According to CNBC, Apple is said to be close to reaching an agreement with Intel to produce chips for some Apple devices, marking a major shift in the chip manufacturing industry. The Wall Street Journal reported on Friday, citing people familiar with the matter, that talks between the two companies had been brewing for more than a year and a tentative agreement had been reached in recent months.

Affected by this news, Intel’s stock price surged nearly 14% on Friday, and Apple’s stock price rose 2%. Both companies declined to comment.

“I am 100 percent confident that this will happen, I just don’t know when.” said Ben Bajarin, a chip analyst at research firm Creative Strategies.

The era of single dependence is over

If the deal ultimately comes to fruition, it would be the strongest vote of confidence yet in Intel's once-troubled chip foundry business. Intel's stock price has risen more than 200% this year.

For Apple, this will be the end of an era. The iPhone maker currently relies entirely on TSMC to manufacture all of its most advanced chips for its devices.

However, in the context of the surge in demand for AI chips, TSMC’s wafer production capacity has been stretched. The AI ​​craze has plunged almost all large technology companies into a frenzy of "core grabbing", and Apple is no exception. In recent years, Apple has continued to expand its self-developed chip plans. Nowadays, almost all core chips in iPhones, Macs and other products are designed by Apple. Bajarin said Apple is TSMC’s second-largest customer, after Nvidia.

“Intel is the only manufacturer that can expand production capacity and become a viable second source of supply.” He said.

Intel is indeed rapidly expanding production capacity, and a new chip manufacturing plant in Chandler, Arizona is now entering mass production. The factory is manufacturing chips using its most advanced 18A process, which is designed to benchmark TSMC's 2nm process, which is currently only produced in Taiwan. TSMC also has several new chip factories in Arizona, and Apple has committed to producing some of its chips there.

Bajarin said Apple is likely to wait to manufacture chips using Intel's next-generation 18A-P process, which could reach mass production as soon as next year. He believes that Intel's current 18A process is "a bit rough" and said that 18A-P "will solve a lot of problems."

Intel weathers the storm

For years, Intel’s foundry business has faced delays and low yields, casting doubt on its ability to make chips for other companies. Currently, Intel remains the only major customer for its own foundry business, producing central processing units and other chips for its own devices.

Bajarin said those days are over.

“They have turned the corner and can now be recognized as a reliable second source of supply,” he said.

Intel’s only other major external customer in chip foundry is Elon Musk, but actual results are not expected to be seen until 2029 or later.

Musk said last month that he plans to use Intel’s future 14A chip process at the $119 billion Terafab factory in Austin, Texas. The factory plans to produce chips for Tesla, SpaceX and xAI. Intel CEO Lip-Bu Tan said in February that the 14A process will enter mass production in 2029.

In terms of advanced packaging in the chip manufacturing business, Intel already has major customers such as Amazon and Cisco. The so-called advanced packaging refers to the integration of multiple chip dies and memory to manufacture products such as graphics processors.

Bajarin said that the Apple-Intel deal will not affect TSMC because "TSMC is already producing wafers at the fastest speed."

However, TSMC changed its rhetoric last month. Its chairman and CEO Wei Zhejia called Intel a "strong competitor."

Bajarin said in this regard: "If your big customer (Apple) may sign with a competitor (Intel), then you will say something like this to ease the impact."

Bloomberg said that Apple executives also visited Samsung's new Texas chip manufacturing plant under construction. Bajarin said Samsung, Intel and TSMC are the only three companies in the world that can build the most advanced chips needed for AI, and "none of them can build them fast enough." (Author/Xiao Yu)

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