Rumors that Intel is considering investing in China-based Spreadtrum have been circulating in China's IT industry recently and Digitimes Research believes the rumors can explain why Spreadtrum's product development completely stopped recently. Spreadtrum may enter a partnership with Intel to start developing x86-based products in-house.
If Spreadtrum enters the x86 ecosystem, the vendor may outsource its chip manufacturing to Intel. The cooperation would allow Spreadtrum to gain advantages from Intel's advanced manufacturing processes to effectively reduce costs, while Intel will also be able to fill some of its empty capacity, Digitimes Research said.
Unlike Rockchip, Spreadtrum has its own baseband technologies and the company does not seem to have a reason to cooperate with Intel; however, Spreadtrum's products are mainly focused on the entry-level segment and emerging markets, areas that still have business opportunities, but are unlikely to contribute high profits due to fierce competition.
Although the China-based chip designer is looking to push its products to higher-end markets, the company is unlikely to do so as it is unlikely to be able to create unique innovations out of existing ARM-based products.
In addition, for an IC designer that mainly focuses on ARM-based products, the wafer industry's insufficient available capacity is limiting the order volumes Spreadtrum can place. Even Taiwan Semiconductor Manufacturing Company (TSMC), which has the best yield rates in the industry, has always been unable to satisfy all its clients' capacity needs. Placing orders with TSMC also creates higher costs.
Meanwhile, other wafer foundry houses are unable to match TSMC in terms of advanced manufacturing processes and are usually chip designers' second choice for mass production.
Although Spreadtrum is backed by the China government and has been receiving subsidies for creating masks, the company's spending is still rather high. To expand its market reach and further lower its production costs, seeking help from Intel would be a reasonable move.
The x86 architecture is currently still a minority in mobile applications, but the leader in the PC computing market. With Intel's aggressive investment and planning, the PC architecture has started to enter the tablet market and joining the x86 camp would be an excellent choice for Spreadtrum.
Intel also has an enormous empty capacity that needs to be filled. Intel's plan to push into the Android-based tablet market is not only for expanding new applications, the CPU giant is also looking to pump up its x86 chip OEM business. Through cooperation with Rockchip and Spreadtrum, Intel is expected to be able to expand the market's scale and create bigger opportunities for its OEM business.
Despite Intel having been trying to expand its chip OEM business, Intel is only achieving limited results from entering the ARM-based chip industry because the manufacturing process of x86-based chips is not compatible with ARM-based chips and conducting adjustments to make the process compatible is rather difficult.
However, if Intel is able to turn existing chip designers to adopt the x86 architecture, they will be able to directly place their orders with Intel's wafer foundries, helping to resolve Intel's empty capacity issues, while chip designers can also benefit from Intel's advanced processes to create differentiation with its competitors.