Krzanich: Intel to Open Manufacturing Service to Rivals

Krzanich: Intel to Open Manufacturing Service to Rivals

Intel chief Brian Krzanich told analysts he will open up the company’s factories to other high-volume processor mobile chip manufacturers. Will we soon see Intel making mobile chips on behalf of Nvidia, Qualcomm or maybe even Apple?

Intel (INTC) chief Brian Krzanich said he will open up the company’s factories to other high-volume mobile chip manufacturers, a move disregarded by his predecessors but an avenue he sees as an incremental revenue source for the chip maker.

Krzanich made the announcement during a call with analysts Nov. 21.

With Intel’s small contract manufacturing business a minor contributor to the company’s overall sales, outsourcing its foundries may signal Krzanich’s belief that the gap between Intel and its competitors in the mobile market is too substantial to overcome without alternate revenue sources.

Make no mistake about it, this is a major departure for Intel. For a company that historically leaned on its advanced manufacturing processes to lever itself from rivals, the possibility that Intel could make chips for mobile honchos Nvidia (NVDA) or Qualcomm (QCOM)—or perhaps squire away Apple’s (AAPL) mobile chip business from Samsung—is, well, startling.

Indeed, according to Intel president Renee James, customers already using Intel’s foundry business either to make chips under their own brand or access its design services include Achronix, Altera, Tabula, Netronome and Microsoft (MSFT). There are others to come, she said, referencing Intel’s new slogan: “If it computes, it does it best with Intel.”

Krzanich, in referring to Intel’s manufacturing services, said, “If we can utilize our silicon to provide the best computing, we'll do that. People who can use our leading edge and build computing capabilities that are better than anyone else's, those are good candidates for our foundry service."

According to reports, Krzanich, appointed by Intel’s board to the top slot last May, said that in the ensuing months he had improved the chip maker’s mobile portfolio (as he said he would) and vowed to quadruple the number of tablets on the market sporting the company’s chips in 2014. Tablets with Intel chips will span the market from the low-end upwards, ranging in price from $100 to $400, Krzanich said.

Along those lines, Intel rolled out two new Atom chips, one at the high end code-named Broxton, and another at the low-end named SoFIA. Broxton is slated for completion sometime mid-2015 and SoFIA due next year. Krzanich said Intel will outsource SoFIA manufacturing initially but will subsequently move production to its 14-nanometer process lines.

As for the beleaguered PC industry, Intel’s view is that the worst is behind us, and the market for desktops and laptops, while still shrinking, may be steadying.

"Our view is that it's declining but it's beginning to show signs of stabilization," he said.

Still, PCs aren’t a bad business for Intel, generating some $33 billion in yearly revenue and $12 billion in profit annuallysaid chief financial officer Stacy Smith. In its recently completed Q3 2013, Intel's PC business earned $3.3 billion on $8.4 billion in sales. No matter, though; Intel plans to pare capital allocated to PC chips.

New Business

James said Intel intends to focus on security, Big Data and the cloud, with plans to deliver 30 new products from its reformatted McAfee security business, moving from detection to products that protect data proactively.

The market opportunity for Intel, she said, “is silicon, plus software, from edge to edge.”

Intel also projected flat year-over-year FY 2014 revenue, less than Wall Street’s 2 percent growth expectation, according to a report. The company expects low- to mid-teens sales growth in its data center business, a mid-single-digit decline in PC sales, flat sales in its Other Architecture group and low-double digit growth in software and services.

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