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Intel’s Cellular Baseband Share Plummets

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Ever since the handset market began its shift to LTE, Qualcomm (NASDAQ: QCOM  ) has been the absolute winner, gaining a bigger share in cellular baseband -- another name for cellular modems -- at a brisk clip. Intel (NASDAQ: INTC  ) , via Infineon Wireless, was once the No. 2 player in baseband, albeit with roughly 12% share against Qualcomm's commanding 60%-plus share.

However, as Intel's smartphone apps processors have failed to impress, and as its LTE rollout happened later than expected, its baseband share has plummeted over the last few years.

Just the facts, ma'am
The global cellular baseband market in 2012 was worth a whopping $17.8 billion, according to Strategy Analytics. Qualcomm held a stunning 52% revenue share, MediaTek held 12.5%, and Intel held 12.3%, with other players holding pretty negligible share. In 2013, the situation for Intel seems to have deteriorated even more, with Qualcomm holding 64% revenue share, MediaTek grabbing 12%, and Intel left with a mere 8%. This poor performance was driven largely by a declining 3G market, in favor of LTE multi-mode solutions, coupled with a hostile pricing environment within 3G.

The good news is that Intel expects that as 2014 rolls along, its LTE products will ramp nicely and begin undoing the damage to its revenue caused by the 3G decline. The bad news, however, is that Intel still expects its total baseband revenue to be down for 2014, despite what the company projects to be a very steep LTE ramp during the second half of the year:

(Source: Intel)

What will drive that steep ramp?
It looks as though Intel is forecasting a pretty dramatic jump in multi-comms revenue beginning at the tail end of the first quarter of 2014 and then blasting off during the end of the second quarter. This would suggest that Intel has one or more significant design wins in the pipeline that will drive this growth. Or, alternatively, Intel may simply have a ton of smaller designs that it hopes will aggregate into a nice batch of sales.

Given the company's announcement at its analyst meeting that it would be focusing on a half-dozen or so major players in the handset market -- presumably these include Samsung, HTC, Lenovo/Motorola, LG, and potentially Apple -- it seems likely that Intel has landed some baseband wins at larger customers. It shouldn't be too much longer before investors know what's going on.

The quarterly market share trends will be important
It is likely that Intel's market share, per the investor meeting slide illustrating the LTE ramp above, will have bottomed in the first quarter, with improvements happening over the next several quarters. Further, the LTE solutions should carry meaningfully higher margins for the early part of the ramp, which should help improve margins a bit  -- although that may be moot, since the "Other IA" division margins will get slaughtered by the Bay Trail contra-revenue deal.

Keep a close eye on these trends, and more importantly, watch to see if Intel can really emerge as a player in the same weight class as the mighty, born-mobile Qualcomm.

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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 25, 2014, at 8:55 PM, KenLuskin wrote:

    Poor Ashraf.....

    Intel is in SHRINKAGE mode for the foreseeable future.

    The average price of both PC chips and Server chips will decline dramatically over the next few years.

    The PC market will be flat at best!

    The server market will grow a little, but ALL the growth will be driven by LARGE CLOUD players, who are DEMANDING and will be RECEIVING lower priced chips from AMD and possibly others.

    Bottom line:

    Intel will have flat unit sales, and dramatically LOWER average selling price.

    ALL this is happening at a time when the $$ price per transistor will increase if and when Intel starts producing 14nm chips.

    EVERYONE understands that the $$ price per transistor will INCREASE with 14nm.. except YOU!!

    How embarrassing for you!!!!

  • Report this Comment On February 25, 2014, at 9:01 PM, KenLuskin wrote:

    The # of TRANSISTORS per $ DROPS for the first time= WHY Intel is in DEEP DOO DOO, and DELAYING 14nm process node.

    1) TSMC has overall costs that are less than Intel at every node.

    2) So, when TSMC states that # of TRANSISTORS per $$ is FLAT from 28nm to 20 nm.... It explains WHY Intel is in DEEP DOO DOO!

    2) The COST per TRANSISTOR RISES as TSMC moves to 16nm!!!!

    3) Outside of GRAPHICS, the growth is in TABLETS and PHONES that use $ 30 chips!!

    4) Intel does NOT gain any advantage from dropping to 14nm, because the COST per TRANSISTOR RISES for the first time....which means Intel canNOT gain market share with a more efficient process.

    5) People do NOT want to pay MORE for a more powerful CPU from Intel! People want LOWER priced PCs! This is the main reason that Tablets are replacing laptops!

    6) APPLE can afford to pay more per transistor to take the PERFORMANCE lead away from Intel, because they design their own chips, and an increase cost of a few $$ does NOT greatly affect the cost of a device that sells for $500 to $700.

    7) Intel canNOT grow market share in Tablets or phones using a MORE expensive process, because they are competing against Qualcomm, Samsung, Nvidia, and AMD! Intel is so desperate to try to keep their FABs full and gain a beachfront in Tablets, that they are willing to LOSE money through subsidization of the OEMs.

    8) ONE BILLION people use their smart phones and Tablets to play video games... they want BETTER GRAPHICS, and not a more powerful CPU from Intel!

    9) Qualcomm and Nvidia have superior mobile graphics than Intel. While AMD has far superior PC and Console graphics than Intel.

    10) AMD has a new chip designed for Tablets called MULLINS, that has 250% more graphic power than Intel's Baytrail T chip, with equivalent CPU performance and power consumption.

    CONCLUSION: Intel is stuck selling over priced PC and server chips. All the growth in servers is coming from CLOUD data centers that want lower power, lower cost alternatives to over priced Intel chips.

    The MSFT "THRESHOLD" OS will Destroy Intel!

  • Report this Comment On February 26, 2014, at 1:30 PM, roguesisland wrote:

    KL you are so OUT OF touch with REALITY, that I don't know where to begin responding to ALL of that INANE DRIVEL that you posted. ;-\

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Ashraf Eassa

Ashraf Eassa is a technology specialist with The Motley Fool. He writes mostly about technology stocks, but is especially interested in anything related to chips -- the semiconductor kind, that is. Follow him on Twitter:

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