At the Intel (NASDAQ: INTC ) Developer Forum, Intel gave a presentation detailing its current family of tablet chips codenamed Bay Trail or, for those who like product names, the Z3700 series. In this presentation, Intel was pretty bullish on this product family and even went so far as to reveal a list of hardware partners that were likely to deploy products based on these chips. Samsung (NASDAQOTH: SSNLF ) wasn't on this list.
No Samsung on the list of partners
Take a look at the following slide from last month's Intel Developer Forum presentation:
Notice how there is a plethora of companies here across the OEMs, ODMs, and developers (the OEMs are the ones that would matter here), but Samsung isn't listed here? Now, this makes sense given that Samsung designs and builds its own chips in-house and that it uses Qualcomm (NASDAQ: QCOM ) likely due to Qualcomm's superior integration and because Qualcomm is a Samsung foundry customer.
It appears, then, that as far as tablets go -- at least for Intel's 2014 chip lineup – Intel is out at Samsung after very heavily touting its short-lived Galaxy Tab 3 10.1-inch "win." This is a pretty major PR blow, but, fortunately, there do appear to be some pretty good strategic reasons as to why a potential Samsung/Intel relationship for tablet-oriented applications processors really doesn't make a lot of sense.
Samsung is Intel's enemy
At this point, it's pretty clear that Samsung is an enemy to Intel, not a friend. Samsung is increasingly trying to push Chromebooks with its own custom Exynos processor, and its Windows PC sales have continued to dwindle as it focuses almost exclusively at the high end. Samsung also designs its own apps processors for tablets and phones and builds chips for some of its key component suppliers at its foundries that it hopes to grow over time. This puts Samsung in direct competition with Intel and there is very little incentive to help Intel drive volumes at its factories when it needs to be driving its own volumes.
Furthermore, if Intel were to work with Samsung, it would need to disclose its product road map/plans to Samsung which builds its own chips. While there are probably firewalls and confidentiality agreements that would theoretically keep Samsung's chip division from knowing Intel's plans, things in the industry have a surprising tendency to leak, even over the Internet.
Doesn't Intel need Samsung, though?
The problem with having Samsung as a competitor in apps processors is that about 30% of the smartphone market and close to that worth of the tablet market belongs to Samsung. While Intel could certainly win designs with the rest of the non-Apple/non-Samsung market, this really does restrict its TAM quite a bit, which makes it that much more difficult to recoup the fairly substantial investment that it is making in mobile processors.
Interestingly enough, Samsung has been using Intel modems (but not apps processors), using the XMM 7160 in the Galaxy Tab 3 LTE and the Galaxy Note 3 Neo and even committing to using the next-generation XMM 7260 in upcoming phones/tablets, but these aren't built at Intel's factories and don't directly compete with Samsung's own modems (which appear to have just fallen by the wayside). It will be important to watch for any new developments with Samsung's own modems going forward or if Samsung is able to score more Qualcomm modems in its foundry.
Foolish bottom line
While Samsung seems OK with using Intel's modems (since there are really only two leading edge modem players at this point -- Intel and Qualcomm), the apps processor story for phones and tablets looks much more grim Intel over at Samsung. Maybe in the future if Intel develops a product so compelling -- particularly for the low end where Samsung doesn't really focus its apps processor energies -- then we'll start to see Intel Inside more of Samsung's products. But for now, and in tablets, Intel looks pretty "out" at Samsung.
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