Intel Corporation Is on Track to Make Strong Mobile Market Share Gains

Intel has been launching a flurry of new smartphone and tablet chips that will help it see better top-line growth. Additionally, the declining PC market is close to bottoming out.

Jul 8, 2014 at 8:00PM

Intel (NASDAQ:INTC) is by and large still a PC company -- the giant chipmaker derived 62% of its revenue from the PC market in the first quarter of fiscal 2014. However, the company has been slowly lowering its dependence on this declining market. Its PC-related revenue in 2012 stood at 65% of its total. Intel has a strong presence in the server microprocessor market too, where its Atom microprocessors have helped it dominate the rapidly growing embedded systems market.

The company's huge success in manufacturing PC microprocessors has, unfortunately, not extended into the smartphone and tablet markets, where Qualcomm (NASDAQ:QCOM) and Samsung dominate. The mobile and communication segment currently accounts for less than 3% of Intel's overall revenue. This failure has been partly to blame for Intel's slow top-line growth in recent times.

 

2010

2011

2012

2013

Tablets (Mil)

60

128

144

217

Growth (%)

 

78.4%

12.7%

50.6%

Smartphones (Mil)

305

491

725

1,004

Growth (%)

 

61.3%

46.1%

38.5%

PCs (Mil)

347

364

350

314

Growth (%)

 

-3.2%

-3.2%

-10%

Source:IDC Press Releases, Gartner

Intel has, however, been making significant strides in the smartphone and tablet market that will not only help the company become an important mobile player, but also help accelerate its top-line growth. Let's have a look at some of these:

New chips to spur new growth
Intel's mobile and communications revenue fell 22% from $1.8 billion to $1.4 billion between 2012 and 2013. In the first quarter of fiscal 2014, Intel realized revenue of just $156 million from this segment, 61% less than its figure for the comparable quarter in 2013. This drastic decline has been orchestrated by the falls in feature phones and 2G/3G and the transition to LTE solutions.

LTE is showing the strongest growth among the various mobile technologies that dominate today's market. Nvidia estimates that the LTE market will grow more than 100% by 2016.

Intel introduced a series of new chip products and updates during the Mobile World Congress in February this year. The company's first LTE solution, the 7160, now powers the Asus Fonepad 7 and the Samsung Galaxy Note 3 Neo. This LTE chip had previously only been available on the Samsung Galaxy Tab 3. Intel expects to start shipping the CAT 6 LTE solution, aka the 7260, this quarter.

Additionally, Intel showcased its next-gen Atom SoC products -- the Atom Z34 SoC family (Merrifield), the Atom Z35 line (Moorefield), Cherry Trail, and SoFIA. The Merrifield chips will start shipping in smartphones in the current quarter, while Moorefield will make its market debut in the second half of the current fiscal year. Both Cherry Trail and SoFIA will become available toward the end of the current year.

Intel also announced multi-year, multi-device agreements with Lenovo, Asus, Dell, and Foxconn to expand the availability of out-of-base tablets and smartphones.

Intel's multimode, multiband 4G LTE solution (XMM7160) started shipping in September 2013. Prior to this, the company only shipped single-mode 4G-LTE solutions. The company introduced a next-gen LTE cellular modem and Atom chipset for mobile devices -- the XMM 7260. The chip will be available in every large LTE market in the current quarter. It will sell the XMM 7260 mobile device makers as a stand-alone unit, with integrated chips likely becoming available toward the end of the year thanks to the launch of the SoFIA chip.

Subsidies to accelerate tablet growth, contra-revenue to fall
IDC predicts that tablet shipments will surpass PC shipments by the end of 2015 with growth from 227 million units shipped in 2013 to 406 million units in 2017, a compound annual growth rate of 15.6%.

Intel announced during its first-quarter 2014 earnings call that it had shipped 5 million tablet chips during the quarter and was on target to ship 40 million tablet ships in fiscal 2014. The company managed to ship just 10 million tablet chips for the whole of 2013.

Intel has been offering heavy subsidies to chip manufacturers to entice them to use its new chips in their future tablets. For instance, Intel is paying tablet makers to cover the additional BOM, or bill of materials, costs of using its Bay Trail chips instead of ARM-based processors. This has resulted in the company incurring contra-revenue charges on its accounts, which badly impacts its bottom line. Additionally, the contra-revenue often offsets the ramp ups in the company's tablet sales.

However, Intel believes that it will no longer have to subsidize tablet manufacturers once its products hit the markets toward the end of 2014. For instance, a Broxton tablet will have a BOM of about $20 less than that of a Bay Trail tablet. Additionally, greater chip integration using SoFIA, as well as smaller die sizes, will further enhance the cost savings.

Stabilizing PC market
As an aside, I think it's worth mentioning that the beleaguered PC market is now showing strong signs of being close to bottoming out. Intel's PC Client Group revenue declined 1% in the first quarter while PC shipments declined 4.4% globally. The company is also seeing stronger demand in emerging markets.

Foolish takeaway
Intel looks set to dominate the important mobile market soon which gives it better growth runways as it transitions from the PC to the mobile era. This makes it a strong long-term growth bet, and a good investment.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Joseph Gacinga has no position in any stocks mentioned. The Motley Fool recommends Apple, Intel and Nvidia. The Motley Fool owns shares of Apple, 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers