Intel inside the iPad? Maybe, if it builds iPhone chips, RBC says

Analyst says Apple might be considering such a deal. A source tells CNET the companies have been talking on and off for the past two years about a foundry relationship.

Shara Tibken
Shara Tibken Former managing editor
Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
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Apple is looking around for a new company to manufacture its smartphone processors. James Martin/CNET

RBC Capital Markets has a new twist to the frequent Apple-Intel relationship rumors, and this time, it could actually be good news for Intel.

According to RBC analyst Doug Freedman, Apple may be contemplating a new relationship where Intel would build Apple's self-designed ARM-based smartphone chips in exchange for Apple using Intel's X86 processors in certain new devices, like the next-generation iPad.

While it may seem illogical for Apple to use different processors in its mobile devices, that could be one way for it to secure enough capacity and use chips on the leading edge of technology. After all, it already uses Intel processors in its Macs. It also would help the electronics giant reduce reliance on its previously close partner -- Samsung.

"We believe Intel has the upper-hand due to the limitations of capacity at alternative sources ... as the demand is outstripping Apple's ability to add supply," Freedman said.

An industry source told CNET that Apple and Intel have been in talks on and off for the past two years about a foundry relationship. But for Intel to manufacture ARM-based chips, it would need a pretty big incentive, the person said. Having its processors used in the iPad could be just enough to make a foundry deal happen.

Spokesmen from Apple and Intel declined to comment.

Demand for Apple's smartphones and tablets has been rising so fast that it has been hard for production to keep up. Intel, meanwhile, ships most of its chips for use in PCs, a market that's expected to flounder. That means it could have enough space in its factories to make some of Apple's chips.

In addition, it's no secret that Apple has been trying to find a new partner to build its processors. Samsung has long been the company tasked with manufacturing Apple's smartphone and iPad chips, but the relationship between the two companies has frayed significantly in recent months. They've been suing each other like crazy. At issue is control of the booming smartphone and tablet markets, areas that are vital for continued growth at electronics makers.

Apple, which also previously relied on Samsung to supply many other components for its products, has been reducing its reliance on the company in other areas, as well. The Cupertino, Calif., company has been sourcing displays from companies like Sharp and LG, as one example.

Taiwan Semiconductor Manufacturing Co., a contract chip manufacturer (all it does is manufacture chips for other companies), has been viewed as the leading contender for Apple's chip business. However, it has other clients with pretty big demands of their own, and some of those companies, like Nvidia, complained earlier this year about not receiving enough supply from TSMC.

Intel, meanwhile, has dipped it toes into the foundry business, building chips for a few small semiconductor makers. While it has said it has no plans to become a full-blown foundry, it would consider bigger, strategic relationships. Such a deal with Apple could be one of those.

Intel has long boasted that its manufacturing capability, a couple of generations ahead of the foundries, is one of its biggest advantages.

Apple, meanwhile, has invested heavily in developing its own chip designs based on the non-Intel, ARM architecture to power its mobile devices, including the iPhone and iPad. There was speculation earlier this month that Apple was considering using its own chips in its computers, rather than using processors from Intel in devices like the MacBook Air.

Updated at 2:25 p.m. PT with Intel declining to comment.

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