Intel as a foundry?

Intel CFO Stacy Smith is on record saying that combining other chip design IPs with Intel's architecture core "would be fantastic business for us." That, of course, is spawning all sorts of speculation about the company's future plans, and whether it could be angling for business from consumer juggernaut Apple.

With its recently unveiled 22nm trigate structure set to ramp later this year, maintaining the company's 1-2 year technology headstart over competitors, Intel could, if it wanted, throw open the doors for some foundry customers

It's not a slam-dunk decision, though. Putting Apple or Sony's IP onto an Intel core is one thing; it's another entirely if a customer wants a custom-designed core. "Then you are only getting the manufacturing margin," noted Smith, and "that would be a much more in-depth discussion."

Smith was quick to point out that no proposal from Apple or others is in the works right now, and that foundry isn't a driver of Intel's capex.

So how much of this is real?

Eric Sherman over at BNet thinks there could be a few reasons why Intel would take on foundry orders: it wants to learn more about making low-power mobile chips (unlikely given IP restrictions), or there's a lot of money available (Intel isn't hurting for sales). The only reason that makes sense, he argues, is that Intel sees, and wants to head off, a long-term trend of falling utilization due to consumer purchasing shifts.

Piper Jaffray's Gus Richard echoes the idea that Intel is on the hunt for fab-filling foundry orders, citing scuttlebutt that Intel has been talking to OEMs -- including Motorola, a Toshiba customer -- and is looking to hire ASIC engineers and support staff. He pulls in other possible customer names into the mix, including EMC, Cisco, Juniper Networks, Sony, Apple, Nokia, and others who need leading-edge logic, and the x86 architecture -- i.e. not ARM or other competitors. What it's all boiling down to, he says, is "will Intel learn how to design its way out of a PC, or will the foundries overcome the process complexity?"

And at its recent investor day, Intel "sent what we thought was a clear message that it was very interested in some type of foundry relationship with AAPL," notes Susquehanna analyst Christopher Caso. Firstly that means Apple's business is indeed up for grabs, i.e. not locked in by previous partner Samsung -- nor a shoo-in for speculated new partner TSMC. Which, secondly, is someone Intel is increasingly thinking of as a process-technology competitor, so INTC wants to keep business away from them, especially any ARM-based competition.

Update: Citigroup's Glen Yeung is adamant that an Intel-Apple foundry partnership is on the horizon, perhaps for the A4 and A5 chips (currently Samsung-made) -- but probably on the condition that Apple converts to the x86 architecture for handsets and tablets, not an ARM-based core. INTC's recently-announced trigate architecture is the main draw for Apple, he notes. TSMC also stands to win some Apple foundry business, though the challenges of shifting to 28nm may spook AAPL into siding with Intel -- and in fact that might be why Intel isn't porting its Atom chips to 22nm just yet, Yeung says.

Yeung adds that fabbing Apple's 122mm A5 chip would require ~24,000 wafers/month, which is roughly equivalent to an Intel fab, but requirements would double with Apple's next chip and any quad-core parts.


A history lesson in M&A fundraising

How much have things changed in 13 years' of M&A? That's the amount of time passed from Applied Materials' most recent offering ($400M) and what it's raking together today to help fund its $4.9B deal for Varian Semi, a mix of five-, 10-, and 30-year bonds, notes Bloomberg's Tim Catts.

Some quick data pulled together by Bloomberg:

- The series of new notes all yield more than a full percent (107-175 basis points) more than similar-maturity treasuries, with interest of 2.65% (five-year), 4.3% (10-year), and 5.85% (30-year). Average data from Bank of America Merrill Lynch shows 3.64% for A-rated debt maturing in 5-7 years and 5.08% for ones due in 10-15 years.

- Borrowing costs have sunk a full three percentage points since AMAT's last $400M offering on October 9, 1997.

- On the other hand, so have returns -- yields on investment-grade corporate bonds were 3.86% on June 1, vs. 6.82% back in 1997.