Intel to use TSMC for Atom production?

Intel and TSMC are going to make a joint announcement today, and so far we can only speculate what it will be about. According to a report from the Taipei Times, Intel has decided to outsource the production of the low-cost Atom.

TSMC has made southbridges for Intel in the past, but if the report is correct, this will be the first time that Intel uses a third party to manufacture its processors. It's also a weird move because Intel frequently boasts about the advantages of having its own fabs, just a week ago Intel CEO Paul Otellini said in an interview that AMD's fabless future will definitely impact their competitiveness as costs will inevitably go up. Here's a snip from WSJ:

The companies on Monday plan to announce what they describe as a “strategic” collaboration, which includes allowing TSMC to make chips that combine the circuitry of Intel’s popular Atom microprocessor with circuitry that handles other chores, according to one person familiar with the situation. Such multi-function chips are commonplace in cellphones and some consumer electronics devices, markets that Intel has been targeting lately to diversify from the computer industry.

The companies will work together in other ways, too, another person familiar with the announcement added.