As an Intel (INTC +4.20%) shareholder, the competitor that seems the most threatening isn't Qualcomm (QCOM 1.32%) -- it's Samsung (NASDAQOTH: SSNLF). Qualcomm has more highly integrated SoCs than Intel does today, and NVIDIA currently has superior GPU IP. But these are problems that Intel can and will eventually fix. And, since Intel has a meaningful manufacturing advantage, the rectification of the design issues will be amplified by its manufacturing technology prowess compared to these players. Samsung, however, is a different animal.
Samsung owns...everything
When it comes to owning the bill of materials for a computing device, nobody is more vertically integrated than Samsung. Samsung has the following in-house:
- CPU/SoC design and manufacturing
- DRAM and NAND manufacturing
- Display design and manufacturing
The problem for Intel -- and the other merchant chip vendors -- is that Samsung also has roughly 30% of the smartphone market. The vast majority of Samsung's phones don't actually sport Samsung-designed applications processors, but given how aggressively Samsung has been building its in-house semiconductor design teams, it's likely that Samsung is going to try to move more of its smartphones and tablets to internally designed chips.
With that in mind, how does Intel, which will almost assuredly need to win some high volume runners, triumph over Samsung's internal silicon teams?
It can't just win on performance alone
Intel is well-known for developing world-class low-power CPUs. But Intel's low-power CPUs today aren't wildly ahead of the stock ARM (ARMH +0.00%) cores found inside of Samsung's current Exynos designs on performance -- although on power efficiency, Intel's cores are likely quite a bit ahead. That isn't enough to get Samsung to pick Intel's part over a home-grown Exynos. So, what can Intel do?
It's about the entire system-on-chip
For high-end phones, Samsung is probably likely to stick to its own apps processors -- or to Qualcomm (QCOM 1.32%) designs for phones selling into regions that require CDMA support. But for the mid-range and low end, the merchant vendors will all probably get a fair shake. The good news is that selling highly integrated, high-performance, and cost-effective solutions is a long-term winning strategy. And, while Samsung can license and build good CPU/GPU IP, it seems to be behind the market leaders when it comes to the development of high-performance cellular and connectivity IP.
Intel announced at Mobile World Congress that Samsung has signed on to use its XMM 7160 and XMM 7260 LTE-Advanced modems, and the word on the street is that Intel has won the discrete cellular baseband socket in a number of the international versions of the Samsung Galaxy S5. This is despite the fact that Samsung has its own internal cellular baseband efforts. Samsung also often uses discrete connectivity combos as well as the integrated connectivity that is on the Qualcomm SoCs it uses in a number of lower-end devices. This suggests that Samsung is likely to require parts from vendors that can supply a fully integrated solution -- and won't be doing these in-house. That means that Intel can have a solid shot at winning low-end/mid-range designs with the successors to its SoFIA line of products, which integrate both connectivity and cellular baseband. There's an even better chance once these products are built on Intel's in-house process.
Long term, Intel can't let Samsung win
In order for Intel to solidify its dominance across the compute continuum, it will need to demonstrate that it can outrun Samsung and Qualcomm. This is a herculean task, particularly as these two companies are both exceptionally good at what they do -- and Samsung is the gatekeeper to 30% of the world's smartphones. But with several years of consistent, methodical execution, Intel can emerge to be the semiconductor leader that many investors have been hoping to see for several years now.
