Apple Inc. (NASDAQ:AAPL) and Intel Corporation (NASDAQ:INTC) may be negotiating a deal to work together, claims a report. According to the article from Reuters, Intel may manufacturer ARM-based SoCs based chips for Apples iOS device.
The article went on to read that executives of the both companies have been discussing a possible partnership, since last year, where Intel’s foundries would be used to manufacture Apple-designed chips. However, the deal has not yet been reached.
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“If you can have a strategic relationship where you’re making chips for one of the largest mobile players, you should definitely consider that. And for Apple Inc. (NASDAQ:AAPL), that gets them a big advantage.” said Pat Becker Jr, of Becker Capital Management.
This is not the first time the public has heard of reports claiming a possible Apple-Intel partnership. In May, a report revealed that the chip maker was interested in designing the Apple’s A4 and A5 SoCs; however, the idea took a back seat as the so-called Ultrabook initiative gained momentum.
Intel Corporation (NASDAQ:INTC) is in a transition phase from a PC maker to mobile devices as PC’s continue to lose popularity with the advent of devices like Apple’s iPad. Intel has been planning to grow its foundry business as recently it entered into an agreement to design silicon based on technology from chip maker Altera.
Though moving into the manufacturing of ARM SoCs would cannibalize Intel Corporation (NASDAQ:INTC)’s own Atom mobile processor, the step seems right considering the changing macro environment. The Partnership, if formed, will be beneficial for Apple Inc. (NASDAQ:AAPL), as the Mac already uses x86 processors. The partnership will also help the iPhone maker to terminate its dependence on its long time rival Samsung, which currently makes A-series SoC for Apple Inc. (NASDAQ:AAPL).
The chip maker is planning to make a huge capital investment and has increased its budget by $2 billion to $13 billion this year. Though the foundry sector, which depends on volume to drive business, is immensely vulnerable to economic swings and could possibly squeeze Intel’s industry-leading margins, analysts have said it’s a necessary move for the company. The contract manufacturing business will not only help the company to fill an upcoming generation of production lines, but will also finance the research to upgrade the production.
Another important activity going on in Intel Corporation (NASDAQ:INTC) is finding a suitable replacement for the outgoing CEO Paul Otellini. Though Otellini believes he will be replaced by an insider, the board of directors are also looking on potential outside candidates.
“This is potentially huge,” said JMP analyst Alex Gauna. “The new CEO will have a very large opportunity to take this to the next level. Those discussions about taking on Apple Inc. (NASDAQ:AAPL) as a foundry customer are going to be very complex and very contentious.”