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Intel plunks down billions to expand in mobile market

Agam Shah | Dec. 8, 2014
Intel has bought its way into the tablet market, but success seems years away in smartphones, despite billions of dollars spent.

Intel has bought its way into the tablet market, but success seems years away in smartphones, despite billions of dollars spent.

The allure of mobile devices has led Intel to take some uncharacteristic moves that defy the company's proud tradition of designing and manufacturing chips in-house. Intel has partnered with Chinese companies to build some smartphone and tablet chips, and is relying on third parties to manufacture those chips.

Intel bets the partnerships will accelerate its business in China, where smartphone shipments are booming. But the company wants to regain complete control over manufacturing, and on Thursday said it was investing US$1.6 billion over 15 years in a China plant for mobile chip development and manufacturing.

The expenditure on a yearly basis isn't as huge as investments in its Israel and U.S. factories, but the goal is the same: to set up the chip maker for success in mobile devices. Most smartphones and tablets use ARM processors, and Intel wants to break that dominance.

Intel this year partnered with Chinese chip makers Rockchip and Spreadtrum — which have a big presence in the country — to design chips for low-cost mobile devices. A fallout with Rockchip led to Intel partnering with TSMC (Taiwan Semiconductor Manufacturing Co.) to produce an initial batch of low-cost mobile chips, which will go into smartphones and tablets starting at under $100.

During a speech earlier this week, Intel president Renee James said the company bring the manufacture of those chips in-house by 2016. The first chips from Intel's upgraded Chengdu facilities will start rolling out in the second half of 2016.

The Chengdu plant first opened up in 2005, but will now be tuned to testing and manufacturing smaller chips for mobile and Internet-of-things devices. It's one step in Intel's long-term goal to reduce its reliance on TSMC.

Power-saving and performance features are etched on to mobile chips in factories that are built for a specific process technology. Depending on designs, the manufacturing of chips designed with Rockchip or Spreadtrum could well happen in Chengdu or other facilities, said Chuck Mulloy, an Intel spokesman.

Intel's factories are dedicated to making its own chips, but it hasn't shied away from making custom chips for a handful of customers like Panasonic and Altera in its newer factories in the U.S. The chips are large due to the size of custom logic circuitry, but Chengdu provides an opportunity to make smaller custom chips for mobile devices.

The Chengdu investment could build up Intel's burgeoning custom chip-making business, Mulloy said.

"We can also use that foundry capability as we grow that business over time," Mulloy said.

Manufacturing chips in China could be cheaper than in the U.S., and would be preferred by companies like Rockchip and Spreadtrum, analysts said.

 

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