Intel: Altera Could Become Foundry Customer, Says UBS

In advance of Intel’s (INTC) Q1 report this afternoon, UBS Securities’s Uche Orji reiterates a Buy rating on the shares and a $34 price target, writing that the company’s strategy to offer its chip-making ability on a contract basis to others is “taking shape.”

Intel’s “Intel Custom Foundry” service is being used by network processor startup Netronome, taking advantage of Intel’s 22-nanometer process technology and its libraries for “system-on-chip,” or SoC, design, writes Orji. He also thinks Netronome’s products will boost Intel’s own networking offering.

In fact, the whole point of an Intel foundry, he thinks, is to fill out Intel’s portfolio:

We believe ICF is about much more than Intel looking to fill excess capacity, as its first 3 customers (Achronix, Tabula announced prior) would hardly be ideal for that role. Rather, we view ICF�s primary roles as either to build separate merchant chips that can create sales synergies with Intel processors or to integrate partner blocks that would increase the competitiveness & differentiation of Intel products.

New customers signing up over the next year, Orji speculates, could include programmable chip vendor Altera (ALTR), perhaps using Intel’s “Atom” low-power chip design, which would mean Intel would win a customer who’s already been using designs from Intel competitor ARM Holdings�(ARMH), and using manufacturing services from foundry�giant Taiwan Semiconductor Manufacturing (TSM).