Intel Intros 2 Technologies for Foundry Customers

Intel Corporation (INTC) recently introduced two new technologies namely Embedded Multi-die Interconnect Bridge ("EMIB") and High Density Modular Test ("HDMT") for Custom Foundry customers in need of economical advanced packaging and test technologies.

The EMIB technology is intended for 14nm foundry customers and offers on-package functionality at a lower cost when compared to the existing solutions. On the other hand, the HDMT platform will allow quick test development and unit-level process control. It is intended for application in diverse markets. Besides improving productivity (as a result of using a common platform for low-volume product debug to high-volume production), it also lowers time to market.

While EMIB will be accessible to foundry customers for sampling in 2015, HDMT (already used by Intel internally) will be made available with immediate effect.

Based in Santa Clara, CA, Intel entered the foundry business in 2010. In the beginning, the company only offered its services to a small group of non-competitive customers. For instance, its foundry business received a boost when Altera Corp. (ALTR) became a customer in 2013.

Altera, being one of the biggest names in the market for FPGAs, or chips that can be electrically programmed for specific jobs by users after the devices have left the factory, has put pressure on the other companies providing foundry services.

Intel also lured away Panasonic Corp. from Taiwan Semiconductor Manufacturing Co. Ltd (TSM). Panasonic’s chip division will use Intel to make system-on-chip products using Intel’s 14-nanometer technology, which is the most advanced type of manufacturing process for semiconductors.

Foundry business is not that attractive for a company like Intel, which has traditionally manufactured its own devices to generate much stronger margins. But a number of factors could be driving Intel.

The most important would be the need for strong strategic partners that could help it grow position in the Internet of Things (IoT) market. Second would be the fact that it gives Intel a chance to benefit from the strong growth in mobile (Intel’s mobile market share remains small). The third would be the increased utilization of its significant capacity and its corresponding positive effect on its margins.

The issue with becoming a foundry for Intel is that it gives its competitors (Qualcomm, AMD and Samsung) access to the same advanced CMOS processes that allowed it to gain such a dominating lead in the PC market. The profit margins are also not as high.

Intel currently holds Zacks Rank #1 (Strong Buy). Competitor Advanced Micro Devices (AMD) is lower ranked at Zacks Rank #3 (Hold) .