Intel began to develop chips for other companies
For the first time in its history, Intel has agreed to manufacture chips for other companies in its state-of-the-art factories. This step of the company is aimed at capturing that part of the chip manufacturing market, which is now dominated by Taiwanese and Chinese companies.
Starting next year, Intel will make chips for Achronix Semiconductor , a small Silicon Valley company that develops specialized microprocessors used to speed computing tasks such as network traffic management and data encryption.
The terms of the contract, which both companies plan to unveil in the near future, will require Intel to abandon only a small part of its production capacity, but this is undoubtedly a serious step for the company, which has traditionally been engaged in the production of chips only for its own needs.
Despite the fact that this transaction uses only 1% of the company's capacity, some analysts believe that this is only the beginning, and see in this step an allusion to the fact that Intel plans to take a large share in the custom-made chip market. Intel has long believed that they are far ahead of the rest of the companies in the electronic chip market, producing chips with smaller components than competitors. Their chips are more productive, more economical and cheaper than competitors' products. Intel owns many multibillion-dollar factories around the world where it develops chips on its own. Meanwhile, some factories, mainly in Taiwan and China, specialize in custom-made chips developed by other companies. These plants are involved in fierce and costly competition for customers such as Apple, Nvidia, AMD.
Many analysts describe this move by companies as Intel’s attempt to try something new in the business before changing its principles by accepting orders from other chip developers. Achronix, a small player in the FPGA (field programmable gate array) chip market. These chips are optimal for quickly solving specialized tasks, so they quickly found their niche in the chip market. Companies use these programmable chips for various purposes: to speed up the operation of switches and routers, in digital signal and video processing systems, to expedite financial calculations on Wall Street and process geological data by oil and gas companies. The global FPGA market is about three billion dollars, and this is only one tenth of Intel's annual revenue, and the company does not currently compete in this market.
The company hopes to gain some experience in creating products for other developers without changing the product lines much. The company may have to face certain difficulties, as it will first have to satisfy the needs of external customers. This move could increase Intel’s competitiveness in the FPGA market, which is dominated by Xilinx and Altera. Both companies are engaged in the production of chips of their own design under contracts. Achronix believes that the deal with Intel can help the company create cheaper and faster products than its competitors and expand the market for these chips.
FPGA chips were too expensive, unit cost was in the range of one thousand dollars. Achronix plans to sell them at 400. Collaboration with Intel will allow the company to avoid many costs, increase competitiveness and capture a significant part of the market. But some analysts are not so optimistic and believe that crowding out Xilinx and Altera will not be so easy.