Intel's Quark Quandary: Can Something so Small Fuel Big Growth?

It's no secret that Intel  (NASDAQ: INTC  ) has missed out on the explosive growth in mobile computing. It's also no secret that declining PC sales are weighing heavily on the company's future prospects. However, Intel's just-announced Quark microprocessors are its first serious foray into the tiny system on a chip, or SoCs, that are being found in progressively more and more of the things we use. 

Can Intel become "all microprocessors for all things," or is this a step into a price-driven, commodity business that will take focus away from more profitable segments like mobile? Let's take a look.

Internet of things
The world around us is becoming more connected every day, almost to a pervasive extent as microprocessors and WiFi integrate more than just consumer electronics into our online lives. Everything from the Nest thermostat to to WiFi enabled refrigerators contain SoCs, enabling us to access them remotely, or use them in ways that we never imagined before. Industrial use of these small, integrated chips is growing like crazy, too. 

To heck with wearable computing -- what about swallowable computing?
The ability to shrink microprocessors to a size that can be embedded in an ingestible medicine isn't that far removed from science fiction. Startup Proteus Digital Health has already developed sensors that can transmit a signal when they interact with bodily fluids in digestion, so in a few years, we could see more powerful ingestible systems that are able to measure, record, and report data about our bodies. 

Freescale  (NYSE: FSL  ) is already making chips that are small enough, with its Kinetis Micro-CPUs, or MCUs. At 2 millimeters by 2 millimeters at their smallest so far, the barrier between what's theoretically possible and what's real isn't as wide as you may think. The question is multi-faceted, though, as to what the real benefits could be, and how large the potential market for this sort of technology will become. Add in concerns about patient privacy and swallowing a tiny computer that's transmitting data about your health may not be appealing, no matter the potential benefits. Freescale, quite frankly, should be concerned that Intel is moving into these smaller SoCs. The company's business is based on purpose-built microprocessors in a variety of industries, including automotive and health care devices, and seeing Intel potentially step into parts of this segment is a serious threat. 

Qualcomm (NASDAQ: QCOM  )  is also involved in the medical field with its Qualcomm Life subsidiary, and the 2net Platform that’s targeted at connectivity for medical devices, specifically providing secure interoperability. However, Qualcomm's ARM-based Snapdragon processors make up a significant share of the still growing mobile market. The most recent quarter's revenue and operating income growth of 35% and 31% were largely driven by the 22% growth in "MSM" shipments, which is Qualcomm's name for its mobile SoCs, specifically the Snapdragon series of mobile processors. Lastly, the company's projections for the rest of the year make it clear that mobile is still the focus. Qualcomm's 21%-35% revenue growth corresponds to its projected growth in MSM shipments of 21%-28%. 

The power of security
Don't expect Intel to get caught up in a price battle in commodity chips. The company's legacy is about innovation and offering something better to its customers. And as even more things become connected, the "something better" that Intel can bring is its security. From EETimes:


Last week, HVAC giant Daikin got one industrial reference board using a Quark chip and including WiFi and 3G support. Kevin Facinelli, executive vice president for operations at the company, dialed into the board from the IDF event here to show it is working. "We looked at Freescale and ARM too but decided on using Quark," Facinelli said. The mechanical engineering company was not concerned about relative silicon performance. It just wanted to offer a remote maintenance capability with high security. Security software gave Intel the edge over ARM. The Quark reference board runs a stack of white-listed Wind River embedded operating system supplemented with McAfee security software, the kind of embedded system stack Intel has been touting for embedded systems for more than a year.


Intel's 2010 acquisition of McAfee will pay dividends as the Internet of things becomes more pervasive, and chip-level security for purpose-built devices become both more common and more powerful. A future where a terrorist attack could be as simple as hacking into tens of thousands of HVAC controllers to overload the grid isn't much farther from reality than swallowable computer medicine. 

Final thoughts
The Atom chip will still be very central to Intel's attempts to stem the losses from desktop computing, and return to growth. Mobile will remain integral to Intel's plans moving forward. With that said, don't ignore the potential of something even smaller playing a role in the company's future as the Internet of things continues to grow.

 

The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!


Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 13, 2013, at 8:34 PM, techy46 wrote:

    Intel's strategy of offering Atom's like Bay Trail in the D, I, M and T versions is a key to what Intel will do with their Quark''s strategy. That's why tablet chips may have 4 cores with no LTE module while smart phoen chips have 2 cores with LTE radios. Intel can take 500 million gates on the same size piece of silicon and rearrange the number of gates in each module and the number of modules. The same strategy will apply to Quarks for appliances, atomobiles, televisions and other items. The other advantage is that an Atom or Quark for one device won't be reusable in a different device. That's much different then the way Intel used to build general purpose chips.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2637176, ~/Articles/ArticleHandler.aspx, 9/2/2014 3:14:31 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement