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Intel Gets Booted Out of Samsung's Tablets

Samsung (NASDAQOTH: SSNLF  ) , the second largest vendor of tablets, just announced an update to its mainstream Galaxy Tab lineup. While it's known that Intel (NASDAQ: INTC  ) wasn't going to be included in the higher-end Galaxy Tab Pro lineup, there was still hope that Intel could have at least found its way into at least one of the Galaxy Tab 4 designs. But that didn't turn out to be the case, as Samsung gave Intel the boot. What's going on here?

Samsung's refreshed Galaxy Tab family. Source: Samsung. 

Two (major) reasons to lose a design: performance and cost

Generally speaking, to win a design, a component vendor has to satisfy one of the two following criteria:

  • Given a specified performance or feature set, offer the part with the lowest price.
  • Given a price, offer the part with the best performance and features.

If you look at Samsung's tablet lines, you'll see that it's segmented into three major product brands:

  • Galaxy Note (8, 10.1, and 12.2 inches)
  • Galaxy Tab Pro (8, 10.1, 12.2 inches) -- this is a Note that's slightly thinner but lacks a stylus
  • Galaxy Tab (7, 8, and 10.1 inches)

If you'll notice, (1) and (2) are more or less the same product with a slight tweak, but (3) is a completely different price and features category. The Note and Tab Pro are meant to go head-to-head with premium devices such as Apple's (NASDAQ: AAPL  ) iPad Air and iPad Mini with Retina Display, while the standard Galaxy Tab is a more mainstream product line. For Note and Tab Pro, Samsung probably wanted the best performance it could afford, while for the Tab it was fine with getting a given performance level as cheaply as possible.

Intel probably lost on price ... for lack of a suitable part
There's little doubt that Intel bid for this socket with its Bay Trail family of chips, but it's also very likely that even with the platform bill-of-materials contra-revenue offset that Intel offers, Intel's part didn't come in as cheaply as Qualcomm's Snapdragon 400 did. Further, on top of the non-integration-related bill-of-materials problems, the Snapdragon 400 is more tightly integrated, which means that if Intel really wanted to play, it would have probably had to provide an obscene amount of contra-revenue to cover the connectivity and cellular pieces.

Intel's CEO demonstrating SoFIA, Intel's first highly integrated SoC with both apps processor and comms. Source: Intel. 

Something else to consider is that Intel's Bay Trail is really in the same performance class as the Exynos 5 Octa and Snapdragon 800 chips found in Samsung's higher-end Tab Pro and Note tablets. If Samsung wanted that class of performance in these devices (and it probably didn't -- Samsung wants to upsell to the Tab Pro/Note), it could have either employed Exynos 5 Octa or Snapdragon 800 and had similar CPU performance, higher graphics performance, and a lower bill-of-materials cost.

Foolish bottom line
Intel is still likely to see success in tablets this year, particularly as it enables the smaller Chinese and Taiwanese players with competitive parts, but to win a company like Samsung -- which has close ties with Qualcomm and its own silicon teams -- Intel's parts need to be unequivocally better. And as nice as Bay Trail is, it just doesn't fit that description. It's too expensive and powerful for Samsung's low-end tablet line, and too weak for the high end. Fortunately for Intel, Samsung has no monopoly on the Android tablet market. 

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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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