Intel Preps for Upturn, Does Deal in Taiwan

Despite a tech spending slowdown which has spelled big trouble for chip manufacturers, Intel(INTC) is quietly preparing for an upturn.

The processor giant teamed up with Taiwanese chip manufacturer TSMC on Monday, announcing plans to collaborate around Intel's diminutive Atom processor.

Specifically, Intel is looking to develop and build Atom System on Chip (SOC) technology, which integrates various computer components onto a single piece of silicon.

By combining its low-cost Atom processor with TSMC's chip technology, Intel is eyeing the lucrative smartphone and netbook markets, according to Rob Enderle, principal analyst at technology research firm Enderle Group.

"It looks like they are trying to create something that is unique and targeted at certain parts of the market," he told TheStreet.com. "I think it's an attempt by Intel to make sure that they are set up for an upside -- they are expecting a strong fourth calendar quarter for Atom."

The fact that Intel will use TSMC for some of its manufacturing is also a clear indication that the chip giant sees some light at the end of the tunnel, according to the analyst.

"If manufacturing capacity is tight, they can use these folks as backup to hit demand," he said. "They are trying to set up some redundant capacity, particularly as they ramp for a high-volume period such as the fourth calendar quarter."

Intel, which has traditionally manufactured its own processors, is in the throes of a major restructuring effort. After recently announcing plans to cut up to 6,000 jobs, the tech bellwether unveiled a $7 billion plan to add new manufacturing plants.