Industry Shakedown: Intel Eyes Custom Chip Manufacturing

Intel has been the premier name in microprocessors since the earliest days of the personal computer. Working in tandem with their software partner, Microsoft, Intel have cared out a niche for themselves as the undisputed leader of the microprocessor field, designing and manufacturing the processors that shaped the personal computer industry. Virtual Internet tracks the developments at Intel closely, since processing power and chip customization may have profound long-term implications for the direction of Infrastructure-as-a-Service (IaaS) and cloud computing in general.

Increasingly, however, the microprocessor behemoth has been looking toward the possibility of becoming a foundry. By bringing its significant expertise to bear on the manufacture of custom chips for companies such as Apple and Cisco, Intel could potentially reap billions of dollars in profits. Such a move could have major implications for many aspects of computing, including network virtualization.

Why Intel Wants to Be a Foundry

Intel’s moves into custom chip manufacture left some commenters wondering why the processor giant would risk giving up its role as a driving force in the world of computer architecture. The answer lies in the changes affecting the landscape of personal computing. New devices and new ways of deploying technology are now challenging the conventional desktops that are synonymous with Intel. Increasing adoption of mobile devices and the drive towards virtualization has compelled Intel to look at ways in which it can remain dominant as new technologies emerge.

Competitors and Partners

Intel has already been producing custom processors for three small private customers; however, this assertive move into custom chip manufacture offers a direct challenge to major foundries such as Taiwan Semiconductor, best known for making Samsung’s chips. Cisco Systems already uses Intel processors, resulting in speculation that they may be a client for Intel’s foundry. Intel has expressed strong interest in working with Apple while Xilinx.and Altera have also been mooted as potential customers.


The implications of Intel’s strategy could be far-reaching. In the short to medium term, it is likely that a deal with Cisco would have significant implications for network virtualization. The networking equipment provider has faced some potential challenges to its dominance: the emergence of Nicira, a startup focused on the provision of “software-defined networks” and Niciria’s subsequent acquisition by long-term Cisco collaborator VMWare; as well as a general trend for large data center vendors to buy up companies involved in network virtualization. Custom chips could allow Cisco much more flexibility in this shifting marketplace, allowing them access to cheaper – but still Intel quality – semiconductors. Custom chips could also enable Cisco to offer unique products that rivals would struggle to imitate.

Industry speculation over the direction that Cisco might take in addressing these new challenges has been intense. With Intel on its side, Cisco may be about to give the IT world a decisive answer.

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