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Chips Ahoy

TSMC To Build Intel's Atom-Based Chips

Brian Caulfield, 03.02.09, 01:05 PM EST

Taiwan-based chip manufacturer to build processors based on Intel's Atom design.

SANTA CLARA, Calif.--In a major shift for a company best known for its manufacturing prowess, computer chip giant Intel will work with the Taiwan Semiconductor Manufacturing Co. to build processors based on Intel's Atom design in an effort to push its processor technology into an ever broader array of gizmos.

The collaboration will allow the the Taiwan Semiconductor Manufacturing Co. (nyse: TSM - news - people ) to build so-called systems on a chip around Intel's (nasdaq: INTC - news - people ) power-sipping Atom design. While Intel is known for pushing the latest innovations in manufacturing, building custom chips based on designs from other companies is TSMC's specialty (see "Intel's Stimulus Package").

The move is part of Intel's effort to push its x86 architecture, which is used in the vast majority of the world's personal computers and servers, into a wider array of lower-cost consumer devices.

"This is about allowing both of our companies to go after customers we are currently not pursuing with full vigor," said Anand Chandrasekher, senior vice president and general manager of Intel's Ultra Mobility Group at a meeting with reporters Monday morning.

Intel and rival Advanced Micro Devices (nyse: AMD - news - people ) provide most of the microprocessors for PCs and servers. By contrast, other markets rely on processors more closely tailored to a customer's requirements.

The market for processors in mobile phones, for example, is dominated by Samsung and Texas Instruments (nyse: TXN - news - people ), based on designs from the U.K.'s ARM Ltd.

Intel does not plan to transfer any of its manufacturing-process technology to TSMC, nor will it stop manufacturing Atom processors in its own manufacturing facilities.

"This gives us access to a different market and allows our customers to build more differentiated products," says Sean Maloney, Intel's chief sales and marketing officer.

The two companies didn't say when TSMC will begin manufacturing processors based on Intel's designs. TSMC Chief Executive Rick Tsai promised the two will move quickly. "Once we have decided to do it, we will do it fast and efficiently," Tsai said, noting that his company had been proposing such an arrangement for several years.

Intel shares fell 17 cents, or 1.33%, to $12.57 in early Monday trading.

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