Menu
Intel plunks down billions to expand in mobile market

Intel plunks down billions to expand in mobile market

Intel's $1.6 billion investment in a Chengdu plant will help it regain complete control of manufacturing mobile chips

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.

Intel will be able to control costs and keep its factories busy by moving manufacturing in-house, said Dean McCarron, principal analyst at Mercury Research.

"It makes sense because Intel likes to make manufacturing facilities in technically sophisticated markets, which China is," McCarron said.

Mobile chips alone may not fill up a facility of Chengdu's size, so Intel may make chips for mobile devices for third parties, McCarron said.

"If someone like Apple were to approach Intel and say we want this custom phone part, it's obvious Intel will build it," McCarron said.

Intel is also upgrading equipment in its factory to remain in the good books of the Chinese government, which is has been difficult on Western technology companies, said Jim McGregor, principal analyst at Tirias Research.

Companies like Microsoft and Qualcomm are being investigated by the Chinese government for monopolistic behavior.

"Intel's trying to stay out of trouble," McGregor said.

The chips made in the Chengdu factories won't be based on the latest process manufacturing technology, McGregor said, adding that Intel wants to protect its intellectual property and won't transfer its latest manufacturing process to China.

"There's a lot of leaky walls there. It's hard to keep intellectual property and patent secrets out there," McGregor said.

If Spreadtrum or Rockchip want the latest technologies, they'd have to rely on Intel factories in the U.S., which can be more expensive. That could raise the price of chips, and ultimately of mobile devices.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com


Follow Us

Join the newsletter!

Error: Please check your email address.

Tags Componentsprocessorsintel

Featured

Slideshows

A snapshot of the Kiwi partners set to shine at the Reseller News Awards

A snapshot of the Kiwi partners set to shine at the Reseller News Awards

With the 2017 Reseller News ICT Industry Awards only weeks away, Reseller News profiles the power line-up of partners set to dominate the biggest night on the channel calendar. ​Ranging from the enterprise, down through the mid-market and small business sectors into the heart of the start-up scene, the end result is the most diverse and wide-ranging partner line-up in the history of the Awards, playing host to the leading innovators of the past 12 months.​

A snapshot of the Kiwi partners set to shine at the Reseller News Awards
Show Comments