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Intel, TSMC Partner To Expand Sales Of Atom

March 3, 2009

Intel Corp and TSMC are partnering to develop and manufacture the low-cost Atom processor with the goal of expanding sales of the tiny chip into new markets beyond their use in netbooks.

The alliance between Santa Clara, Calif.-based Intel and Hsinchu, Taiwan-based TSMC represents the partnership of the world’s largest foundry with the world’s No. 1 semiconductor company, with Intel supplying the majority of the world’s microprocessors.

Although Intel has previously worked with Taiwan Semiconductor Manufacturing Co. on wireless chips and other products, the company said Monday’s announcement marks the first time it has licensed its CPU core to a foundry,

The agreement also demonstrates the significance of Atom to Intel at a time when declining personal computer sales are draining demand for Intel’s traditional processors.

Indeed, PC sales are expected to experience their sharpest sales decline in history this year due to the recession, with a new forecast released Monday by research firm Gartner Inc. projecting a nearly 12 percent year-over-year decline in 2009, to 257 million machines.

Atom is designed for “netbooks,” or stripped-down laptops that are lower-cost and smaller than conventional laptops and are used primarily to surf the Internet.  The chips can also be used in other small electronics devices.

Intel’s new agreement with TSMC involves “system-on-chip” technology, whereby processors are built on the same chip alongside other components, such as memory chips.

The move boosts Intel’s drive in that area, in which it competes with other chip designers such as Broadcom Corp. and Qualcomm Inc., which also make “system-on-chip” products, and British-based ARM Holdings Plc., which licenses low-power chip designs broadly used in mobile electronics devices.

The Intel-TSMC alliance is also important because it opens up new sales channels for the Atom processor.  Indeed, making the chip compatible with TSMC’s manufacturing processes will make it easier for Intel to sell to electronics manufacturers that already buy from TSMC, who have many of their products’ technologies tied up in the way TSMC makes its processors.

In its announcement, Intel said it will continue to manufacture Atom chips in its own factories in the United States and elsewhere, and that the alliance does not include transferring any of Intel’s manufacturing secrets.

The only other time Intel agreed share its processor blueprints with another company was 1982, the year Intel expanded its cross-license agreement with Advanced Micro Devices Inc. so the firms could supply chips for IBM’s personal computers.  The move was brought about by IBM’s demand that Intel secure a reliable second source for the processors.

Intel shares were down 27 cents, or 2.1 percent, to $12.47 on Monday.

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