But executives from Intel Corp. believe that the company has the right formula to turn the fabless ASIC model into a success. As reported, Intel today launched a fabless ASIC business--dubbed Intel Microelectronics Services. The service is geared for communication-orient chip products. (see today's story ).

In fact, Intel has already proven the concept works: it has offered this service on a limited basis for about a year, but it has formally launched a much bigger version of the program today.

The company claims it is already developing--and successfully--ASIC designs for several customers, including TranSwitch Corp. and others, said Craig Peterson, co-general manager of Intel Microelectronics Services, based in Hillsboro, Ore.

"Intel has a long history in design, manufacturing, and test of complex products," Peterson said. "For the last year, we have been looking at entering the ASIC market," Peterson said in an interview with SBN.

But still, why would Intel formally enter the fabless ASIC business in the first place? Intel not only sees a big opportunity in this market, but it could also expand its own chip business, especially in communications ICs, according to analysts.

For the past three years, Intel has aggressively pursued the communications-chip market by acquiring a slew of companies. In this market, Intel makes and sells standard chip products.

Communications-equipment makers are procuring standard products, but they are still developing a slew of ASICs in their own systems, according to analysts.

As a result, it makes sense for Intel to offer fabless ASIC services in an effort to get a piece of this business--as opposed to another ASIC vendor, said Naveed Sherwani, co-general manager for Intel Microelectronics Services.

In a roundabout way, the company is looking to bolster its communication-chip business--and for good reason. It is still reportedly losing money and struggling in this market, but the company's new networking chief recently vowed that it would turn the operation around and become a leader in the arena (see Aug. 30 story ).

There are other reasons why Intel is offering this service as well: chip makers and OEMs do not have the infrastructure in place to manage the supply chain, Sherwani said. Many chip makers and OEMs also "have more projects than resources," he added.

Moreover, some chip makers and OEMs are said to be unsatisfied with their current ASIC providers, he said. "Many companies say: 'I can't get the right combination of libraries and IP from my current manufacturer,' " he said.