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Intel’s contract chip manufacturing business, or foundry work, took a big step forward today as it announced it will manufacture chips designed by Altera. The deal is likely the biggest one yet where Intel manufactures chips that other companies design.

In the past, Intel’s foundry business has been relatively small. But Altera plans to launch a major family of chips, dubbed field programmable gate arrays, using Intel’s wafer fabs, or chip fabrication plants. The deal will kick in as Intel launches its 14-nanometer manufacturing process, which is still in development. Right now, Intel makes most of its chips with a 32-nanometer process and it is shifting to 22-nanometers. The smaller the number, the more advanced the manufacturing process.

In the past, Intel has been so busy making its own chips that it didn’t make sense to do foundry deals. But over time, Intel can spread its risk out by making chips for others, and it can play it safe, too. After all, Intel could face a sudden drop in demand if the shift from PC chips — where Intel dominates — to chips for mobile devices accelerates.

Altera considers the deal to be a big part of its future, said Misha Burich, chief technology officer at San Jose, Calif.-based Altera in an interview with VentureBeat.

“This high-end product will be built only with Intel,” he said. “We look at the best available technology. Intel is ahead of the industry in process node advantages.”

In the past, Burich said his chip design firm, which had $1.8 billion in sales last year, used Taiwan’s TSMC exclusively as a chip manufacturer. But he said he believes Intel is racing ahead of the pack with its multibillion-dollar investments in Tri-Gate tansistors and other manufacturing advances.

Burich said that the FPGAs will see use in Altera’s typical markets, including ultra high-performance systems for military, wired communications, high-end broadcast equipment, cloud networking, compute, and storage applications.

Intel has foundry deals with Tabula and Achronix, but those chips will be built with a 22-nanometer process.

“Altera’s FPGAs using Intel 14 nm technology will enable customers to design with the most advanced, highest-performing FPGAs in the industry,” said John Daane, the chief executive of Altera. “In addition, Altera gains a tremendous competitive advantage at the high end in that we are the only major FPGA company with access to this technology.”

A year ago, Intel chief executive Paul Otellini said that Intel’s foundry business was in a “crawl, walk, run” learning process. This is probably more like “walk.”

“We look forward to collaborating with Altera on manufacturing leading-edge FPGAs, leveraging Intel’s leadership in process technology,” said Brian Krzanich, Intel’s chief operating officer. “Next-generation products from Altera require the highest performance and most power-efficient technology available, and Intel is well positioned to provide the most advanced offerings.”