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Intel Corp. Wants to Make the Desktop Computer Great Again

By Ashraf Eassa - Dec 21, 2017 at 6:46PM

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Intel isn't content with a steady decline in this key business unit.

Chip giant Intel (INTC -1.89%) has been open about its expectation that the market for personal computers, and therefore the processors it builds and sells into this market, is on the decline. 

There seem to be several widely accepted factors driving that trend. The first is that the average person no longer relies exclusively on notebook and desktop computers for their computing needs -- they now have access to increasingly powerful and always-connected smartphones and tablets to handle most of their daily computing tasks. 

The general manager of Intel's Client Computing Group holding a laptop.

Image source: Intel.

On top of that, there's the simple fact that there's less reason for people to buy new computers unless the ones they have break. This is probably best explained by the fact that PC hardware capabilities have significantly exceeded software demands. 

Nevertheless, while Intel's public messaging to investors seems to be that it has resigned itself to the PC market continuing to decline, a job posting that I spotted on Intel's website seems to indicate that the company isn't quite giving up hope. 

Intel's desktop PC ambitions

The personal computer market consists, broadly speaking, of portable personal computers (e.g., notebook computers, notebook/tablet hybrids, and so on) and stationary desktop computers (e.g., tower desktops, all-in-one desktops). 

The job listing that I found on Intel's website seems to talk specifically about the consumer desktop PC market, but I'd imagine any ambitions gleaned from this are applicable to the entire PC market, not just consumer desktops. 

In this listing, Intel says, "this market is slowly declining and this team's [sic] is focused on turning that trajectory around by driving innovative new desktop products and usages to accelerate PC refresh." 

In other words, Intel is hoping that by building more interesting products and by trying to usher in new use cases that take advantage of those products, it can get the market (and therefore its own desktop-related revenue) back on a growth trajectory. 

This is the right way for Intel to think. 

Can Intel succeed?

Only time will tell if Intel's consumer desktop business -- as well as its other PC segments -- can return to growth. I think it's far more likely that Intel will be able to, through aggressive product segmentation and through the introduction of targeted products for high-value areas (e.g., processors aimed specifically at the gaming market), drive up its processor average selling prices rather than necessarily drive unit volumes up. 

Moreover, Intel has often talked about its strategy to try capture more of the bill of materials that go into a PC. Today, Intel makes a lot of money selling processors and some auxiliary chips (e.g., Wi-Fi, Thunderbolt controller, etc.) into desktop computers, but there's room for Intel to grow its share of the bill materials.

An Intel desktop processor.

Image source: Intel.

For example, Intel has a blossoming NAND flash business that's focused primarily on storage drives aimed at data centers. If Intel were to get more aggressive with its NAND ambitions, it could stand to capture a large portion of the market for NAND flash-based solid-state drives that go into both desktop and notebook computers. 

Indeed, Intel could bundle such drives with its processors and other chips for a compelling price, leading to a win/win situation for both Intel and its personal computer partners. 

The chip giant has also expressed its intention to build stand-alone high-performance graphics processors. Over time, Intel could start bundling in such graphics processors (likely integrated on the same package as the main processor) as an option for higher-end, gaming-capable systems. 

I'm not convinced Intel would be able to win the hearts and minds of the hard-core gaming crowd with its graphics processors -- at least not without demonstrating a track record of consistently great products -- but if Intel can deliver reasonable graphics solutions (something that, quite frankly, remains to be seen), the company could stand to capture a significant amount of dollar content inside of premium gaming-capable notebook computers and all-in-one computers.

Even in a declining PC market, there's still opportunity for Intel to grow revenue as long as it identifies the right opportunities and executes well against trying to capitalize on those opportunities. 

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