm low-power process technology includes the second generation of Tri-Gate transistors that are optimized for low-power applications. It will allow Panasonic’s SoCs, that are targeted for audio visual-based equipment markets, to achieve high levels of performance and functionality. The performance and functionality will be achieved at lower power levels than the planar transistors.

As a result, the 14nm Tri-Gate process technology will play a key role in the development of next generation SoCs. Panasonic is the biggest client in Intel’s foundry business.


TSMC leads the business

As the above chart shows, TSMC (TSM) dominates the foundry business. TSM is growing. The key factors contributing to this growth are the increase in the cost of semiconductor manufacturing. Also, companies are preferring to outsource their chip production. In October 2014, IBM (IBM) announced that it would pay $1.5 billion to GlobalFoundries to run its semiconductor operations.

Intel’s foundry business is gaining acceptance

Semiconductor companies—including Altera Corporation (ALTR), Achronix Semiconductor, Tabula, Netronome, and Microsemi—have announced agreements with Intel’s custom foundry business.

Continue to Part 5

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