Samsung says Intel outsourcing will expand foundry market, mum on possible tie-up

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) - Samsung Electronics on Thursday commented for the first time on Intel's decision to outsource more of its chipmaking, but declined to talk about any possible partnership with one its key rivals.

Intel, one of the few remaining firms that both designs and makes its own chips, said last week it would lean more heavily on outside factories, or foundry manufacturers, and could even licence technology from outside firms.

Samsung, the top maker of memory chips, and TSMC, the world's biggest contract chip manufacturer, are considered Intel's only competitors for high-end chips.

"We do think that Intel's decision to outsource - from the entire foundry market perspective - will lead to increasing overall foundry market size," Shawn Han, senior vice president of Samsung's foundry business, told a post-earnings call.

However, he declined to comment on any possible partnership or quantify the impact of such a move by Intel, which comes as some investors think the company has lost its manufacturing lead to Asian firms.

Intel already partners with TSMC to make chips used in self-driving cars, and sources told Reuters earlier this month that it plans to tap the Taiwanese company to make some graphics chips for personal computers.

Intel could also outsource legacy products like graphics chips, rather than its flagship processors, said Greg Roh, head of research centre at Hyundai Motor Securities.

"Because legacy products don't require a lot of advanced technology, it seems that Intel will decide outsourcing amount after seeing how things stand with both Samsung and TSMC. Intel is not in a position to be dependent on a particular company," he said.

TSMC stood a better chance than Samsung of teaming up with with Intel as it was just a contract manufacturer, said Lee Seung-woo, an analyst at Eugene Investment & Securities.

Samsung on Thursday forecast solid demand for its chips in the March quarter, as work-from-home devices such as laptops and tablets continue to fly off shelves.

(Reporting by Joyce Lee and Heekyong Yang in Seoul; Additional reporting by Jihoon Lee; Writing by Sayantani Ghosh; editing by Richard Pullin)