The Intel spokesman declined to comment on Castellano's calculations. But he said Atom was boosting the company's profit.
"Atom sales in netbooks have given us extra growth and revenue we would not have otherwise seen," the spokesman said in an e-mail. "We're seeing very little arbitrage from our Core-brand of processors as many people buy netbooks as companions to their laptops or as a third or forth home PC purchase."
The spokesman continued, "We are comfortable with the margins we make on Atom and more than pleased with the early returns we're seeing from the family."
Jack Gold, an independent mobile and semiconductor analyst, said Castellano's analysis relies on several flawed assumptions.
Atom production could only cannibalize Penryn chips if Intel's factories were running at full speed today. That's extremely unlikely, given the weak PC market and Intel's decision earlier this year to close down 4 factories and lay off 6,000 workers, he said.
"If Atoms were really displacing Core 2s, you'd see a shortage of Core 2 processors. But no PC vendor is crying about that," Gold said.
Gold said that he believes Castellano underestimates the difference in yields between Atom and Penryn chips. The latter crams so many transistors in a tight space that the failure rate during the Penryn manufacturing process is higher than Castellano thinks, meaning the potential profits are lower, Gold said.
Also, TSMC's expertise is in creating specialized chipsets based on the Atom for very small devices like smartphones, not inexpensively manufacturing "plain vanilla" Atom netbook CPUs in high volumes, said Gold. But he did say Intel might use TSMC as a second source for Atom netbook CPUs if demand for Penryn/Core 2 chips pick up again.
But that scenario is also unlikely because Intel is starting to de-emphasize 45-nm Core 2 processors for its 32-nm Westmere chips that it will introduce in Q4. These chips will run faster and use less electricity than Penryn ones, and be priced accordingly.
"I understand the argument, but he's pulling at straws," Gold said.
Analyst: All about the margins
Castellano said in reply that while Intel's older factories producing 65nm, 90nm and 110nm chips may have been underused -- hence, the recent factory closures -- its 45-nm factories are still "running pretty much flat-out," he said. Intel would not comment on the assertion.
Castellano disagrees that the Penryns are much harder to manufacture than Atom CPUs. He points out that Atom chips, while having fewer transistors, are also roughly four times smaller.
Given that the cost of manufacturing is roughly equal -- "same factories, same materials, same tools, same engineers" -- the profit potential tilts heavily in the favor of Penryns.