Intel Takes On Chip-Production King Taiwan Semiconductor

Like most Silicon Valley chip-design specialists, Altera has long adhered to a trusted formula: Design semiconductors at home; produce them in Asia. For the San Jose (Calif.)-based company, which sells phone-equipment processors, that’s meant outsourcing production to Taiwan Semiconductor Manufacturing Co., whose cutting-edge chipmaking plants save customers the $4 billion or more it’d cost to build their own. TSMC is the leader in the $39.3 billion contract manufacturing industry for chips—the so-called foundry business—taking roughly $7 per smartphone sold.

In late February, though, Altera announced that it’s taking its advanced chip orders to Intel, which has traditionally focused on making its own microprocessors rather than producing those of other firms. With PC sales in the doldrums, the world’s biggest chipmaker needs to find new uses for its excess production capacity. Winning business from Altera “is a huge confidence boost for our team,” says Sunit Rikhi, Intel’s vice president in charge of its foundry business.