Can Intel Become a Force in Mobile?

As Intel (NASDAQ: INTC  ) looks toward its future -- and the prospect that being chipzilla is less important when the chips it makes are no longer flooding into PCs -- establishing a significant footprint in mobile has never been more critical. This was likely one of the primary motivators behind its efforts with Tizen, the new smartphone operating system being designed in partnership with Samsung in others. This is not to say that Intel is not making efforts on the PC side, simply that its involvement with Samsung in balancing the market share against the continuing spread of Google’s (NASDAQ: GOOGL  ) Android has the potential to revamp the company’s focus a bit.

The importance of Tizen
If you have followed the growth of Android at all, you are already aware that in four short years the operating system has gone from newcomer to the name to beat. Research firm IDC puts Android’s market share at 68.3% for 2012, with Apple’s (NASDAQ: AAPL  ) iOS a distant second with 18.8%.  While these numbers are impressive, they get even more extreme in the emerging markets; late last year, where the overall smartphone market was showing a 46% growth rate, that figure was 63% in the emerging markets. Apple has very little penetration into these markets, helping to explain why Android has been able to grow so fast.

Behind this growth, however, is a significant problem that Tizen looks to correct. Google’s web applications, which form the integrated programs that are native to Android, are not the preferred option in most of Asia. While we all remember Google’s noble departure from China when the local government told the company that it had to either allow snooping or depart, options such as Baidu and Naver are preferred in most of these countries. The availability of a huge ecosystem and free software have led to the wide adoption of Android in spite of these limitations, but many manufacturers build complex user interfaces that largely strip away much of Android’s functionality.

In an attempt to address this problem, Google and Samsung have banded together, joined by an amalgam of Asian telecoms -- think Huawei and others -- to create a new open-source OS that will challenge Android. Functionally, early reports suggest that the look and feel will be very similar to Android -- because Google and Samsung have recently run short off things to sue each other over -- but the even-more-open Tizen will give specific manufacturers that ability to more easily use other applications.

While no formal announcement has been made, you should assume that as an integral part of its role in helping to develop the new OS, Intel is endearing itself with all of these manufacturers. Samsung is expected to release a high-end, Tizen-based smartphone by the end of the summer that will directly compete with its own Galaxy S4. As the Tizen ecosystem is developed, assuming it can get a solid foothold, it will make the entire market more interesting.

What will be very interesting is how Google’s Motorola reacts to the news. Going back to Jan. 2012, Motorola and Intel have continued to deepen their partnership. Where most U.S. version of the Razr line uses Qualcomm (NASDAQ: QCOM  ) chips, Intel got most of the European orders. The critical differentiator was Qualcomm’s superiority in 4G LTE. In Europe, where the protocol was at a different stage of development, this distinction was not critical and Intel chips were used.

Other chip applications
While the death of the PC has become more of a matter of acceptance than one of debate, Intel is not going quietly into the night. On the one hand, Intel PC chips are used in Microsoft’s recent Surface Pro. The device, which is the first serious attempt at a hybrid between a tablet and a laptop, was met with mixed reviews. It remains to be seen if Microsoft will be able to make a serious challenge in the tablet arena, but recent projections from IDC suggest that by 2017, Windows – and presumably Intel chips -- will account for 7.4% of the tablet market. This may not be a hugely powerful position, but it gives Intel another footprint in mobile.

Finally, Intel is developing an application known as perceptual computing. The concept behind this interface is to allow your laptop to actively adapt to the various types of user interactions seamlessly. At initial inspection, the system looks like a productive version of Microsoft’s Xbox Kinect, but it goes deeper and, Intel hopes, will reinvigorate traditional computing.

A new force in mobile
It is ultimately too early to make a real determination as to whether Intel will charge into mobile with the same dominance it has exerted in the PC segment, but the company is making significant efforts. When it appeared that Qualcomm was running away with the mobile chip market, by partnering with Samsung on the Tizen OS, Intel again stands on the cusp of real influence. The reception that Tizen receives will be critical, but even ahead of this, Intel looks solid.


 

When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel finds itself in a precarious situation longer term if it doesn't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Click here now to learn more.


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