Goldman Comments on Intel (INTC) / TSMC (TSM) Battle

Altera Corp. (Nasdaq: ALTR) announced yesterday that it plans to collaborate with Intel (Nasdaq: INTC) on its next-gen FPGAs using 14nm Tri-Gate transistor technology. At the same time it said it will continue to work with Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) (NYSE: TSM) on 20nm process and leverage future TSMC technologies.

Commenting on news, Goldman Sachs analyst Donald Lu said, "Direct competition between Intel and TSMC is inevitable as they vie to lead semi manufacturing. Altera is the first top 10 customer of TSMC to choose Intel’s advanced technology, which leads TSMC by 12-18 months. We also view Altera's sole sourcing of 14nm at Intel as an exceptional commitment of both sides in light of Xilinx’s (Nasdaq: XLNX) challenges at IBM (NYSE: IBM) and Samsung LSI and the low margin of foundry business to Intel."

Lu doesn't think Intel will offer its technology to Qualcomm (Nasdaq: QCOM), Nvidia (Nasdaq: NVDA), and AMD (NYSE: AMD) due to competition. Additionaly, Xilinx is unlikely to switch its 16nm FinFet. However, Goldman Sachs thinks TSMC and Intel will compete for Apple (Nasdaq: AAPL) business next.

"We view Intel's foundry commitment as incrementally negative to TSMC, but still expect TSMC to gain market share and surpass Intel in capex in 2013-2015," concluded the analyst.

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