Intel and Arm Surprise Partnership Announcement... Challenge to Samsung and TSMC

U.S. semiconductor manufacturer Intel and British fabless (semiconductor design) company Arm have announced a 'surprise partnership.' As Intel expands its business after re-entering the foundry market, the collaboration with Arm, the 'absolute leader' in mobile application processor (AP) design, is seen as a serious challenge to the market dominated by Samsung Electronics and Taiwan's TSMC.

[Image source=Reuters Yonhap News]

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On the 12th (local time), Intel announced that Arm will produce semiconductor system-on-chips (SoCs) for mobile devices using Intel's 18A (angstrom, 0.1 nanometer) process in collaboration with Intel Foundry Services (IFS). The 18A process refers to a 1.8-nanometer (nm; 1 nm = one billionth of a meter) process. Intel and Arm plan to gradually expand their cooperation from smartphone SoCs to automotive, Internet of Things (IoT), data center, and aerospace sectors.

Intel did not specify exactly where Arm semiconductors will be produced but explained that production will take place at IFS's robust manufacturing facilities based in the U.S. and the European Union (EU).

Pat Gelsinger, CEO of Intel, said, "Demand for computing performance is increasing, but fabless semiconductor design companies have had limited options to create advanced mobile technologies. The collaboration between Intel and Arm will expand market opportunities and provide new possibilities for companies seeking to use industry-leading open processes."

Ren?e Haas, CEO of Arm, stated, "As demands for computing and efficiency become increasingly complex, our industry must innovate on a new level. By creating next-generation products that change the world, the collaboration between Arm and Intel can make IFS a key foundry partner for our customers."

Arm, which Intel has partnered with, is an intellectual property-based company specializing in mobile semiconductor design. In particular, Arm sells chip design architectures to companies such as Apple, Qualcomm, and Samsung Electronics. These companies redesign chips based on Arm's designs to suit their own needs and sell them. With this collaboration with Intel, it is anticipated that in the coming years, Arm's customers like Apple or Qualcomm may choose Intel over TSMC or Samsung Electronics for foundry contracts.

The market interprets this collaboration as a sign of Arm's trust in Intel's technology roadmap. Since Pat Gelsinger became CEO in 2021, Intel declared its re-entry into the foundry business, challenging TSMC and Samsung Electronics, which dominate this market. In July of the same year, Intel announced it would usher in the angstrom era beyond nanometers starting in 2025. Intel has revealed plans to commercialize ultra-fine processes such as Intel 20A (around 2 nanometers) and Intel 18A (around 1.8 nanometers).

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The key point now is whether Intel can succeed in mass-producing semiconductors based on the 18A process. Currently, TSMC and Samsung Electronics are reportedly developing 2-nanometer processes targeting mass production in 2025. Intel recently announced at an event that it has completed development of the 20A and 18A processes. However, in semiconductors, yield?the proportion of defect-free, acceptable products?is crucial, so the hurdle of mass production remains.

If the collaboration between Intel and Arm succeeds, it will significantly strengthen Intel's position as a latecomer in the foundry market. According to market research firm TrendForce, as of the fourth quarter of last year, foundry market shares were TSMC 58.5%, Samsung Electronics 15.8%, UMC 6.3%, GlobalFoundries 6.2%, SMIC 4.7%, Hua Hong Group 2.6%, PSMC 1.2%, Tower (Intel affiliate) 1.2%, VIS 0.9%, and DB HiTek 0.9%.

However, Intel's foundry business currently generates annual revenue of $1 billion, accounting for only 1.4% of Intel's total revenue, and is operating at a loss.

Meanwhile, SoftBank, the largest shareholder of Arm, is expected to officially agree on Arm's Nasdaq listing soon and begin the initial public offering (IPO) process within this year.

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