A year ago, Intel, the world's top semiconductor maker, announced an alliance with TSMC, the world's largest chipmaker.

TSMC, headquartered in Taiwan, makes chips for other companies. It invented the "fabless" chip industry, which is now the largest sector of the global chip market.

In the first deal of its kind, Intel licensed its Atom microprocessor design to TSMC, so that third parties could design custom chips combining Atom, with technologies from many sources. The goal was to provide something similar to the UK's ARM microprocessor design, which is used in many custom chips, such as the A4 found in Apple's iPad.

But this hasn't worked out. Ashlee Vance reports in the New York Times: A Tie-Up Between Intel and TSMC Fizzles

Intel confirmed this week that a lack of customer demand has put the partnership on hiatus for the short term. Which is to say, there will be no jointly developed Atoms arriving anytime soon, although Intel continues to hope for the best down the road.

Foremski's Take: This shows that Atom has a long way to go in being able to challenge ARM, which has an advantage in that there is a huge library of chip designs available for use with ARM.

Atom doesn't have a library of compatible designs that can be easily used to create custom chips.

Also, Atom's design is influenced by Intel's manufacturing processes. In order to design custom Atom chips, the chip design software has to be closely tied to TSMC's manufacturing process -- each fab has its own differences.

Intel is very secretive about its chip manufacturing processes but that's what allows it to produce high performance chips in very advanced semiconductor technologies, such as 32 nanometer. Transferring a design from one fab to another is not easy and the performance of the chip can be very different. This could be one of the reasons that no one has yet made an Atom based custom chip.

Intel says it will continue working with TSMC.

“I think we had a lot of key learnings from the partnership so far,” Robert Crooke, Intel’s Atom chief, said in an interview. “We haven’t given up. These things never happen super-fast.”

But this is a setback for Intel because it is trying to break into the market for smartphones and larger consumer electronics products such as the iPad. ARM based chips dominate this market.

Interestingly, Intel used to make ARM based chips. It acquired StrongARM from Digital Equipment, and later renamed it XScale. However, it sold XScale to Marvell Technology Group in June 2006, so that it could concentrate on producing a version of its X86 microprocessor architecture for consumer products -- which became Atom.

Atom is a powerful chip but it is challenging to produce a version that matches ARM's low power consumption.

From Datarespons.com:

Gilad Mizrahi, hardware development manager for Data Respons Denmark. “An ARM-based system typically uses as little as 2 watts, whereas a fully optimised Intel Atom solution uses 5 or 6 watts. This is incredibly significant for the battery lifetime in small mobile devices."

"... [ARM also] allows us to reduce the solution’s total size considerably."

ARM is moving into larger products than smartphones, such as Apple's iPad, and also netbooks. It is encroaching into Intel territory while Intel is making little headway into ARM territory.

Intel certainly has the talent and resources to make future Atom designs that are competitive with ARM in terms of power consumption and size. But the longer this takes, the more design wins for ARM.

Once a company is committed to an architecture, it is very expensive to switch to a different one.

Interestingly, Intel still holds an ARM license.

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[Please note: I am an "Intel Insider" a member of a small group that consults with Intel on various topics.]

Please see:

The Mysterious Apple A4 Chip - Where's MSFT's and GOOG's Chip?

Global Foundries to start pumping out 28 nm ARM Cortex A9 processors in 2H 2010

ARM vs. Atom: The battle for the next digital frontier | The Standard

Analysis: The real scoop on Atom-ARM rivalry