Updated from 9:00 a.m. EST to provide additional analyst comments in the tenth paragraph.NEW YORK ( TheStreet) -- Rumors continue to circulate about a deal in which Intel ( INTC) will make chips for Apple's ( AAPL) iPhone and iPad. It's not what you think though. According to Reuters, Intel has spoken to Apple about manufacturing chips for Apple's iPhone and iPad as part of its burgeoning, foundry business. Intel's -x86 chips would not be inside the iPhone or iPad, but rather Intel would manufacture the A-series chips for Apple, as opposed to Samsung, which Apple is increasingly trying to move away from. This is something TheStreet predicted would happen in 2013, though nothing is official as of yet.
With the PC market stagnant and in decline and Intel's mobile business not taking off like it had hoped, many have said Intel has "lost the mobile race" to other semiconductor companies, such as Qualcomm ( QCOM). Qualcomm, Broadcom ( BRCM), Apple, Samsung and others all use intellectual property from ARM Holdings ( ARMH), which holds a 90% market share in the smartphone market. An Intel spokesman declined to comment on the speculation. When Intel issued first-quarter guidance, it raised its capital spending budget to $13 billion, suggesting to some that it would be upping its foundry business, trying to get a piece of the Apple pie (pun intended).
JPMorgan analyst Christopher Danely said he believes it could be big business for Intel, especially if it wins 50% of Apple's business. "
Raymond James analyst Hans Mosesmann noted that Taiwan Semi's gross margins are in the 45% to 50% range, while Intel's are much higher. It's a major change for Intel, Mosesmann noted, signifying that "the more formal entry into the foundry business is an implicit admission" Intel will not be able to use all of its plants to build its -x86 processors, as PC demand wanes. It's a risky business for Intel, but one its new CEO (current CEO Paul Otellini is retiring in May) will have to make if it hopes to stay relevant in a world that is increasingly passing it by. -- Written by Chris Ciaccia in New York >Contact by Email. Follow @Commodity_Bull