In a major shift for the $580 billion semiconductor industry, Apple is diversifying its chip manufacturing, bringing a portion of its production to US soil with Intel.
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Apple Taps Intel for Chipmaking in New Deal After 1-Year Negotiation
Apple has reached a preliminary agreement with longtime rival Intel to manufacture custom chips for its devices, a landmark deal aimed at reducing its manufacturing concentration with Taiwan's TSMC after more than a year of negotiations.
While the companies have not commented, sources familiar with the year-long, intensive talks said a formal agreement was finalized in recent months, according to a report from The Wall Street Journal.
The deal would make Apple a key client for Intel's revitalized foundry business, though specifics on which product chips Intel will produce or the financial terms were not disclosed. For Apple, this move follows early-stage diversification talks with Samsung and addresses growing geopolitical risks associated with its heavy reliance on TSMC, which currently produces nearly all of its custom silicon for iPhones, iPads, and Macs.
This partnership is a significant validation of Intel's multi-billion dollar foundry strategy under CEO Pat Gelsinger, potentially securing a high-volume customer and shaking up the foundry market. For Apple, it marks a strategic pivot to onshore more of its supply chain, which could impact production costs and logistics for its most profitable products.
Intel's Foundry Future Gets a Major Boost
Landing Apple as a foundry customer is a monumental win for Intel. The company has been aggressively trying to revitalize its chip manufacturing arm, Intel Foundry Services, to compete with industry leaders TSMC and Samsung. Securing a portion of Apple's business, the world's most demanding and highest-volume chip buyer, provides immense credibility and a stable demand base for Intel's advanced manufacturing processes.
The move is central to CEO Pat Gelsinger's turnaround plan, which aims to reclaim Intel's historical leadership in chip technology. The company is investing billions in new fabs in the US and Europe. This deal follows other strategic moves, including a partnership to build processors for Elon Musk’s Terafab AI chip project, signaling Intel's serious ambition to become a major player in the global foundry industry.
Apple's Supply Chain Diversification Takes Center Stage
For Apple, the agreement with Intel is a critical step in diversifying its supply chain and mitigating geopolitical risk. The company's deep dependence on TSMC, located in Taiwan, has been a growing concern for investors amid rising tensions in the region. By shifting some production to Intel, which has a significant US manufacturing footprint, Apple can ensure greater supply chain resilience.
The tech giant has also reportedly held early-stage discussions with Samsung about producing its advanced chips at a new plant in Texas. While TSMC will likely remain Apple's primary partner for the foreseeable future due to its scale and cutting-edge technology, these parallel negotiations show a clear strategy to cultivate multiple high-end manufacturing partners.
The deal's success will be a key factor for investors watching both companies. For Intel (INTC), it could signal a successful turnaround, justifying its massive capital expenditures. For Apple (AAPL), it represents a strategic de-risking of its supply chain, though the market will watch closely for any potential impacts on chip performance or cost compared to those produced by TSMC.
This article is for informational purposes only and does not constitute investment advice.
