It's been clear for a while that Intel (NASDAQ:INTC) needs to do something to increase its mobile chip sales. While the company has had a stranglehold on the PC industry for years, rival ARM Holdings' (NASDAQ:ARMH) chip designs dominate the mobile landscape. But this week Intel announced a new partnership with chip designer Rockchip, which will help the company boost its tablet processor sales.
A match made in China
Rockchip designs chips, primarily ARM-based ones, for companies in China, but the new partnership will allow them to also sell Intel's processors to its existing customers. Rockchip will have access to Intel's x86 CPU Atom core processor, with the SoFIA system on a chip.
Intel's new partnership will bring the company's x86 processors, combined with mobile 3G modems, to low-end Android tablets, primarily in the Chinese market. Because Rockchip currently only designs ARM chips, it'll allow the company to offer a new tablet processor choice to its existing customers. While Rockchip will sell the Intel processor and modem, the company itself will provide things like Bluetooth, Wi-FI and GPU technology.
Why this is good for Intel
Intel has struggled to gain traction in the mobile market, and this latest move is very promising for the company. The high-end tablet market is dominated by chip designer Qualcomm, and there's no chance that's going to change any time soon. The company comes in third place worldwide for tablet processor market share, while Rockchip takes the No. 5 spot and Intel holds No. 6.
As HP showed this week with its new $99 Android tablet, original equipment manufactures are continually moving to the low-end of the tablet market to sell their devices. This is good news for Intel, which might finally be able to gain some market share in that low-end space, a place where it's much more likely to make gains compared to high-end devices.
Recent data from IDC shows that sales of unbranded tablets priced at less than $150 are expected to increase this year by 36%. Intel's new partnership should help the company be a part of this low-end tablet spike, instead of just watching from the sidelines.
It's unclear how Rockchip and Intel will split revenue from sales of the chips, but Intel investors should be happy to see the company's new opportunity to expand further into the tablet space. China is a vast mobile market, and tapping into the prevalence of low-end tablets there can only be a good thing for the company.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of 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.