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Intel widens agreement to manufacture chips for Altera

By Noel Randewich

SAN FRANCISCO (Reuters) - Chipmaker Altera Corp is working with Intel Corp to combine separate components like processors, memory and programmable chips into customized devices in a technique aimed at reducing manufacturing costs and improving performance.

The new agreement, to produce what are known in the technology world as "multi-die" devices, builds on a deal announced over a year ago for Intel to open its most advanced factories to produce Altera's programmable chips, Brad Howe, Altera's senior vice president of research and development, told Reuters late on Tuesday.

It also reflects strategy at Intel, the world's largest chipmaker, to look for growth opportunities in new markets and reduce the company's reliance on the slowing personal computer industry.

Both companies are contributing packaging and semiconductor expertise that will help Altera improve the performance of chips for communications, high-performance computing and military applications. "We're partnering to bring those technologies together in a single-package solution," Howe said.

Multi-die packaging is aimed at efficiently connecting separately made components as one device. Many of those components could be manufactured together on one silicon die, but in some cases the complexity of doing so can mean higher costs and lower yields of successfully produced components.

Connecting discrete components in sophisticated ways can also lead to smaller-form devices that use less energy and let chipmakers more easily mix and match components to produce different variations of chips.

Altera is betting that paying for access to Intel's factories equipped with new 14 nanometer trigate transistor technology will give it an edge over rival programmable chipmaker Xilinx Inc.

Intel's manufacturing agreement with Altera is going "exceptionally well," Sunit Rikhi, general manager of Intel's contract manufacturing business, said in a statement on Wednesday. "Our close collaboration enables us to work together in many areas related to semiconductor manufacturing and packaging."

The deal to share Intel's prized manufacturing technology with Altera is the most notable of its kind so far for Intel. Chief Executive Brian Krzanich said in November he wanted more customers.

Far behind rivals in making chips for smartphones and tablets, Intel views adding more manufacturing customers as one way to keep its multibillion-dollar factories operating at optimal levels.

In February, Intel said that a new facility built in Chandler, Arizona, originally slated as a $5 billion project to produce its most advanced chips, would remain closed for the foreseeable future.

Shares of Intel were down 0.3 percent at $25.39 while Altera's stock was 1.2 percent lower at $35.98 on Wednesday afternoon.

(Reporting by Noel Randewich; editing by Kenneth Maxwell and Matthew Lewis)

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