Can Intel Manufacture Architectural Gains?

Recent announcements stemming from Intel’s annual analyst day have provided ample insight into the company’s embedded strategy to maintain and grow the x86 architecture. While Intel’s plans to quadruple tablet processor shipments next year would put a dent into ARM’s share in that arena, the company’s expanded custom foundry business offers significantly more long-term potential. Intel will be providing access to Intel Architecture that can be added to customers’ IP cores in system-on-chip devices. The company will also allow customers to select their level of engagement, from design and test services to purely manufacturing. Though many details on Intel’s refocused foundry business are scant, we believe it has the potential to be a prominent contributor to x86 growth over the next several years.

Intel’s expanded foundry services greatly support x86 in a number of ways:

• First, Intel retains the control to pick and choose exactly what they will fabricate. Intel isn’t going to cannibalize sales of their own processors through manufacturing SoCs for fabless competitors in the embedded markets that it plays in. The company can also equally regulate the integration of foreign IP. 
• Second, expanded customization services will help Intel’s new Quark SoCs in penetrating new and traditional embedded markets. Intel will surely discount customization services of its homegrown productsbecause of the higher margins captured from semiconductor design. Such pricing reductions are the premise for Intel’s planned expansion into tablet devices.
• Third, Intel’s foundry ecosystem is growing to accommodate increasing flexibility in development platforms. In addition to Intel EDA tools, customers will be able to leverage software development tools from Cadence, Synopsys, and Open-Silicon.

By expanding fabrication services, Intel stands to grow its architectural share at the expense of dedicated foundries. The expansion also enables Intel to become more proactive to market shifts. Though specific details on Intel’s new semi-customization services remain scarce, we believe the growing foundry business will help grow x86 in embedded markets over the long-term.