Reports indicate that Apple (AAPL) and Intel's (INTC) foundry division have reached a preliminary agreement for chip manufacturing. A prominent analyst focused on the Apple supply chain suggests this deal may heavily involve relatively lower-end chips for iPhones.
Ming-Chi Kuo, an analyst at TF International Securities, stated on social media platform X that the collaboration is likely to focus on "relatively low-end and legacy previous-generation" chips for Apple products like the iPhone, iPad, and Mac. These chips would utilize Intel's 18A-P manufacturing process and its exclusive Foveros advanced packaging technology.
Given that iPhone sales still dominate Apple's revenue, Kuo estimates that approximately 80% of the order volume will be allocated to the iPhone lineup, "reflecting Apple's end-device sales mix."
Media reports suggest the two companies are actively re-engaging after years apart, with small-scale manufacturing tests expected this year. Production ramp-up is anticipated in 2027 and 2028, potentially tapering slightly in 2029.
Kuo added that the iPhone maker is also "actively evaluating" other advanced process node technologies from Intel.
Should Apple proceed to test some of its low-end/legacy chips for iPhone, iPad, and Mac within Intel's 18A-P + Foveros foundry/packaging system as reported, it signifies that Intel Foundry has secured early validation from one of the world's most discerning chip clients. This is seen as crucial for Intel's long-term strategy to attract external customers and rebuild its foundry narrative.
Apple is expected to showcase a major update to its Apple Intelligence platform based on Gemini and an AI-powered Siri assistant at its Worldwide Developers Conference (WWDC) in June. The company is undertaking a comprehensive, AI-driven overhaul of Siri, with the first version anticipated at the event. Previous Siri updates announced at WWDC 2024 were never officially released, and plans for a Spring 2025 launch have faced repeated delays. The launch of the new Siri is viewed as a key countermove by Apple amid increasing pressure from competitors like ChatGPT and Claude.
Ming-Chi Kuo has long focused on Apple's supply chain and the consumer electronics sector, accurately predicting updates to Apple's product lines and future technological shifts within the supply chain. In 2020, Apple announced its transition to in-house Apple Silicon for Macs, and with the discontinuation of the final Intel-based Mac Pro in 2023, the companies largely completed their "public split" regarding Intel CPUs. However, this renewed collaboration, as reported, does not involve Apple repurchasing Intel x86 CPUs but potentially involves Intel Foundry manufacturing some of Apple's custom-designed chips.
This development adds fuel to Intel's bullish narrative, particularly the resurgence of its foundry business. However, the true test remains yield rates and mass production capabilities.
Kuo further noted that it remains unclear when Intel's long-struggling foundry business can achieve scaled mass production and begin shipping products in volume to major U.S. tech companies, including NVIDIA (NVDA), AMD, Broadcom, and Apple, which seek domestic U.S. manufacturing capacity. The company aims for yield rates between 50% and 60% for its high-end advanced processes next year, with plans for further improvement. In contrast, industry estimates suggest Taiwan Semiconductor Manufacturing's (TSM) most advanced 2nm process node currently boasts yield rates above 70%.
Therefore, Kuo added, Apple is likely to remain heavily dependent on TSMC for the vast majority of its core chip manufacturing needs for flagship products, potentially reaching 90% or higher.
However, Apple has also recognized that TSMC's production capacity may continue to be prioritized for core AI processors like data center CPUs and AI GPUs/TPUs, given the unprecedented and seemingly endless surge in AI-related investment.
For Intel's remarkable bull run this year, news of renewed collaboration with Apple undoubtedly strengthens the bullish narrative. Intel's stock surged as much as 19% following the reports, bringing its year-to-date gain to a staggering 220%. However, this also significantly raises the bar for the company to deliver on its financial performance.
In other words, Intel's stock price trajectory is no longer solely focused on the data center server CPU super-cycle but is also trading on a broader narrative of becoming a "second source for advanced foundry services for U.S. tech giants." Yet, if the 18A-P process's yield rates, production ramp-up pace, customer shipment volumes, or gross margin improvements fall short of expectations, this high-volatility bull run could quickly face significant downward pressure.