Intel is reportedly in negotiations with Apple to replace Samsung as the manufacturer of chipsets for the iPhone and iPad. RBC Capital’s Doug Freedman released a report on the negotiations today, saying that under the deal, Intel would manufacture iPhone chips using the design from rival ARM Holdings, which Apple refers. In exchange Apple would change the design of the iPad to Intel’s x86 design.
Intel Corporation (NASDAQ:INTC) wants to become Apple Inc. (NASDAQ:AAPL)’s replacement for Samsung Electronics Co., Ltd. (LON:BC94), the current manufacturer of chipsets for its iPhones. Doug Freedman of RBC Capital reported today that Apple and Intel are currently in talks about Intel taking over Apple’s chipset manufacturing.
Freedman also listed the terms of the potential deal between Intel and Apple. He said that Intel would use the iPhone design Apple Inc. (NASDAQ:AAPL) prefers, which is the one from ARM Holdings, a major rival of Intel Corporation (NASDAQ:INTC). And in exchange, Apple would swap out the iPad’s current design for the x86 design from Intel. According to Freedman, if Intel ends up with this deal from Apple, it could make about $2 billion in revenue from it next year.
Of course there has already been speculation that this could happen, but Freedman said he believes that this time, Intel Corporation (NASDAQ:INTC) and Apple Inc. (NASDAQ:AAPL) will “remain in active dialogue.” Samsung announced recently that it would raise the price of the chipsets it currently provides for the iPhone. Also, next year there’s a very real possibility that Apple’s demand for certain iPhone chips could exceed Samsung’s ability to fill it.
Freedman believes that Intel Corporation (NASDAQ:INTC) will likely edge out other potential chipset manufacturers, like GlobalFoundries and TSMC, because it has a higher manufacturing capacity. Also Intel has three foundry partners at the moment (Achronix, Tabula, and Netronome) and could be adding Cisco Systems, Inc. (NASDAQ:CSCO) later. Freedman noted also that Intel is a generation and a half ahead of ARM, and that gap could widen by 2014.
Thus far, Intel has only manufactured chips for its own x86 design, so adding the ARM chips to its manufacturing facility would require some major changes—changes that might not happen if current Intel CEO Paul Otellini wasn’t going to retire next year. As VentureBeat points out, he’s “been one of the main cheerleaders” for Intel when it came to the question of whether the chipmaker should stick to its own designs, or delve into the world of designs from other chipmakers.
And Apple’s not the only other tech company Intel could become involved in soon. As ValueWalk reported on Thursday, Sharp Corporation (PINK:SHCAY) has offered shares of its company to Intel, and also Dell Inc. (NASDAQ:DELL). Management problems at Sharp have led some to questions of whether the company has what it takes to keep going, and Intel Corporation (NASDAQ:INTC) is one of the investors Sharp is hoping to attract in its efforts to stay afloat.