Intel's (NASDAQ:INTC) processors infamously missed out on most of the mobile market, and since then, the company's been determined not to fumble the next tech opportunity. That's one of the reasons Intel's turned it's attention toward the Internet of Things (IoT), and just last week, the company made another big step in its IoT ambitions.
Building on old relationships
According to a report by The Wall Street Journal, one of Intel's chips (though it's not clear which one) will power the next major hardware update to Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Glass. Intel's chip will replace the current Glass processor built by Texas Instruments.
For the most part, the change from TI to Intel isn't all that surprising. Intel makes chips for Google's servers, driverless cars, and its upcoming Nexus Player streaming device. So, there's a strong relationship between the two companies already. On top of that, Google needs a chip that uses less power than the current one. Battery power on Glass lasts about a day at the most right now, and Intel's been working on new processors that can use minimal power for IoT devices.
Why this is big for Intel
Intel currently makes more revenue from the Internet of Things than does its mobile division. In Q3 2014, the company made $530 million IoT revenue, up 14% year over year. In order to keep the momentum going, Intel needs to get its technology into more devices.
The company had a hard time convincing device makers that its chips could power mobile devices, but the same isn't true for wearables. Intel created its small Quark processor and Edison board to help power IoT devices, and getting one of its chips into an IoT device like Google Glass is a big win.
Glass may still be a bit too futuristic for the mass market, so Intel likely isn't looking to the partnership as main revenue generator for its IoT division. Instead, Intel can use the device to showcase the company's IoT capabilities and apply what it learns to other devices.
Cisco Systems estimates that by 2020, Internet of Things devices and services will be worth $19 trillion. While that number is at the top of many predictions, it shows the potential IoT could have -- and why Intel wants to get into as many devices as possible.
Every device Intel gets its chips into -- including Glass -- is another stepping stone to the broader IoT market.
Moving further into wearables
Just last month, Intel announced a partnership with Opening Ceremony to create a high-end bracelet (called MICA) that can send and receive texts and emails, and social media notifications. The big news behind the device is that it uses an Intel chip with a licensed ARM Holdings design. Last year, Intel started manufacturing ARM chips, moving away from its exclusive fabrication of its own chip designs.
So, while Intel clearly wants its own chip designs inside wearable devices, the company appears willing to delve into the Internet of Things any way it can.
The bigger picture
Google Glass is just a small part of Intel's IoT ambitions. The company is helping to create Internet of Things standards as a member of the Industrial Internet Consortium, and it is even working on smart city technologies with the city of San Jose.
If Glass fails, it won't matter much for Intel's Internet of Things plans. There will be other devices to power and other companies to partner with. But if Glass is even mildly successful (mostly likely in healthcare or the industrial sectors), then it'll help prove to other device makers that Intel is up for the Internet of Things challenge. Either way, it's a win-win for the company.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends ARM Holdings, Cisco Systems, Google (A shares), Google (C shares), and Intel. The Motley Fool owns shares of Google (A shares), Google (C shares), and 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.