Lenovo’s Motorola Purchase Could Benefit Intel

The harsh truth is that Intel (NASDAQ: INTC  ) is unlikely to sell chips into the iPhone (barring a cellular baseband design win). On top of that, it is not yet clear whether Intel has a clear path to selling chips into various Samsung (NASDAQOTH: SSNLF  ) devices. While a truly excellent solution would likely get some wins at Samsung and others, what Intel really needs is a "friend" in the smartphone world.

Motorola Mobility was pretty friendly
Interestingly enough, Intel and Motorola Mobility (before it was acquired by Google (NASDAQ: GOOGL  ) ) signed a "multi-year, multi-device agreement." More than a year has gone by since the original Motorola Razr I (which featured an Intel processor) hit the market, potentially signaling that this deal became null and void when Motorola Mobility was acquired by Google. However, it could just be that none of Intel's chips for phones released since then were competitive.

Now, it has never looked as though Google and Intel were on bad terms; quite the contrary, as Intel seems to be a fantastic partner in supporting both the Chrome operating system as well as Android. Furthermore, Google buys quite a few Xeon processors from Intel to power its data centers. So, Google, while probably closer to the neutral side of "friendly" is still friendly. Lenovo (NASDAQOTH: LNVGY  ) , on the other hand, is quite a different story.

Lenovo and Intel are very friendly
In a recent interview with Engadget, a Lenovo executive was particularly bullish on Intel's long-term prospects in the mobile-chip market, having the following to say on the matter:

You really need to pay attention to Intel. I think that someday they will be a major player in this phone ecosystem. On the PC side, they just build the densest, lowest power-consumption, best chips in the industry; they have the fabs; they can build the things. My understanding is that they have more engineers working on Android than Google does now. They are very, very serious. So, you know, keep an eye out.

So, while Samsung may be reluctant to use Intel's chips and while Apple certainly won't, Lenovo -- which is growing is presence in phones like a weed -- will...if Intel can provide products that are competitive. It also seems unlikely that Lenovo will build its own chips (despite the reports that Lenovo has hired a handful of chip engineers), particularly as the merchant ecosystem (including Qualcomm (NASDAQ: QCOM  ) , Intel, etc.) is quite literally investing billions per year to develop mobile chips (and right now the merchant ecosystem is producing some exceptional products.)

This is Intel's best shot
At the end of the day, Intel just needs to gain a foothold. If it can design best-in-class mobile SoCs by leveraging its immense design experience and its leading edge manufacturing, then it could eventually become a powerful player in this space. However, it's tough to gain traction when you don't have any competitive products to sell, and this has been -- more than anything -- an execution problem on Intel's part.

The company's next generation Merrifield platform should launch at Mobile World Congress, but it is unlikely that this platform will gain too much traction (since the XMM 7160 modem it is paired with isn't particularly good, and a dual core chip is unlikely to look good from a marketing perspective). All eyes should really be on Intel's next generation 22-nanometer smartphone platform, code named Moorefield, paired with the much more competitive XMM 7260 modem, which should be available in roughly the third quarter of 2014 period.

Foolish takeaway
Lenovo buying Motorola Mobility and really expanding its presence as a leading smartphone vendor is a boon for Intel, and more broadly, the merchant-chip ecosystem. While Apple is married to its own designs, its market share isn't really large enough to cry over. The big issue is Samsung owning 30% of the market, something that Intel, Qualcomm (even though it is a supplier to Samsung today), MediaTek, and others should work to displace by enabling vendors less likely to try to do their own chips.

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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 February 03, 2014, at 6:03 PM, keeperoftheq wrote:

    2014 looks to be an important year for Intel's smartphone plans.

    Unnamed sources in the upstream supply chain claim that Intel is considering leaving the smartphone market in 2015 if it continues to see weak demand in 2014. More specifically, these sources say that Intel is evaluating whether the company should cease in spending resources on its handset business, as Intel hasn't seen any significant improvements over the past several years.

    According to the report, Lenovo is no longer using Intel's processors in phones, which if true could be a huge blow considering Lenovo's overwhelming presence in China, not to mention its new ownership of Motorola Mobility. Because of this, sources say Intel will have to look elsewhere for business to be able to maintain its shipments for 2014.

  • Report this Comment On February 03, 2014, at 6:41 PM, keeperoftheq wrote:

    Qualcomm Unveils Next-Generation Snapdragon Mobile Processors

    By Michael Wall, Brighthand Staff | Thursday, January 10, 2013 | 2181 Reads

    "Out with the old and in with new" is Qualcomm's mantra for 2013, as the mobile chip developer introduced its latest generation of mobile process at CES in Las Vegas this week. The tech company has boasted that its new line of processors will offer noticeably strong boost in mobile performance.

    The new line consists of several models, the Snapdragon 800, Snapdragon 600, Snapdragon 400, and the Snapdragon 200. For those wanting to know how powerful the new chipsets will be, compared to last generation's premium S4 Pro chip (seen in devices like the Motorola Droid DNA), the second-tier Snapdragon 600 is promising a 40% increase in speed. The chip will offer a quad-core Krait processor and Adreno 320 graphics, and is expected to arrive in the second quarter of this year.

    http://www.brighthand.com/default.asp?newsID=19679&news=...

    If Motorola already uses Qualcomm and Lenovo already dumped Intel just a few months ago for Qualcomm, I would not expect them to even give Intel another look.

    Yet another Ashraf pipe dream that will never materialize.

  • Report this Comment On February 03, 2014, at 7:33 PM, KenLuskin wrote:

    Ashman, Do you do ANY research before spewing and hurling on the FOOLS?

    Lenovo dumps Intel smart phone plans

    2014 an Important Year for Intel's Smartphone Plans

    By Kevin ParrishJANUARY 30, 2014 11:26 AM - Source: DigiTimes | B 7 COMMENTS

    Unnamed sources in the upstream supply chain claim that Intel is considering leaving the smartphone market in 2015 if it continues to see weak demand in 2014. More specifically, these sources say that Intel is evaluating whether the company should cease in spending resources on its handset business, as Intel hasn't seen any significant improvements over the past several years.

    According to the report, Lenovo is no longer using Intel's processors in phones, which if true could be a huge blow considering Lenovo's overwhelming presence in China, not to mention its new ownership of Motorola Mobility. Because of this, sources say Intel will have to look elsewhere for business to be able to maintain its shipments for 201

  • Report this Comment On February 04, 2014, at 12:07 AM, daverhall wrote:

    My main concern is that Lenovo is run by communists and this can give Communists some additional technology advantages to compete with the US and may be too influencial in America's technology growth and have a controlling affect on the US.

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