UPDATE: Intel (INTC) Expands Foundry Business; Signs Deal with Altera

February 25, 2013 5:08 PM EST
(Updated - February 25, 2013 5:56 PM EST)

Intel (NASDAQ: INTC) announced a new customer for its fledgling foundry business that highlights the company's process technology lead. Intel and Altera Corporation (NASDAQ: ALTR) entered into an agreement for the future manufacture of Altera FPGAs on Intel's 14 nm tri-gate transistor technology.

"We look forward to collaborating with Altera on manufacturing leading-edge FPGAs, leveraging Intel's leadership in process technology," said Brian Krzanich, chief operating officer, Intel. "Next-generation products from Altera require the highest performance and most power-efficient technology available, and Intel is well positioned to provide the most advanced offerings."

For the past three years Intel has embarked on the foundry business, although they are moving very slowly given they don't have a lot of experience in the space. Last spring, outgoing CEO Paul Otellini characterized the company's foundry efforts as "crawling, transitioning to walking and then to running."

With today's Altera announcement, an Intel spokesperson described the company as "moving from the crawling phases of our business to the walking phase."

In addition to Altera, Intel currently has foundry deals with Achronix, Tabula and Netronome. There are others but they have chosen to keep their relationship with Intel confidential. Notably, Achronix announced just last week that they are shipping their first Intel manufactured products on 22 nm.

This afternoon, RBC Capital analyst Doug Freedman speculated that a material foundry design win for Intel was close. Freedman said the move into a foundry relationship is a positive. He warned, however, that Intel needs to be careful to build products that are complementary and not competitive with internal aspirations. Freedman said success in the foundry business for Intel would be defined as incremental revenues in excess of $2 billion per year.

Commenting on the after-hours news release, Freedman said: "In our view, the move is mutually beneficial to ALTR and INTC. On the ALTR-side, the company is now on-track to reach sub-20nm before competitor XLNX. We highlight that Intel does have experience acting as a foundry for a PLD customer (Tabula). Recall that INTC and ALTR have worked together in the past as INTC uses an ALTR’s FPGA on select Atom SoC processor packages (i.e. E6x5C series). On the INTC-side, we believe this is the first in what is likely to be more tier-one customer announcements in the future."

Some are looking at Apple (NASDAQ: AAPL) and Cisco (NASDAQ: CSCO) as other potential foundry customers for Intel.

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