Intel plans to make chips for Taiwan’s MediaTek to keep up with Asian manufacturing rivals

Intel will manufacture semiconductors for Taiwan’s MediaTek, giving the U.S. company a big boost for its contract chipmaking business.

MediaTek is one of the biggest suppliers of smartphone processers and a rival to Qualcomm. Intel Foundry Services will manufacture multiple chips for MediaTek for a range of smart edge devices, the two companies said on Monday.

After taking over as CEO of Intel last year, Pat Gelsinger made revitalizing the foundry business a key priority in order to catch up with and break the dominance of its Asian rivals TSMC and Samsung. Via its foundry business, Intel will manufacture chips that other companies design. The U.S. giant plans to spend more than $40 billion building fabrication plants around the world.

“The agreement is designed to help MediaTek build a more balanced, resilient supply chain through the addition of a new foundry partner with significant capacity in the United States and Europe,” Intel said in a press release.

NS Tsai, a corporate senior vice president at MediaTek, said the partnership with Intel “provides value” to the company as it seeks “to create a more diversified supply chain.”

TSMC is MediaTek’s main manufacturing partner for chips. It’s unclear what MediaTek semiconductors Intel will be responsible for making.

MediaTek was not immediately available for comment when contacted by CNBC.

Chip companies around the world have been focusing on strengthening their supply chains and diversifying production amid a global chip shortage that has persisted since early 2021.

But the manufacturing of the most advanced chips is not something many companies can do and is in fact is dominated by TSMC and Samsung. These two companies account for more than 70% of global foundry revenue, according to TrendForce.

As demand continues to rise for chips, Intel and its Asian rivals plan to ramp up spending on foundries.

But Intel lags far behind, though gaining MediaTek as a customer will give the company a boost. MediaTek had 38% of the smartphone application processor market in the first quarter, making it the biggest company in the segment, according to Counterpoint Research.