Why Intel Got a Boost From China Today

The Dow Jones Industrial Average is up to start the week and Intel is helping lead the way.

May 27, 2014 at 5:15PM
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After a holiday on Monday, Wall Street was in a cheery mood today, pushing the Dow Jones Industrial Average (DJINDICES:^DJI) up 0.42%. A fairly strong 0.8% increase in durable goods orders was released by the Commerce Department today, a surprise after an abnormally strong March. A $17.6 billion nuclear-powered submarine order helped mask a 4.1% drop in aircraft orders and a 1% decline in autos.

Durable goods orders can be very volatile month to month, but even a little growth was enough for investors to cheer today. But one of the biggest moves came from Intel (NASDAQ:INTC), which was up 1.6% after making another move into the tablet market.

Intel's move into China's Android market
The latest partner for Intel is Rockchip, a Chinese chipmaker that specializes in the low end of the smartphone and tablet market, a business Intel has largely lost out on. Most of the devices that Rockchip customers make will be using Android, so this is also another departure from the traditional Wintel ties that Intel has long been known for.

Intc Wearable Image

Wearable devices like this one are supposed to be the next growth market for Intel. Source: Intel.

The two companies will be working together to building quad-core mobile chips using Intel's architecture and branding but leaning on Rockchip for design and Chinese relationships.  

Rockchip is experienced designing the "system on a chip" that mobile devices demand today and is already working with Chinese suppliers that are making devices for as little as $100. With the high end of the market largely taken, this is a big growth opportunity for Intel and chipmakers in general.

After missing out on the early phases of smartphone and tablet growth, Intel is now stuck scrambling to get some of the low-end market and move into new wearable devices, which it may have an early mover advantage on. These sorts of agreements are like a patch that may help Intel keep revenue flat as PC sales fall, but it likely will be a few years until wearable devices take off that there's a lot of operational upside for the company.

For now, even small moves that stop the bleeding are enough to get investors excited about Intel and were enough to help push the Dow higher today.

Leaked: Apple's next smart device (warning, it may shock you)
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Travis Hoium owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. 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.

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