Investors following Intel know the company has been making a greater push into the semiconductor foundry business. One of the company's biggest clients to date has been FPGA vendor Altera . Intel announcedits deal with Alterain February 2013, but chips will not begin to sample to customers until the second half of this year.This suggests a material revenue contribution to Intel in 2016.
At the recent Goldman Sachs Technology and Internet Conference, Intel CEO Brian Krzanich explained exactly what this deal with Altera means for his company's custom foundry business as a whole.
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What do foundry customers want to see from Intel and Altera?When asked by Goldman's Jim Covello about Intel's deal with Altera, Krzanich said this:
Krzanich said he believes Intel will pass both of those tests with Altera. After that, the CEO believes that if all goes as he expects, the doors will open up to "more strategic discussions" with other customers for other foundry dealsvis--vis custom foundry.
Building chips for competitors? Krzanich says yesCovello pointed out that much of the foundry business is focused on the mobile market, in which Intel is trying to compete with its Atom processors. He asked Krzanich the following:
Krzanich's response left little doubt about his take on the issue:
Krzanich added that the market is large enough that he would "absolutely take competitors' parts" for production at Intel foundries.
Will competitors trust Intel?Covello then asked whether competitors would feel comfortable having Intel build their parts. Krzanich said first he believes that before most potential customers would be comfortable with this situation, Intel would need to pass the aforementioned set of tests with Altera. "I have to prove to the marketplace that there's a reason they need to be there," he said.
Next, Krzanich said potential customers would "need to have a comfort that [Intel] is not going to disadvantage them." For example, Krzanich explained, customers need to be sure Intel isn't going to release parts that compete with its customers' parts before its customers do.
Krzanich, however, seemed optimistic that those issues could be worked through.
The article Intel Corporation CEO Talks Foundry Ambitions at Goldman Sachs Conference originally appeared on Fool.com.
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