How Intel Can Fend Off Samsung

With Samsung holding 30% of the smartphone market, Intel's mobile chip team needs to outrun Samsung's own internal efforts.

Mar 19, 2014 at 2:00PM

As an Intel (NASDAQ:INTC) shareholder, the competitor that seems the most threatening isn't Qualcomm (NASDAQ:QCOM) -- it's Samsung (NASDAQOTH:SSNLF). Qualcomm has more highly integrated SoCs than Intel does today, and NVIDIA currently has superior GPU IP. But these are problems that Intel can and will eventually fix. And, since Intel has a meaningful manufacturing advantage, the rectification of the design issues will be amplified by its manufacturing technology prowess compared to these players. Samsung, however, is a different animal.

Samsung owns...everything
When it comes to owning the bill of materials for a computing device, nobody is more vertically integrated than Samsung. Samsung has the following in-house:

  • CPU/SoC design and manufacturing
  • DRAM and NAND manufacturing
  • Display design and manufacturing

The problem for Intel -- and the other merchant chip vendors -- is that Samsung also has roughly 30% of the smartphone market. The vast majority of Samsung's phones don't actually sport Samsung-designed applications processors, but given how aggressively Samsung has been building its in-house semiconductor design teams, it's likely that Samsung is going to try to move more of its smartphones and tablets to internally designed chips.

With that in mind, how does Intel, which will almost assuredly need to win some high volume runners, triumph over Samsung's internal silicon teams?

It can't just win on performance alone
Intel is well-known for developing world-class low-power CPUs. But Intel's low-power CPUs today aren't wildly ahead of the stock ARM (NASDAQ:ARMH) cores found inside of Samsung's current Exynos designs on performance -- although on power efficiency, Intel's cores are likely quite a bit ahead. That isn't enough to get Samsung to pick Intel's part over a home-grown Exynos. So, what can Intel do?

It's about the entire system-on-chip
For high-end phones, Samsung is probably likely to stick to its own apps processors -- or to Qualcomm (NASDAQ:QCOM) designs for phones selling into regions that require CDMA support. But for the mid-range and low end, the merchant vendors will all probably get a fair shake. The good news is that selling highly integrated, high-performance, and cost-effective solutions is a long-term winning strategy. And, while Samsung can license and build good CPU/GPU IP, it seems to be behind the market leaders when it comes to the development of high-performance cellular and connectivity IP.

Intel announced at Mobile World Congress that Samsung has signed on to use its XMM 7160 and XMM 7260 LTE-Advanced modems, and the word on the street is that Intel has won the discrete cellular baseband socket in a number of the international versions of the Samsung Galaxy S5. This is despite the fact that Samsung has its own internal cellular baseband efforts. Samsung also often uses discrete connectivity combos as well as the integrated connectivity that is on the Qualcomm SoCs it uses in a number of lower-end devices. This suggests that Samsung is likely to require parts from vendors that can supply a fully integrated solution -- and won't be doing these in-house. That means that Intel can have a solid shot at winning low-end/mid-range designs with the successors to its SoFIA line of products, which integrate both connectivity and cellular baseband. There's an even better chance once these products are built on Intel's in-house process.

Long term, Intel can't let Samsung win
In order for Intel to solidify its dominance across the compute continuum, it will need to demonstrate that it can outrun Samsung and Qualcomm. This is a herculean task, particularly as these two companies are both exceptionally good at what they do -- and Samsung is the gatekeeper to 30% of the world's smartphones. But with several years of consistent, methodical execution, Intel can emerge to be the semiconductor leader that many investors have been hoping to see for several years now. 

The biggest winner in smartphones might no be so obvious
Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information