Intel and TSMC Split the Atom

March 2, 2009:  Today Intel and TSMC made a major announcement.  The companies have issued a memorandum of understanding (MOU) to collaborate on addressing technology platform, intellectual property (IP) infrastructure, and System-on-Chip (SoC) solutions.  Essentially, Intel is licensing the Atom core to customers who will be able to customize a design and have it manufactured by TSMC.

Intel is doing this in order to expand the potential market for the Atom architecture, which is a derivative of the 80x86.  The agreement with TSMC allows IP to be integrated around the Atom core.  This is IP that Intel does not have access to for whatever reason.  Both OEMs and other semiconductor companies may be customers, but no companies were identified at this time.

The primary market segments that are targeted are mobile internet devices (MIDs), smart-phones, netbooks, nettops, and AC-powered consumer electronics device.  These are the same markets Intel is addressing with its current Atom products and roadmap.  The company said the agreement with TSMC does not change any of its plans for its standard product line.  The current Atom product line will continue to be manufactured in-house by Intel; this is not a second sourcing agreement.  Intel will maintain control of which companies will be allowed to license Atom under this agreement. 

At this time many details are not available.  Among these are technical details for future products.  Intel will transfer the Atom IP but not its manufacturing process to TSMC.  The actual TSMC manufacturing process that will be used was not disclosed, only that it will be an advanced process node.  Timing of product releases was not disclosed at this time.  The two companies did say that the objective will be to achieve fast time to market for its customers.

The actual sales of the SoCs will be treated as a sale through Intel with manufacturing provided by TSMC.

Semico Spin

Based on everything that could not be revealed, Semico is assuming that many of the details of this agreement still have to be worked out.  Intel stopped short of saying that this new business model will put Atom in direct competition with ARM.  However, Semico believes this is inevitable.  ARM offers its core to customers who integrate other IP with it.  This is essentially what Intel is doing with Atom.  The key markets for growth are MIDs and smart phones since these are high volume. 

The netbook and nettop markets are dominated by Intel since it has defined and established these markets.  However, there are some ARM vendors eyeing these markets as well.  Nevertheless, netbook/nettop is a relatively new segment.  While it has high growth, the numbers are still very small.  Semico estimates that 12.5 million netbooks shipped in 2008. 

Intel needs to stimulate Atom’s growth in markets outside of netbook/nettop.  It needs to do so quickly and generate high growth in order to make the architecture viable.  The netbook/nettop segment, even growing at 60% to 70% per year for the next few years, does not generate enough volume.

It seems to Semico that licensing to other semiconductor companies through the TSMC agreement may be a bit complicated considering competitive issues.  It would seem more likely that large OEMs with their own IP libraries, whether developed in-house or licensed, are candidates for this program.

What is significant about this arrangement is that this marks a major collaborative effort between Intel and TSMC, the two biggest players in their market space, well-known for their technology prowess.