Intel: Could They Lure Apple, Qualcomm Amidst Industry ‘FinFet’ Problems … – Barron’s (blog)

Drexel Hamilton chip analyst Richard Whittington today ponders whether Intel (INTC) might gain new business for its fledgling foundry services from chip makers struggling to get 3-D transistors made elsewhere.

Whittington, how maintains a Hold rating on Intel shares, notes last week’s fiscal Q3 report from chip equipment maker KLA Tencor (KLAC), which commented at the time that attempts by companies to manufacturer so-called “FinFet” transistors, with a novel three-dimensional gate structure, are running up against “yield issues” because of the big learning curve for the industry. Intel has for several years now already been producing such transistors, which it calls “Tri-Gate.”

KLA didn’t mention names, but presumably those struggling include Taiwan Semiconductor Manufacturing (TSM), the world’s largest contract maker of semiconductors.

Intel, writes Whittington, “is fraught with both opportunity and peril from a still unfolding tug of war between leading-edge process technology and competitive mobile economics.”

Whittington wonders whether Intel, playing off the success so far of its marquee foundry customer, Altera (ALTR), could lure Apple (AAPL) or Qualcomm (QCOM) if the current suppliers of those companies continue to run up against problems with FinFet:

Altera playing both ends against the middle prominently highlighted 14nm Trigate for its highest end, highest margin Stratix family. Also leveraging long-standing Intel multi-chip module technology, Altera moves forward with 20nm TSMC-made parts for the value, broad market. This process bi-furcation is perhaps the emerging model should TSMC, Samsung et al continue to have problems shifting to 3D from planar. Question is whether Apple and Qualcomm become similarly motivated to shift incumbent foundry relationships for high end parts over to Intel. Questions about what would such would look like, fears of 30%-40% gross margins play off against this year’s better than $3bn mobile loss. Intel’s wish is to fill its fabs at profit rates sufficient to fund process R&D while focusing on PC legacy and fending off ARM in Data Center. One would think an Apple/Qualcomm arrangement would cease Intel’s present mobile course, and eliminate this year’s $0.60 EPS hit. Another Intel course to exploit 3D processing by aggressively bundling NAND and DRAM in mobile, possibly with NAND partner Micron [Technology (MU)].

Intel shares today are down 16 cents, or 0.6%, at $26.10.


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