Apple, Intel reach preliminary chip-making deal, WSJ reports
Intel and Apple Chip Manufacturing Agreement Overview
May 8 (Reuters) - Intel has reached a preliminary deal to make some chips for Apple devices, the Wall Street Journal reported on Friday, in a potential boost to Intel's contract manufacturing business and Washington's push to shore up U.S. chip production.
Background of the Apple-Intel Negotiations
The companies were engaged in intensive talks for more than a year and they hammered out a formal deal in recent months, the report said, citing people familiar with the matter.
Market Reaction to the News
Intel's stock extended gains to rise 15% on the news, while Apple shares were up about 1.7% in afternoon trading.
Significance for Intel's Business
Landing an Apple contract would give Intel a steady stream of demand from one of the world's largest consumer electronics companies, bolstering both its reputation and a manufacturing business that has fallen behind TSMC in recent years.
Role of the U.S. Government in the Deal
The Journal report said the U.S. government, which became Intel's largest shareholder last year under a deal with its CEO Lip-Bu Tan, played a major role in bringing Apple to the negotiating table.
Administration's Support for Intel
An administration official said he could not speak to the reported Apple-Intel preliminary deal, but said the administration had generally been trying to bolster Intel.
"In general, we want to and have been helping Intel," the official said, adding the effort was not because of the equity stake in Intel, but because the company is a major U.S. semiconductor producer.
"We have been trying to drum up business for Intel."
Broader Impact on U.S. Chip Production
The tie-up would also further the Trump administration's goal of bringing more chip production to the U.S. and strengthening domestic manufacturing.
Details and Implications of the Deal
It is unclear which Apple products Intel would make chips for, according to the report. Intel and Apple declined to comment.
Apple's Strategy to Diversify Manufacturing
For Apple, a deal with Intel could help diversify its manufacturing base as it seeks more chip capacity. The company relies heavily on TSMC, whose advanced production lines are also in high demand from AI chipmakers such as Nvidia and AMD.
Supply Constraints and Manufacturing Challenges
Apple CEO Tim Cook said on the company's most recent earnings call that iPhone sales were held back by supply constraints at its contract manufacturer.
Reunion of Apple and Intel
The deal would also reunite the two companies, years after Apple moved away from Intel-designed processors for its Mac computers and shifted to its own custom silicon.
Intel's Recent Strategic Moves
Intel has spent the past year signing deals with the U.S. government and securing investments from Nvidia and SoftBank as Tan pushes to turn around the company.
Government and Industry Leaders' Involvement
Commerce Secretary Howard Lutnick met repeatedly over the past year with senior Apple officials, including Cook, as well as SpaceX chief Elon Musk and Nvidia CEO Jensen Huang, to encourage them to work with Intel, the WSJ reported.
Reporting Credits
(Reporting by Zaheer Kachwala in Bengaluru, additional reporting by Steve Holland in Washington; Editing by Shinjini Ganguli and Alan Barona)
