Apple, Intel have reached preliminary chip-making deal, WSJ reports
Intel and Apple Chip-Making Agreement: Key Details and Implications
Overview of the Preliminary Deal
May 8 (Reuters) - Intel has reached a preliminary deal with Apple to make some of the chips that power the iPhone maker's devices, the Wall Street Journal reported on Friday, in a major boost for the chipmaker's bid to revive its manufacturing business.
The companies were engaged in intensive talks for more than a year and they hammered out a formal deal in recent months, the report said, citing people familiar with the matter.
Market Reaction
Intel stock extended gains to rise 15% on the news, while Apple shares were up about 1.7% in afternoon trading.
Strategic Significance for Intel
Landing an Apple contract will give Intel a steady stream of demand from one of the world's largest consumer electronics companies, bolstering both its reputation and a manufacturing business that has fallen behind TSMC in recent years.
Role of the U.S. Government
The Journal report said that the U.S. government, which became Intel's largest shareholder last year under a deal with its CEO Lip-Bu Tan, played a major role in bringing Apple to the negotiating table.
Uncertainties and Responses
It is unclear which Apple products Intel would make chips for, according to the report. Apple and the White House did not immediately respond to Reuters' requests for comment; Intel declined to comment.
Implications for Apple
For Apple, a deal with Intel could mean a diversification in manufacturing, giving it the ability to secure more capacity as it has been beholden to extremely tight capacity at TSMC.
At its most recent earnings, Apple CEO Tim Cook said iPhone sales were held back by supply constraints at its contract manufacturer.
TSMC's Dominance and Capacity Constraints
TSMC is the world's largest contract chipmaker and makes advanced wafers for AI firms such as Nvidia and AMD, but the swelling demand has made securing chip capacity extremely difficult.
Big Win for Intel
Recent Deals and Investments
Intel has spent the last year signing deals with the U.S. government and securing investments from AI chip giant Nvidia and SoftBank amid a push from CEO Lip-Bu Tan to turn the chipmaker around.
Government Involvement in Negotiations
Commerce Secretary Howard Lutnick has met repeatedly over the last year with high-ranking Apple officials, including top boss Tim Cook, SpaceX chief Elon Musk and Nvidia head Jensen Huang, to try to convince them to get into business with Intel, the WSJ report said.
Tesla and Intel Collaboration
Last month, Musk said Tesla will use Intel's next-generation 14A manufacturing process to make chips at its Terafab project, an advanced AI chip complex Musk has envisioned in Austin.
Exploratory Discussions with Other Manufacturers
Earlier this week, Bloomberg News reported that Apple had held exploratory discussions about using Intel and Samsung to produce main processors for its devices.
(Reporting by Zaheer Kachwala in Bengaluru, additional reporting by Steve Holland in Washington; Editing by Shinjini Ganguli and Alan Barona)
