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Intel Marks ‘Best Year Ever’ – But Can It Win in Tablets & Smartphones?

Paul Otellini knows how to work a crowd.

On Thursday, Dec. 9, one day after the president and CEO of {complink 2657|Intel Corp.} presented an update on his company's prospects to the investment community, analysts rushed to revise their ratings on the microprocessor supplier, with many of them jacking up the price target for its shares. {complink 6730|Deutsche Bank AG}, for instance, reiterated its Buy rating on Intel's shares, helping to push the stock nearer to the 52-week high.

Intel's “best year ever” is 2010, Otellini said in his speech at the {complink 12478|Barclays Capital} Global Technology Conference in San Francisco. That's not an empty boast. The world's biggest semiconductor company by revenue is forecast to post sales of $43.5 billion in 2010, up 24 percent from $35.1 billion in 2009. Its earnings per share for 2010 will ratchet up to $1.93 from 77 cents last year, while cash and short-term investments will nearly double to more than $20 billion from the $13.9 billion it had in the kitty only one year ago.

It's difficult to disagree with Otellini that this is a boom year for Intel. Yet, what has propelled the company's stock higher in recent days was not its past or current performance; prospects for future growth seem equally positive. Despite challenges from the wireless handset and tablet computing market, where {complink 379|Apple Inc.} is leading a disruptive charge with the iPhone and the iPad, Intel's core PC business continues to show opportunities for worldwide growth.

By some estimates, PC sales will not grow at its old double-digit pace, but the sector will still remain the leading contributor to semiconductor sales for the foreseeable future, putting Intel — by far the dominant supplier of microprocessors — in a comfortable position to benefit from the expected upswing. Figures offered by Otellini indicate room for growth in worldwide demand for personal computers.

Globally, families on the average currently have less than one computer per household, according to Otellini. By 2015, PC penetration would have risen to about one per household. Most of the increase will come from China and Eastern Europe. Even in North America where PC penetration is now above one per household, the trend is for adoption to increase to almost two per household over the next five years. Otellini believes Intel will benefit strongly from the higher demand.

The numbers cited by Otellini imply consumers will continue to gravitate towards the PC as a main platform for technology-related activities, including Internet access. However, indications are that portable devices such as smartphones and tablets will gradually erode that base, though it is uncertain by how much these will eat into the PC space.

Demand for smartphones and tablets has been surging at a double-digit clip, and analysts have predicted consumers may divert funds meant for PCs into these devices. As the usage of these devices expand, so will the functionalities, some of which are currently offered by PCs. It is possible some consumers may eventually opt to buy tablet devices rather than mobile notebooks or desktop PCs.

Intel is not leaving anything to chance. The company is accelerating its push into the tablet device market in a bid to benefit from the expected surge in demand for products like Apple's iPad and the Galaxy from {complink 4751|Samsung Electronics Co. Ltd.}, as well as a bunch of competing products analysts expect will hit the market in 2011.

So far, Intel has successfully grabbed some 35 design wins for its Atom tablet processor from companies like {complink 5648|Toshiba Corp.}, {complink 9284|Lenovo Group Ltd.}, {complink 1544|Dell Inc.}, {complink 500|AsusTek Computer Inc.}, {complink 2149|Fujitsu Ltd.}, and {complink 4644|Research In Motion Ltd. (RIM)}, which is getting ready to roll out the BlackBerry Playbook next year (See: Tablet War Begins: BlackBerry Playbook Takes on Apple iPad.)

“The [Intel] consumer tablet products will roll out over the first half of next year,” Otellini said.

Does this mean Intel will develop the same dominance it has in PCs in emerging areas like tablet devices and smartphones? It's unlikely, because the industry does not want to see another monopoly in the sector, similar to what currently holds in the microprocessor business. But will Intel be one of the core players in these new and rapidly growing sectors? Definitely, unless it trips itself up with products that fail to match the competition.

17 comments on “Intel Marks ‘Best Year Ever’ – But Can It Win in Tablets & Smartphones?

  1. DBertke
    December 12, 2010

    Intel will continue to prosper based on its installed PC base and the normal replacement cycle.  Face it, most of the worlds “real work” is done on Windows dominated PC's.  I see nothing in the offing that will change that fact.

    Yes, the little handhelds and tablets will penetrate those market areas where people need to access information and need to distribute information quickly, but the nuts and bolts of every companies daily operation runs on Windows Office or its freeware clone.

    If the tablets add improved data collection hardware, then there is a opportunity for them to penetrate those market positions where users out of the office can use them, but by and large, the PC still rules!

    Take note tablet makers, you need voice to text capability, camera to OCR capability, and bar code scanning capability.  Until you have those elements in your devices, they will never be a threat to the PC.

    Thanks,

    DAB

  2. DataCrunch
    December 12, 2010

    I agree that Intel will prosper for many, many years to come with enviable financials, but the popularity and the prospective explosive growth of Netbooks, tablets and smart devices has to make Intel a little worried about being able to maintain these growth rates going forward on its current higher-margin PC/Laptop chipsets.  Intel is addicted to the PC and its higher margins.   The company recently introduced the Atom processor for Netbooks, tablets and smart phones, but these are lower margin and Intel has to be careful not to cannibalize its cash cow with lower margin Atoms, used for Netbooks.  Not sure it has a choice though but to jump into the smart phone and tablet arenas, but this field is much more competitive than the near monopoly it enjoys in the PC world. 

    There are no shortages of competitors and competing technologies, including the extremely popular ARM based processes dominating the mobile market.  The main players Intel will need to square off with are:  Qualcomm’s Snapdragon, Nvidia’s Tegra, and Texas Instruments’ OMAP.  Apple has its own used exclusively for iPad and iPhone, the A4 based on the ARM processor technology. 

    Of course all this competition is good news for the consumer, in terms of lower costs, but may continue to be bad in terms of cross compatibility between mobile devices and mobile applications.  No doubt this is a battle Intel has to fight, although it is coming a little late.  I for one will not bet against Intel’s ability to grab market share and perhaps even one day dominate in the mobile space as well.

     

  3. t.alex
    December 12, 2010

    The fight between Intel Atom and ARM has been going on for many years with ARM more and more dominate the tablet/smartphone market. This year is the best year for Intel but that might not last for long.

  4. Hardcore
    December 12, 2010

    Personally I don't see Intel winning this one……

    Completely different business models, with Intel  you take what Intel is giving you, when Intel has finished they move on, which means you then have to redesign the next “what ever” Intel is giving you, on top of this Intel whats to give you complete integrated chipsets.

    CPU by Intel, graphics by Intel, power management by Intel, expansion by ……. Intel

     

    Arm licenses a CPU infrastructure/ architecture,  you take what Arm licenses and  you use this a a firm base you can expand on, adding I/O  reducing power, adding in proprietary functions and all this can be done within a single die.Apple even purchased a Semi conductor company purely for that purpose.

    Samsung, Freescale, Atmel, Sony  & Apple to name but a few all integrate Arm technology into their silicon, and they are FREE to compete against each other because Arm is a partner that opens a massive compatability market to each of them.

    Plus Arm is now offering Cortex-M1, a core you can load into your own FPGA, which is cool because adding functionality or fixing hardware problems becomes a simple case of re-loading the FPGA.

    So You have the following options:

    1. Take what Intel gives you until Intel wants to give you something else.

    2. Partner with Arm and get flexibility + market exposure  but more importantly you get cross platform compatibility between multiple vendors.

    This is CRITICAL because it means there is a larger market for applications/ functional add ons, no one wants a pad computer/ phone that cannot load software onto it.

    But more importantly if you are a designer  you are no longer tied to a single supplier source for silicon, now you have cross core compatibility  over billions of devices, rather than the few million chipsets Intel will sell, which in turn makes software & system development times significantly less ,because you have a shrewd idea of what is possible without massive redeployments of resources.

     

     

     

     

  5. Mydesign
    December 13, 2010

        This year (2010) may good for Intel, but I think the coming years are only for those who can deliver better chips with a minimal cost. In such case ARM can contribute a lot. Now itself they had some very advanced chips in market with good features and they are very economical also. I think almost all younger generations are fans of ARM processor. When compare with Intel, ARM is much faster and futuristic. Since Intel wants to keep the monopoly in their market sector, they had made tie up with almost all software developers. As part of this tie up, almost all common software’s are developed in such a way that they will run fine on all Intel architecture. If we are trying to run such mission critical software on any other platforms or architecture, it may thrown out some form of errors.

         In order to avoid such headaches, most people prefer for Intel chip sets. In my opinion more companies say Freescale, NXP etc have to come up with new chipsets. One of the good things about Intel is they are spending millions of dollars every year for research. In coming years we can expect a good market growth in tablet and mobile computing equipment sector.

  6. Anna Young
    December 13, 2010

    Intel is or should be more than just a bit worried about the direction of the market hence the decision to invest more in mobile and wireless chipsets and also Otellini's focus on the company's prospects in the presentation was to enable investors know what was being done in the face of competition.

    No company will dominate the hardware innards for tablets and smartphones. Intel won't and neither will any of its rivals but nobody should write off Intel currently. I reviewed Otellini's presentation and he mentioned that the race was a marathon, not a sprint. If you see it as a 100-meter race then get Intel out of the race but if the match becomes a marathon then it stands a chance.

  7. stochastic excursion
    December 13, 2010

    The well-defined road maps offered by Intel makes it easy for companies to adopt its technology.  ARM's flexibility offers more opportunity for innovation at the integration level, but also more cost in terms of engineering expertise.  The trend is apparently moving away from investment in this type of trade-off.

  8. SP
    December 13, 2010

    Intel is no doubt a leader in microprocessor. And anybody who has performed so well in this domain is bound to be profitable. But when it comes to tablets and smartphone guess it still has long way to go. Apple is floating very well in those domain. But it would be interestin if Intel thinks about it and shares their strategy. 

  9. bolaji ojo
    December 13, 2010

    You nailed the ARM challenge, which many want to ignore because of underlying concerns about the potential for Intel to dominate another sector of electronics. ARM's model is vastly different than Intel's. For all the gains the company has made, it remains a semiconductor intellectual property provider. The company does not make semiconductors and so its licensees must do their own heavy lifting, including customizing and manufacturing.

    Semiconductor companies like the ARM model because they can make money via leveraging ARM's technology but will the process be cost-efficient for OEMs when matched against what Intel can marshall when it is in full fighting mode? Intel can offer both the IP, the chipsets and the manufacturing efficiency. That's what could help the company in the battle against ARM. Even so, ARM is not standing still, either. It has first starter advantage and will do its best to offer the most competitive rates to its licensees. The challenge ARM has is that it is afterwards dependent upon semiconductor companies to clinch deals at OEMs.

  10. Hardcore
    December 13, 2010

    I Think there are a number of misassumptions about Arm technology, It is no harder to use from an engineering point that Intel Atom technology, since it is the chip manufacturers that are implementing Arm on their technology.

    From an engineering point of view it makes things easier, you can buy final silicon from Freescale,Atmel, Xilinx,Cypress,Samsung etc, generally an engineer would select an embedded cpu based on arm technology, they would not contact Arm to gain a licence then start trying to  Fab their own chips.

    It is only if you are developing  FPGA based products that you will actually have to get down  and integrate the Arm core into your silicon.

     

    Lets take the unscientific “Pepsi” challenge:

    How many products can you see that are currently on the market using Intel Atom Technology VRs Arm.

    http://www.ipmart.com/main/browse/Computer_Tablet,PC,11269.php?cat=11269

    I counted two and the price appears to be double that of the other pad prices, then if we trawl various forums we see the largest majority of pad computers are based around Arm technology.

    But again more importantly is the integration of software into the devices, by far the largest forums cover Arm technology. If intel is going to capture the market then they have some serious catching up to do, both in pad devices and mobiles

     

     

  11. bolaji ojo
    December 13, 2010

    Hardcore, ARM's dominance in the mobile computing market is not in doubt and the company is not about to disappear despite Intel's now ferocious focus on the segment. Yet counting how many OEM products have ARM-based processors vs. Intel's is just enumerating today's victories, which is influenced by yesterday's first-mover advantage. It tells us nothing about tomorrow.

    I am not downplaying ARM's No. 1 position, I just want to point out Intel's strength too and its weakness. Intel was late to the party — that was its mistake — but it has now decided to enter the sector and it would be naive to think it won't make a huge dent on the market. Software developers are in the market to make money; they have allegiance only to themselves. If it is in their interest they will support Intel. Only Intel can make that case and that's what Paul Otellini has been doing.

  12. DataCrunch
    December 14, 2010

    Like I said in my earlier post that although Intel may be late to the mobile party, I would not bet against them.  Besides the introduction of the Atom, two key acquisition announcements have recently been made by Intel, McAfee (for $7.65 billion) and Infineon’s wireless unit (for $1.4 billion).  The McAfee acquisition was a bit of a surprise, but makes sense, in terms of being able to include advanced security features into the chips of mobile devices.  Intel knows security will be a major concern for mobile devices in the future and has taken the initiative to be a key player.  The acquisition of Infineon’s wireless unit was less of a shock because the synergies were more obvious.    Infineon is Europe’s second largest semiconductor company and has a major presence in the mobile arena already, specifically in the cellular baseband market.  Some of Infineon’s top customers include Apple, Samsung, Nokia, and LG, which they already sell them chip technology.     Infineon has seen a pickup in business thanks to the iPhone and Android device sales.

    Intel is no doubt serious about the mobile space and don’t count them out.

  13. elctrnx_lyf
    December 14, 2010

    With the Intel Atom gaining its place into the tablets made by so many OEM’s like Toshiba, Lenovo and Asus etc there is very bright future for Intel in the tablet market. They stand aside from ARM since they are not just offering processor core but they are also offering graphics, connectivity, wireless interfaces and along with this all the manufacturing process of Intel is always been a trademark.

  14. bolaji ojo
    December 15, 2010

    Dave, I see your point and concur. However, I also tend to see what others have been saying about ARM's current dominance of the sector and OEMs' concern that Intel's presence in the mobile/tablet PC market could also eventually lead to a virtual monopoly. Yes, Intel is strong but we cannot ignore the market's determination to give it a smaller role than it currently has in the microprocessor sector. What do you see as Intel's Achilles heel? Does it have one or is it inevitable that the company may dominate this segment too?

  15. DataCrunch
    December 15, 2010

    Hi Bolaji, I think the Achilles’ heel for Intel is time.  It will take time for Intel to fully integrate chip technologies with Infineon.  The biggest threat I believe at the moment may be Qualcomm on several fronts.  They have are basically the Intel of cellular and their CDMA technology is showing no signs of slowdown.  Also, what is interesting is that while Intel is attempting to break into the smartphone market, Qualcomm is breaking into Intel’s territory with its Snapdragon chip, which is currently used by Dell and Lenovo in their netbooks and tablets.  Intel needs to speed things up and start penetrating the mobile space.   Also, NVidia and AMD are chomping at the bit to get into the mobile arena as well, but right now Qualcomm is probably in the best position.  Their technology is currently the best in terms of performance on low power consumption. 

    I don’t expect 2011 will be the year we see Intel gaining momentum in the mobile space, but I expect 2012 and beyond to see Intel really start pouncing.  It just may be inevitable.

  16. Hardcore
    December 15, 2010

    Hi BolaJi, yes I see your point , ultimatly it  comes down to market dominance, sometimes having a 'better' product is not enough , Betamax was better than VHS , but VHS won because it gave the users what they wanted , which was cheap accessible porn, which is why the internet has been so successful……;-)

    Arm gives the 'users' what they want. Intel gives the users what 'Intel' wants, the issue is that Arm has a massive legacy of code that has already been written and tested.

     

    These portable devices are the equivalent of a desktop packed into a smaller space but without the performance, and it is all down to 'drivers'  I.E software written to drive the individual chips, GPS touch screen power management audio etc.

    With Arm , the shear legacy of code that has been tested out in the real world is massive, which means that if you want to implement a device the learning curve is significantly less.

    it is 'almost' cut and paste coding, but since Intel's system is inherently different  all that learning and experience is wasted, you have to start from scratch.

    I would also have to disagree with your point

    Software developers are in the market to make money; they have allegiance only to themselves.

    If that were true then linux and Android would not exist, nor would the internet exist in the form we see today, because the net  is driven to a larger extent by 'free' software.

     

     


  17. hwong
    December 19, 2010

    The architecture of ARM differs completely from Intel's CISC architecture. ARM company is comprised of many intelligent engineers from Oxford and Cambridge. Intel has too many instructions. Hennessy and Patterson invented RISC (reduced instruction set) and that decoding is taking much less time and power. ARM is based on this RISC idea and optimized this for low power circuit design. Circuit topology is purely low power. Hence alot of companies licensing ARM and pay fees for  super low power netbook, cell phones, ipads.

    Even Intel's atom low power still does not beat it.

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