Intel (INTC) is Willing and Able to Help Apple (AAPL) in a Pinch
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Up: 7 | Down: 12 | New: 10
Rating Summary:
39 Buy, 25 Hold, 7 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 7 | Down: 12 | New: 10
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It is a well known fact that Apple (Nasdaq: AAPL) is searching for foundry space to diversify away from mortal enemy Samsung and to meet massive iPhone demand. One large U.S. semiconductor company has the extra capacity, and an industry analyst is speculating this morning that the two could be in active discussions.
The company in question is Intel (Nasdaq: INTC) and, according to RBC Capital analyst Doug Freedman, Apple has re-engaged in dialogue with the Santa Clara, CA-based giant.
"We believe Intel is in consideration to be a potential foundry partner for Apple," the analyst comments. "While this news has been made/speculated in the past, we believe that Apple and Intel remain in active dialogue."
Total wafer demanded for 2013 from Apple is seen at 415,000. Intel has the excess capacity with leading-edge technology and could provide Apple with assurance of performance advantages should the company decide to move to a multisource foundry model, Freedman notes.
Intel currently has 3 foundry partners including Achronix, Tabula and Netronome and could later add Cisco. Intel is currently ahead of ARM by 1.5 generations plus FinFET, comparing 22nm x86 SoCs to Apple's custom ARM-based 32nm processor, the analyst notes. This gap could widen as Intel moves into 14nm production in 2014. "We believe Intel has the upper-hand due to the limitations of capacity at alternative sources (TSMC and GloFo) as the demand is outstripping Apple's ability to add supply."
Important for shareholders to consider is the fact that helping out Apple in a pinch could give Intel some leverage on future deals. "While ARM (NASDAQ: ARMH) is likely to remain the architecture of choice for Apple, we believe that Intel is lobbing for x86 on certain products like next gen iPad, in exchange for iPhone ARM based production," the analyst notes.
In addition to gaining leverage, the financial impact from a foundry deal with Apple could in itself be large. Freedman believes that the total revenue opportunity from Apple in foundry will be roughly $2 billion in 2013, assuming wafer price of $5,000 multiplied by the our estimated 415,000 wafers to meet mobile SoC demand.
While a deal with Apple would clearly be a positive for Intel, the analyst is remaining cautious on the stock. He rates the shares at Perform, with a $24 price target.
The company in question is Intel (Nasdaq: INTC) and, according to RBC Capital analyst Doug Freedman, Apple has re-engaged in dialogue with the Santa Clara, CA-based giant.
"We believe Intel is in consideration to be a potential foundry partner for Apple," the analyst comments. "While this news has been made/speculated in the past, we believe that Apple and Intel remain in active dialogue."
Total wafer demanded for 2013 from Apple is seen at 415,000. Intel has the excess capacity with leading-edge technology and could provide Apple with assurance of performance advantages should the company decide to move to a multisource foundry model, Freedman notes.
Intel currently has 3 foundry partners including Achronix, Tabula and Netronome and could later add Cisco. Intel is currently ahead of ARM by 1.5 generations plus FinFET, comparing 22nm x86 SoCs to Apple's custom ARM-based 32nm processor, the analyst notes. This gap could widen as Intel moves into 14nm production in 2014. "We believe Intel has the upper-hand due to the limitations of capacity at alternative sources (TSMC and GloFo) as the demand is outstripping Apple's ability to add supply."
Important for shareholders to consider is the fact that helping out Apple in a pinch could give Intel some leverage on future deals. "While ARM (NASDAQ: ARMH) is likely to remain the architecture of choice for Apple, we believe that Intel is lobbing for x86 on certain products like next gen iPad, in exchange for iPhone ARM based production," the analyst notes.
In addition to gaining leverage, the financial impact from a foundry deal with Apple could in itself be large. Freedman believes that the total revenue opportunity from Apple in foundry will be roughly $2 billion in 2013, assuming wafer price of $5,000 multiplied by the our estimated 415,000 wafers to meet mobile SoC demand.
While a deal with Apple would clearly be a positive for Intel, the analyst is remaining cautious on the stock. He rates the shares at Perform, with a $24 price target.
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