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Intel’s Slow Waltz at the Smartphone Dance

In the years during which the smartphone market has taken flight, {complink 2657|Intel Corp.} has failed to establish a strong position in the smartphone chip business, a fact that can only be viewed as a missed opportunity, coming as it does at a time when PC shipments are on the decline.

Surely Intel, the largest semiconductor manufacturer in the world, should have seen the rise of the smartphone market and prepared for its arrival, but figures show that Intel chips are not inside the majority of smartphones.

IHS Corp. numbers reflect this, and show that among suppliers of mobile handset baseband ICs (analog and digital), Intel holds only 8.4 percent of the market share, and is in third place behind Qualcomm Inc. at 52.3 percent and MediaTek Inc. at 14.9 percent.

I think it's fair for shareholders to raise questions about why Intel was unprepared to meet the high adoption rates of smartphones. I do accept the fact that it's a challenging market, as analyst Linley Gwennap of the Linley Group points out:

    It's not every year that the third- and fourth-ranked mobile application-processor vendors bail out of the smartphone and tablet markets, as Texas Instruments and Freescale have done. Or that the fourth-largest cellular-baseband vendor loses its sugar daddy and appears likely to fail—the tenuous spot that ST-Ericsson is now in. Intel, by contrast, earned its first-ever smartphone design wins and appears ready to take up some of the slack, while MediaTek's shipments into smartphones suddenly took off.

As Intel prepares to catch up with its competitors, the company is seizing on the high expectations for the low-end smartphone market, which should offer the chipmaker a golden opportunity. Figures from IHS show that from 2012 to 2016, the market will double with shipments moving from 206 million in 2012 to 559 million in 2016. In fact, according to IHS, shipments of low-end smartphones will rise at a compound annual growth rate (CAGR) of 51 percent from 2011 to 2016. That's faster than high-end smartphone shipments, which will grow at a CAGR of only 12 percent during the same period.

The strong demand for low-end smartphones is mainly from China and other Asia-Pacific countries, as well as Eastern Europe, Africa, and the Middle East. To get its chips into low-end smartphones, Intel introduced, at the recent Consumer Electronics Show in Las Vegas, an Atom processor platform designed to target this market in emerging economies. Francis Sideco, senior principal analyst for wireless communications at IHS, called this a “shrewd strategy” that just might help Intel increase its chip business in this market segment.

In the meantime, Intel declares that it continues to make progress with its acquisition of Infineon Technologies AG Wireless Solutions business and is preparing to launch its first Long-Term Evolution (LTE) solution to support 4G wireless technology — another important milestone for Intel as it seeks to make inroads into the US smartphone market.

The consensus is that the benefit to be derived from an LTE solution is substantial. According to IHS, three years after its original deployment, projections are that there will be 100 million subscribers to LTE this year.

Intel needs to effectively and efficiently adjust its supply chain to capture this market, but rushing into the market with its product, it seems, is the least of its concerns. With regard to timing, here's what Paul Otellini, Intel's CEO, had to say during a recent earnings conference call about rolling out an LTE for phones:

    First LTE phones, I would expect to have launched early next year, principally around MWC-14. We believe we have a very competitive solution. The Infineon team is known for not necessarily being first to market, but being really good at engineering a very solid solution and being cost effective and cost competitive and I think that they are doing a very good job with respect to this product. In terms of integrated solutions, you'll see higher levels of integration from us next year.

Intel has a far way to go to catch up with Qualcomm in the smartphone market. As a company that is heralded as the largest semiconductor company in the world, with a market capitalization of $105 billion, and an aggressive capital expenditure budget of about $13 billion this year, Intel should not be so far behind in the wireless market, but it is.

That said, Intel has a lot to prove during the next 18 to 24 months as it begins to ramp up its processors and its presence in the smartphone market. How Intel rolls out its supply chain strategy during the next 12 months will truly be a test as analysts and investors wait to see its products, price, and smartphone wins. Certainly Intel has not demonstrated that it has what it takes to succeed in this market thus far, but that can change.

22 comments on “Intel’s Slow Waltz at the Smartphone Dance

  1. bolaji ojo
    January 25, 2013

    There's been a lot of criticism of Intel for its “failure” to break into and be the biggest supplier of chips to smartphone OEMs. That's fair criticism but it doesn't represent the entire picture. Intel's future hinges on more than PCs and smartphones as the company laid out during its conference call.

  2. _hm
    January 26, 2013

    Intel has very good enginnering human resources and prudent management. Intel will not have troubel migrating to new pasture.

  3. itguyphil
    January 26, 2013

    I don't know.

    Sometimes what seems to be a simple pivot mght not be. Especially when you factor in the resource costs involved with the move.

  4. mfbertozzi
    January 27, 2013

    @pocharle: I agree, after all we are assisting to unpredictable events which are impacting, in a such way, this market; for instance, Mozilla smartphone advent, is another event probably ever been considered only a few months ago for most of us.

  5. itguyphil
    January 27, 2013

    We'll see how that goes. I don't predict much success with it.

  6. mfbertozzi
    January 28, 2013

    It will be presented in a few weeks, in Europe at GSM event in Madrid. Quite curious to assist to what will happen in terms of market's reactions, competitors' reactions and endusers feeling.

  7. SP
    January 28, 2013

    While Intel is a dominant player in computer chips, but when it comes to smartphones I guess they are not there. Smartphone is a tough consumer market, it may be not be vey easy to bring from prduct design to market and production the chips for smartphones..

  8. Taimoor Zubar
    January 28, 2013

    I don't blame Intel entirely for their slowness in terms of going for the smartphone market. It shows that they're careful of what they do. I think the biggest issue here is the fact that Intel doesn't want to lose focus on it's core strength which is manufacturing processors and chips for the laptops and PCs and entering into the smartphone market may cause them to lose focus on this.

  9. Taimoor Zubar
    January 28, 2013

    “Smartphone is a tough consumer market, it may be not be vey easy to bring from prduct design to market and production the chips for smartphones..”

    @SP: I agree. While it may seem easy on paper, entering into the smartphone business may involve a great change in the entire supply chain and operating procedures for Intel. What has worked for them in the PCs and laptop market may not necessarily work in the Smartphones market.

  10. Taimoor Zubar
    January 28, 2013

    ” Intel's future hinges on more than PCs and smartphones as the company laid out during its conference call.”

    @Bolaji: Apart from PCs and Smartphones, what is Intel trying to get into? Are they looking to enter into chips for gaming consoles etc? It would be interesting if they do try to shift their focus away from PCs and Laptops.

  11. The Source
    January 28, 2013

    Taimoorz,

    You have noted that you think Intel wants to focus on its core business which is PCs and laptops. Let me remind you that Intel made a previous attempt to be more successful in the mobile handset market when it had a communications and application chip business for the mobile handhelds and cellphone market. As it turned out, that business flopped and Intel had to sell it to Marvell Technology Group. When Intel sold the business it said it wanted to focus on its core business, and as we know the PC business has slumped significantly. I think companies have to be thinking ahead of the curve, and currently I'm not sure Intel is doing a good job of reacting to the shifts that are currently occurring in the marketplace. 

    Thanks for your comments.

     

  12. The Source
    January 28, 2013

    _hm

    You've noted that you think Intel has what it takes to expand its smartphone chip business. I hope you are correct. I'm a bit more apprehensive, though, because Intel made a previous attempt to expand into this area and ended up having to sell its chip business for mobile handhelds and the cellphone market to Marvell Technology Group.  My question is what is going to make Intel succeed this time around?  In fact the market has now changed significantly with Qualcomm's chips dominating this market. I think Intel recognizes that it has to get into the smartphone market because it needs to crack open that revenue stream, and it may increase its chip business in this market because it barely has any market share to begin with. I look forward to the next two years to see if Intel can succeed in getting more of its chips inside smartphones.

    Thanks for your comments. 

     

  13. itguyphil
    January 28, 2013

    Eh. ANother competitor to Google and the others. I guess we'll see if there's any real 'new' innovation there.

  14. mfbertozzi
    January 28, 2013

    I am with you, even coming back to Mozilla, they could count on a very strong advantage do to the adoption of their browser abroad and several versions produced exactly for fitting smartphone technology.

  15. bolaji ojo
    January 28, 2013

    Yes, Intel is bumbling about in the mobile processor market currently but I wouldn't write it off. It is going to be a long fight and one Intel cannot afford to walk away from so let's avoid predicting it will fail here yet. That conclusion may be premature.

  16. The Source
    January 28, 2013

    Dear Bolaji,

    There is something unsettling about Intel being so far behind in the wireless chip market, especially when the company already had a communications and application processor business which developed and sold processors for handheld devices including smart phones . That business was sold to Marvell Technology Group in 2006. This means Intel took the initiative to get into the market and things did not work out.  

    Yes, I understand that Intel has deep pockets, it has strong relationships with OEMs that make smartphones and Intel will be offering new products from its Infineon division. The company completed the purchase of Infineon   Technologies AG Wireless Solutions in 2011. I believe that Intel is going to have a rough time competing in this market, and it will still be at least two more years before we can gauge whether Intel can aggressively compete in this market.  Two years is a lifetime in technology, and frankly nothing is certain.

    Thanks for your comment.   

     

  17. The Source
    January 28, 2013

    Taimoorz,

    You said: “I think the biggest issue here is the fact that Intel doesn't want to lose focus on it's core strength which is manufacturing processors and chips for the laptops and PCs and entering into the smartphone market may cause them to lose focus on this.

    It seems you think that Intel cannot develop its smartphone business and its laptop and PC chips at the same time?  Interestingly, when Intel sold its communications and application processor business, which developed processors for handheld devices including smart phones to  Marvell Technology Group, Intel said it wanted to focus on its core business.  I s it not possible for Intel to walk and chew gum at the same time?  Hmmmm.  That's a thought.

     

     

  18. bolaji ojo
    January 29, 2013

    Intel has said it expects products from its Infineon wireless acquisition to reach mass scale in 2014. So, I expect it will start making a splash here by then. My point, though, is that Intel can't just be about PC processors or smartphone/tablet processors otherwise it will find itself in the same position in a few years.

  19. FLYINGSCOT
    January 30, 2013

    Don't underestimate Intel's ability to design processors and also to (eventually) act as a foundry with its world beating technology.  If it can crank out designs with more MIPS per current consumption then it might regain some of what it has lost.

  20. Taimoor Zubar
    January 30, 2013

    @The Source: I don't deny that companies don't have to be thinking about the shifts in the market and possible expansion, but that move shouldn't involve a shift from the core strategy or competence. I fear this might happen in Intel's case.

  21. Taimoor Zubar
    January 30, 2013

    “I s it not possible for Intel to walk and chew gum at the same time?”

    @The Source: Intel can surely do that as long as chewing gum doesn't make you walk slowly or walk on the wrong path. It can step into mobile processors but will it continue to innovate on the laptop and desktop side at the same pace and be able to maintain the market share there? That's something questionable.

  22. t.alex
    February 14, 2013

    We have heard about Intel entering mobile since last year and maybe the year before..unless Apple switch iPhones to using Intel chipset. 

     

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