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 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 that it will introduce in Q4. These chips will run faster and use less electricity than Penryn ones, and be priced accordingly.