Well, Intel isn't buying TSMC, nor is it asking the foundry to produce Larrabee discrete graphics processors. Rather, Intel plans to port the Atom processor core to TSMC's bulk silicon manufacturing process, a move Intel expects to "significantly broaden the market opportunities for its Intel Atom SoCs," or system-on-a-chip devices.
Doesn't Intel already have enough manufacturing capacity for teeny Atom chips? Perhaps, but as Intel's press release also notes, "The collaboration is intended to expand Intel's Atom SoCs availability for Intel customers for a wider range of applications through integration with TSMC's diverse IP infrastructure." That means Intel could allow customers to license and tweak Atom SoCs for their own use. That would explain why the partnership is meant to "accelerate deployment of the [Atom] architecture through multiple SoC implementations."
Since Intel is talking about SoCs, one would assume the partnership with TSMC will focus on Lincroft. Part of the upcoming Moorestown platform, Lincroft will house a microprocessor, graphics processor, and memory controller on a single die. Moorestown-based devices should be out by next year.
Intel says TSMC-built Atom chips may "find adoption" in smart phones and netbooks, nettops, consumer electronics devices, and mobile Internet devices. Intel announced last month that LG will be one of the first companies to introduce a Moorestown-based handset.