Every now and then I get one of those emails that makes time stop for a moment or two. The earth-stopping gasp happened on Friday when I got an email from Intel inviting me to a briefing hosted jointly by Intel and TSMC.

For those of you who don’t know TSMC (Taiwan Semiconductor Manufacturing Company Ltd.), it’s the manufacturing and design house out of Taiwan that is used most famously in our industry by AMD and NVIDIA for the manufacturing of everything from GPUs to chipsets.

And now Intel is making a collaboration announcement between itself and TSMC.

The first thing that came to mind was Larrabee, Intel’s upcoming GPU, since that’s what we usually talk about being made at TSMC. Such thoughts are a bit ill conceived as one of Larrabee’s strengths is that it will be made at Intel’s fabs; any collaboration with TSMC would have to be about a very low cost, low performance device. In other words: Atom.

Today Intel announced that it and TSMC have agreed to a “memorandum of understanding (MOU) to collaborate on addressing technology platform, intellectual property (IP) infrastructure, and System-on-Chip (SoC) solutions.” We’re clearly early on in the process, Intel isn’t announcing any products or mentioning any shipping time frames; it’s just saying that in the future, some Intel products may be manufactured at TSMC.

The next line of the press release specifies which products: “Under the MOU, Intel would port its Atom processor CPU cores to the TSMC technology platform including processes, IP, libraries, and design flows. The collaboration is intended to expand Intel’s Atom SoCs availability for Intel customers for a wider range of applications through integration with TSMC’s diverse IP infrastructure.”

This isn’t about Larrabee, Core i7, Core 2 or anything else. Certain Atom based SoCs will be made at TSMC at some point in the future. This is huge simply because Intel is, first and foremost, a manufacturing company - the biggest in its industry. Its fabs have been a tremendous leg up on the competition; products made at TSMC would effectively lose that advantage. But does the move make sense?

The Specifics of the Announcement

Before we get to the why, let’s understand the what. Currently the Atom processor is no different than any other Intel CPU, it’s just a lot smaller and a lot cheaper. By the end of this year Intel should release Moorestown, a System-on-Chip (SoC) version that uses the Atom processor core and surrounds it with graphics, memory controller and video encode/decode engines:

Future versions of Atom will also continue to be SoC solutions. These are the processors that fall under the umbrella of today’s announcement.

Some, but not all, of these Atom based SoCs will be manufactured at TSMC. It’s important to note that Intel will continue to make Atom and Atom SoCs at its own fabs. However, to target specific markets, Intel will manufacture some designs at TSMC.

Intel was careful to stress that this move would extend the reach of Atom and not simply shift manufacturing capacity from Intel to TSMC. In Intel’s eyes, by leveraging TSMC’s capacity and IP (more on that later) Atom SoCs can be used in more designs by more OEMs.