Intel opens up the Atom processor to TSMC

The partnership with TSMC could lead to customized chips that could provide Intel access to new markets it can't reach alone, said Sean Maloney, Intel executive vice president and chief sales and marketing officer, during a conference call with reporters.

TSMC will be able to provide its customers with details of Atom's design so that they can design chips based on the chip's core.

Atom chips currently go into low-cost laptops, also known as netbooks, and devices such as mobile Internet devices (MIDs) and smartphones. Future Atom chips will include more integrated PC capabilities, such as graphics and Internet connectivity, that could push the processor into embedded devices and consumer electronics.

To date, Intel has alone developed and sold its Atom processors for netbooks and MIDs. The company wants to maintain tight control over the types of products the derivative Atom chips will go inside, Maloney said. Intel will not be transferring Atom's manufacturing process technology to TSMC, so any chips that result from the deal will be manufactured by Intel.

"What we're doing here ... we will be picking the segments we go after," Maloney said.

The companies have collaborated for close to 20 years on products that include WiMax chips.

Intel officials shied away from answering questions on whether the TSMC deal would affect Atom's product road map or future smartphone chips like Moorestown. Details surrounding the deal are still being worked out, Intel officials said.

This agreement is similar to a strategy employed by Arm, which generates revenue by licensing smartphone and embedded chip designs to chip makers, said Jack Gold, principal analyst at J. Gold Associates. Arm has licensed its chip cores to companies such as Texas Instruments and Qualcomm, which provide chips for smartphones.

"This is a direct attack on competing processors, especially the Arm processor, which is trying to move upstream from phones and embedded gadgets, while Intel is trying to move downstream with Atom into this overlapping space. The battleground in the middle will be aggressive and potentially bloody, with huge potential returns," Gold wrote in a research note.

The partnership will help Intel add a revenue stream by licensing out its Atom core, and adds "massive market potential" through TSMC's customers, Gold wrote. TSMC has connections to many consumer and lower-end products like smartphones and embedded device markets, especially in Taiwan and Japan, Gold wrote.

The partnership is a win for both companies, said Rick Tsai, president and chief executive officer of TSMC, during the call. It is mutually beneficial as it will allow both companies to generate additional revenue and reach new markets, especially at a time when the semiconductor industry is struggling.

"People in our industry must work together ... so we can share the benefits," Tsai said.

Intel has taken a number of steps to develop integrated chips that could fit into new products like set-top boxes and TVs. Intel in February said it was prioritizing its move from the 45-nanometer process to the new 32-nanometer process technology, which should help the company produce faster and more integrated chips.

To that effect, the company said it would spend US$7 billion over the next two years to revamp manufacturing plants. It will also help Intel make more chips at lower costs and add efficiencies to the production process. Intel will begin producing chips with 32-nm circuitry starting in late 2009.