Intel Soars on Apple Chip Deal Report

CNBC reported Friday that Apple and Intel have reached a preliminary agreement for Intel to manufacture some chips destined for Apple devices. Neither company offered a public comment on the arrangement.

Intel shares surged nearly 14% on the news. Apple added roughly 2%. The Wall Street Journal first cited people familiar with the matter to describe talks that had been developing for more than a year.

A Watershed Moment for Intel’s Foundry Business

For Intel, the reported deal would represent the most significant external validation of its contract chipmaking ambitions. The company has spent years trying to convince outside clients its foundry unit was credible.

Chip analyst Ben Bajarin of Creative Strategies told CNBC he was fully convinced the deal would eventually close. He described Intel as the only realistic provider capable of scaling capacity as a secondary source for Apple at this level.

Intel’s shares have now climbed more than 200% this year, a remarkable recovery for a company that endured extended foundry struggles marked by low yields and repeated production delays.

Why Apple Needs an Alternative to TSMC

Apple currently sends all of its most advanced chip orders to Taiwan Semiconductor Manufacturing Co. It ranks as TSMC’s second-largest customer, behind only Nvidia.

The constraint is capacity. Demand for AI-oriented silicon has consumed TSMC’s manufacturing bandwidth at a pace that leaves little room for growth. Apple has been deepening its in-house silicon program for several years, designing nearly every core processor used in iPhones and Macs.

Bajarin suggested Apple would likely wait for Intel’s next production node, called 18A-P, rather than commit to the current 18A process. He described 18A as somewhat unpolished and said the follow-on node resolves many of those issues. Intel’s Chandler, Arizona fabrication plant is already running 18A in high-volume production.

Background: Intel’s Long Road to Credibility

Intel’s foundry division struggled for years with persistent delays and underwhelming output. The unit currently serves Intel’s own chip lines almost exclusively. Its one notable external commitment beyond Apple comes from Elon Musk, who has flagged plans to use Intel’s future 14A node at a massive Texas facility. CEO Lip-Bu Tan has indicated 14A will enter volume production in 2029.

TSMC has been building its own Arizona fabs, where Apple has already pledged some domestic silicon production. Bajarin noted an Apple-Intel deal would not meaningfully dent TSMC’s business since that company is already running at full capacity.

TSMC President C.C. Wei notably called Intel a “formidable competitor” last month, language Bajarin interpreted as a signal that TSMC was already bracing for this shift.

Read Next: What the US-China Chip War Means for Global Semiconductor Supply