Intel Gets Another Chance to Prove Itself

One of this Fool's biggest criticisms of Intel's (NASDAQ: INTC  ) smartphone strategy has been the company's inability to get competitive parts to market in a timely fashion. There's always been a problem, whether it's an issue with the actual system-on-chip or with the modem -- Intel was very late with its LTE modem -- and it has limited the company's traction in smartphones in a big way. At the upcoming Mobile World Congress, the company has an opportunity to prove that its smartphone efforts aren't a complete failure.

Merrifield wasn't designed for large phones
It's clear that Intel was very much aping Apple (NASDAQ: AAPL  ) with its next-generation Merrifield smartphone product. The design is a dual-core, likely with the same GPU block from Imagination Technologies (NASDAQOTH: IGNMF  ) that Apple is using in its A7 chip, although probably clocked higher. These all point to Intel trying to do a chip very much in the spirit of what Apple did with A7. Unfortunately, Intel is very much shooting behind the duck here, as the world moved on to larger phablets that support higher-power envelopes and larger die sizes.

Source: Phandroid

That said, there's a true litmus test
Even in a world where phablets are the norm -- and it's likely that even Apple will move to large-screen phones this year -- there is still a market for small smartphones. In fact, the market is large enough that Apple still smashes records with its iPhone sales, Samsung (NASDAQOTH: SSNLF  ) dutifully rolls out "Mini" editions of its Galaxy S flagships, and many others still supply 4-inch-class phones. It is these phones that Intel will likely be targeting with its Merrifield platform.

Source: Intel

If Merrifield is successful, then investors should see Samsung, HTC, LG, or Motorola announcing a higher-end, but smaller device with the chip. That means unless Intel is able to show a real design win with one of these major players -- and not third-tier designs such as the Safaricom Yolo and the Xolo -- the platform will join Medfield and Clover Trail+, the two previous smartphone platforms from Intel, in the failed-design graveyard. So, keep an eye out at Mobile World Congress.

Foolish bottom line
At the end of the day, tablets will end up simply compensating for the decline in PCs, while smartphones represent the real opportunity for growth. The total addressable market is very large -- about 1 billion smartphones were sold in 2013 -- and the opportunity to drive incremental silicon value via tighter integration is very real.

With a modem, connectivity, and other goodies integrated on-board, the chip vendors can capture more value per chip sold and, thanks to a very high unit-volume market, there's a lot of revenue to be had for the companies that can afford it. Can Intel capitalize on this opportunity? In theory, the answer should be a resounding "yes," but we'll see just how far it got this year at Mobile World Congress.

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[Editor's note: Article was updated to reflect writer's position in IGNMF shares]


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  • Report this Comment On February 11, 2014, at 10:48 AM, KenLuskin wrote:

    Microsoft’s “THRESHOLD” Operating System will use ARM processors to Destroy Intel’s PC Monopoly

    http://www.scribd.com/doc/205186823/Microsoft%E2%80%99s-%E2%...

  • Report this Comment On February 11, 2014, at 10:52 AM, KenLuskin wrote:

    WHY is Intel contracting with TSMC to produce phone chips using 28nm process node?

    This move destroys your entire theory about Intel's process node providing an advantage!

    You and others have been touting Intel's process lead as a reason that Intel would be successful in mobile..

    WHAT HAPPENED?

    Maybe process node lead is NOT as important as you think???

    Yet, you continue to beat the same tired old LOSING arguments over, and over, and over....

    What is the definition of INSANITY?

  • Report this Comment On February 11, 2014, at 10:56 AM, KenLuskin wrote:

    Microsoft’s “THRESHOLD” Operating System will use ARM processors to Destroy Intel’s PC Monopoly

    Microsoft (MSFT) is working on a new OS that is code named Threshold, and will be released sometime in 2015.

    Lower cost Apple and Android operating system tablets are destroying MSFT’s PC business. Tablet’s are using $25 to $35 processors, versus Intel’s average PC

    processor price of $150.

    MSFT earns revenues from the number of PCs sold. Higher cost components drives up the cost, which reduces the competitive position versus tablets. MSFT wants lower cost PCs, which means trying to reduce the price. Intel was essentially given a monopoly on the processors for PCs by IBM. MSFT extended that monopoly b

    y optimizing its OS for processors based on Intel’s

    proprietary X86 architecture.

    The “THRESHOLD” of What?

    The word “threshold” is defined by Merriam

    -Webster as:

    END

    ,

    BOUNDARY

    ;

    specifically

    :

    the end of a runway (2)

    :

    the place or point of entering or beginning

    :

    OUTSET

    <on the

    threshold

    of a new age>

    MSFT knows that the only way to get substantially lower PC processor prices is to tap into the innovation and competition surrounding the ARM processor ecosystem.

    The problem has been that ARM chips were only 32 bit, and did not have the processing power to run current Windows OS. By early 2015, all of the major ARM vendors will have 64 bit ARM processors in production with multi-cores, and enough power to run Windows.... That is if MSFT optimizes it to run on ARM.

    So, the “threshold” is the end of Intel’s X86 monopoly on Windows, and the

    beginning of the ARM PC!

    Microsoft joins OPEN COMPUTE!

    Open Compute is a foundation started by Facebook to create an “open” set

    of standards for lowering the cost of running data centers.

    Microsoft has a powerful and profitable software server tools business. It shocked some people to see them joining and contributing to a non profit

    group that will reduce MSFT’s own hegemony in server tools.

    But, MSFT can see the writing on the wall, and this time wants to be part of the revolution, rather than the one being sent to the gallows.

    A key part of Open Compute is the use of lower power ARM server chips,

    that will compete with Intel’s X86 server chips.

    Again, MSFT knows that lower cost, lower margin ARM server chips will spur greater innovation, and reduce their own data center costs.

    ARM is to Intel, what Intel was to work station/mini computer processor chips

    Intel helped crush the providers of processors to the mini-computer business, which in turn had previously helped to destroy the main frame computer business.

    In the words, AMD’s server chief Andrew Feldman: “

    “What have we learned from 50 years of the history of compute?” Smaller, high volume,

    lower cost parts always win

    . That’s what we’ve learned. That’s how the mainframes were

    beaten by the micros, and the micros by the minis, and the minis by the workstations,

    and the workstations by x86.”

  • Report this Comment On February 11, 2014, at 12:45 PM, SSchlesinger wrote:

    Thank you Ashraf for another thought provoking article. The thing about Intel to keep in mind is that it can hit the market with one failed design after another until it gets something right.

    "Unfortunately, Intel is very much shooting behind the duck here, as the world moved on to larger phablets that support higher-power envelopes and larger die sizes."

    Correct, which is why this market is better served with low power i3 and i5 processors.

  • Report this Comment On February 11, 2014, at 12:48 PM, SSchlesinger wrote:

    KenLuskin enough with the AMD propaganda. I know you're in full stroke on the AMD pump and dump campaign but please don't use MF to post your hyperbole.

  • Report this Comment On February 11, 2014, at 12:56 PM, KenLuskin wrote:

    SSchlesinger, I am glad to discuss the FACTS with you... because the author continually MISLEADS and LIES about them.

    so, instead of the calling it "propaganda", why not TRY and discuss the points made???

  • Report this Comment On February 11, 2014, at 1:35 PM, sbstr wrote:

    Unfortunately, there is no way to ignore comments on this site. KenLuskin's verbal diarrhea often prevents me from reading comments altogether. Mr. Luskin, please post comments, not essays, then perhaps people might read your views. Often, I see ten successive 1000 word essays masquerading as comments, which make you your own worst enemy.

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