US chipmaker Intel Corp said on Monday (Jul 25) it will produce chips for Taiwan's MediaTek, one of the world's largest chip design firms.

The manufacturing arrangement is one of the most significant deals Intel has announced since it launched its so-called foundry business early last year.

A foundry business builds chips that other companies design and Taiwan Semiconductor Manufacturing (TSMC) is the top player in that space. Intel has mainly built chips it designed itself.

"That's a pretty big deal for us to engage a customer from Taiwan and them betting on us to grow and try this. And so this is a major anchor customer win," Randhir Thakur, president of Intel Foundry Services, told Reuters.

TechInsights' chip economist Dan Hutcheson said there were doubts in the industry on whether Intel could pull off the foundry business, but the deal with MediaTek shows it's on the right path and its investments, including in recruiting the right executives, are paying off.

"When you go into a foundry, you're putting at risk about 2 years of work," said Hutcheson about the risk for chip design firms like MediaTek. "If something happens and the foundry can't pull it off, you've lost that design window in that market window."

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While Intel didn't give any financial details of the deal or say how many chips it would be producing for MediaTek, it said the first products would be manufactured in the next 18- to 24- month period and will be in a more mature technology process called Intel 16, with the chips used for smart devices.

"MediaTek has always adopted a multi-sourcing strategy," MediaTek said in a statement. "In addition to maintaining close partnership with TSMC in advanced process nodes, this collaboration will enhance MediaTek's supply for mature process nodes."

Intel previously announced that its foundry business has signed deals with Qualcomm Inc and Amazon.com. REUTERS