Intel, Qualcomm, Nvidia On Collision Course

(MoneyWatch)  Competition is far from over in the chip sector, as illustrated by the recent flurry of moves by semiconductor manufacturers.

Intel's decision to outsource some chip manufacturing to Chinese foundry TSMC may seem curious given the current economic downturn, but TSMC fabs are set up to produce chips for mobile Internet devices (MIDs), a market for which Intel has serious aspirations with its recently introduced Atom processor.

And while Intel recently said it would invest in more capacity, it has also closed some fabs, meaning it could get caught short in the meantime. So the TSMC agreement should be seen as "a hedge against capacity constraints," said industry analyst Rob Enderle.

Intel's decision to go after the MID market, which includes netbooks and set-top boxes, puts it squarely in the path of Qualcomm; its agreement with TSMC now means the two companies will also be fighting over the Taiwanese company's manufacturing capacity. "The two companies are on a track to run head-on with each other," Enderle told me this evening.

Now, graphics processor maker Nvidia has said it may challenge Intel in the x86 market as a means of ensuring its long-term survival, creating yet more demand for manufacturing capacity.

One immediate beneficiary of this incipient conflict between Intel and Qualcomm could be Globalfoundries, the chipmaker just spun out of AMD, Intel's erstwhile rival in the x86 chip market.

TSMC is known for favoring its larger customers at the expense of the likes of Marvell and Sigma Designs. According to Enderle, smaller chip design companies "have been kicking the tires" at Globalfoundries and may well take their business there.

So while Intel looks to extend its dominance in the x86 space to the mobile Internet device market, Nvidia, Qualcomm and even AMD (which many have left for dead) have plans of their own. "Neither of those want to go quietly into the night," said Enderle.