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Summary:

Intel’s move into the custom chip manufacturing business would get a boost if, as Bloomberg reports, it has netted Cisco Systems as a customer.

Intel CES 2013

It looks like Intel’s nascent foundry for building chips to third-party specifications has netted a big fish — Cisco. A Bloomberg report on Thursday cited unnamed sources saying the two companies were close to a deal.

Intel CEO Paul Otellini

Intel CEO Paul Otellini

In December, Intel CEO Paul Otellini said the company was open to building chips for companies that were not directly competitive with its key PC- and-server-chip business.  Critics say that Intel missed an opportunity to dominate the low-power chips powering fast-selling cell phones and tablets where ARM is king. This deal, if it pans out, means Intel would build Cisco-designed chips for Cisco networking hardware and become a player in the $30 billion custom chip making business.

A move into the made-to-order chip business would also mean facing off with Taiwan Semiconductor, a foundry that makes chips for customers including Qualcomm, and which appears ready to take on Samsung for Apple’s chip business.

Intel had no comment in the Bloomberg report. A Cisco spokeswoman reaffirmed to me that Cisco and Intel have worked together for years — Cisco’s Unified Computing Systems (UCS) servers run Intel chips for example — but would not comment further.  But this deal would validate the notion of Intel as a manufacturer of special-built chips to run things other than servers and PCs.

It’s interesting that Intel may now build chips to other companies’ specs. The company’s own silicon technology and designs drove the PC and laptop business pretty much from the get-go in the 1980s when Intel and its software partner Microsoft. This looks like a leader becoming a follower.

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  1. Not sure why you say “leader becoming a follower” here. If Amazon had stayed e-commerce the whole way and then today said they’d created AWS, would you say they were jumping on to the “cloud” bandwagon? Intel has top-notch talent here and has found a customer that does not directly compete with it. What is wrong with them extracting some value out of the industry that this article states is a $30B opportunity? Intel is a smart company, I don’t think this is a signal of a bigger shift for them, but it could be a way to steal value out of the market and indirectly affect their direct competition.

    1. the minute i finished writing that I thought — they’re attacking a $30B plus market — not such a bad idea. Good point– thanks for the comment.

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