iPhones And iPads Could Be Getting Intel Chips, Says Citi
Intel is in talks with Apple to manufacture its custom A4 and A5 chips, says Citi analyst Glen Yueng. — However, the manufacture of Apple's chips is only a prelude to a much bigger partnership.
Context & Ripple Effects
Apple has been pulling silicon design in-house since the A4 debuted alongside the iPad, and back in January 2010 a PC World report already floated the idea of that custom chip finding a home in iPhones. Citi analyst Glen Yueng now extends that thesis one layer down the stack: per his note, Intel is in talks to manufacture Apple's A4 and A5 — meaning the question shifts from where Apple's chips ship to who actually etches them.
Both claims are unconfirmed analyst commentary rather than announced deals, and no other outlet pickups are recorded around June 7, 2011, so this rests on a single research note. Its significance lies in what Yueng says the arrangement implies: chip manufacturing framed as merely a prelude to a much larger Intel-Apple partnership.
First-order effects
- If Yueng's read is right, Intel would take on a role it does not hold today — manufacturing another company's custom designs — giving Apple a second fabrication source for the A4 and A5 and diversifying away from whatever single supplier currently builds them.
- Apple gains leverage over its incumbent chip manufacturer simply by the market pricing in a credible alternative, before any deal is signed.
Second-order effects
- Incumbent contract chipmakers serving Apple's mobile silicon would face pressure to defend the account on price and process leadership against an Intel willing to run external designs.
- An Intel move into merchant manufacturing would blur its model of building chiefly its own processors, forcing other fabless chip designers to reassess who fabricates their parts.
Third-order effects
- Fabrication capacity itself becomes a negotiating lever: Yueng explicitly casts manufacturing as a prelude to a broader alliance, suggesting device makers and chipmakers increasingly bundle supply relationships into strategic partnerships rather than transactional contracts.
- If custom-designed mobile silicon keeps winning, the industry drifts further toward a split between firms that design chips and the shrinking set of manufacturers capable of building them at scale — with Intel's willingness to cross that line a bellwether.
The trend: Mobile makers are consolidating around custom in-house silicon while manufacturers compete for the right to build it, turning foundry relationships into strategic bargaining rather than commodity procurement.