Intel Corporation (INTC.US) receives a key endorsement from subcontracting: The industry shift behind Apple Inc. (AAPL.US) orders.

A potential chip outsourcing agreement between Apple Inc. (AAPL.US) and Intel Corporation (INTC.US) is reshaping the global semiconductor industry's competitive landscape. This is not only a strong signal for Intel Corporation's outsourcing business to overcome obstacles, but also indicates that Apple Inc.'s reliance on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) for many years may come to an end. According to sources cited by The Wall Street Journal, negotiations between the two parties have been ongoing for over a year, and a preliminary agreement has been reached recently. Intel Corporation will manufacture some chips for Apple Inc.'s devices. Following the announcement, Intel Corporation's stock price jumped nearly 14%, while Apple Inc.'s stock price also rose by about 2%. Both companies have declined to comment. The significance of this deal goes beyond a normal supply contract. Intel Corporation's stock price has already risen over 200% this year, and if Apple Inc. introduces Intel Corporation as a second supplier, it will directly change the allocation logic of global advanced process capacity and potentially put pressure on Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's market position. Intel Corporation's outsourcing: from skepticism to endorsement Intel Corporation's outsourcing business has long been struggling. Over the years, the business has been plagued by capacity delays and low yields, leading to doubts about its ability to handle third-party orders. Currently, Intel Corporation's main customer for outsourcing is still itself, producing processors and other chips for its devices, with few external customers. Chip analyst Ben Bajarin from Creative Strategies stated in an interview, "They have gone through the toughest stages, and now can be seen as a validated, trusted second supplier." He also said, "I am 100% sure that this deal will happen, just not sure about the timing." Intel Corporation is currently ramping up production at a new wafer fab in Chandler, Arizona, using its most advanced 18A process node, positioned to compete with Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's 2-nanometer node currently only produced in Taiwan. Strategic considerations for Apple Inc.: Capacity constraints driving diversification For Apple Inc., this change has its pragmatic DRIVE. Apple Inc. currently exclusively manufactures all its most advanced chips through Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, which is Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's second largest customer, after NVIDIA Corporation. However, with the explosive growth in demand for AI chips, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's wafer production capacity has become saturated. "Intel Corporation is the only viable option for expansion of production capacity as a second supplier," Ben Bajarin said. It is worth noting that Apple Inc. may be cautious in selecting the node. Ben Bajarin pointed out that Apple Inc. is more likely to wait for Intel Corporation's next-generation 18A-P node, which could achieve mass production as early as next year. He described the current 18A node as "still a bit rough," while the 18A-P "solves many problems." Additionally, according to CNBC, Apple Inc. executives have also visited Samsung's new wafer fab under construction in Texas. Currently, Samsung, Intel Corporation, and Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR are the only three companies in the world with the ability to produce the most advanced AI chips, and "none are building fast enough," according to Ben Bajarin. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR: Subtle changes in the competitive landscape The potential collaboration between Apple Inc. and Intel Corporation does not necessarily mean that Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR will immediately suffer. Ben Bajarin believes that this deal will not directly impact Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, "because they are already full force in wafer printing." However, there have been subtle changes in Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR's attitude. Last month, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR President and CEO C.C. Wei referred to Intel Corporation as a "strong competitor" - a statement that has raised eyebrows in the industry. Ben Bajarin interpreted this as saying, "If one of your biggest customers is about to sign with a competitor, you would probably say something like this to soften the blow." Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR has also set up multiple new wafer fabs in Arizona, and Apple Inc. has promised to produce some chips locally, indicating that their cooperation will not be shaken in the short term. A larger landscape for Intel Corporation's outsourcing If Apple Inc.'s order is finalized, it will become Intel Corporation's most substantial external customer endorsement to date for its outsourcing business. However, this is just part of Intel Corporation's outsourcing strategic layout. In terms of advanced packaging business, Intel Corporation already has major customers like Amazon.com, Inc., and Cisco Systems, Inc. This business involves bonding individual chip dies with memory to produce products like graphics processors. In terms of logic chip outsourcing, another important external customer for Intel Corporation is promised by Elon Musk. Musk announced last month his plans to use Intel Corporation's future 14A node in his $119 billion Terafab project in Austin, Texas, to produce chips for Tesla, Inc., SpaceX, and SpaceXAI. Intel Corporation CEO Lip-Bu Tan stated in February that the 14A node will achieve mass production in 2029. This means that the substantial landing of external customer revenue in the logic chip outsourcing field for Intel Corporation may not occur until at least 2029 or later. If Apple Inc.'s order can be fulfilled early, it will significantly shorten this time window, providing earlier and more direct market validation for Intel Corporation's outsourcing business credibility. This article is reproduced from Wall Street Horizon, GMTEight Editor: Chen Yufeng.