There's been a lot of buzz around the "Internet of things" or IoT. It's a somewhat nebulous term that describes a plethora of smart devices, including in-vehicle infotainment systems, smartwatches, and much more. During Intel's (INTC 0.65%) investor meeting held on Nov. 20, Doug Davis talked about the IoT market and the company's position there today.
Sizing up the market and Intel's place in it
According to Davis' presentation, Intel's served addressable market from a silicon perspective in the "Internet of things" will be somewhere between $11 billion and $13 billion during 2015. In that same presentation, Davis noted that Intel is on track to generate about $2.1 billion from this market, which comes out to approximately 17% market segment share.
To get a better picture of the different sub-segments of the IoT that Intel serves, the underlying growth of those sub-segments, and Intel's positioning within each of them, the company offered the following instructive slide:
Source: Intel.
Given that the underlying market seems to offer double-digit growth rates, and given that Intel isn't even close to saturating its potential market share here, this represents an interesting set of growth opportunities for the company.
Most, but not all, of the IoT chip market is open to Intel
One slide that I found particularly helpful is one in which Intel provided a breakdown of the total IoT opportunity by average selling price/compute needs:
Source: Intel.
This slide shows that today, with its Atom, Core, and Xeon processors, it can address markets requiring entry performance, mid-performance, and high-performance microprocessor units. Intel also points out that its new Quark architecture family of products will allow it to push into the market for 32-bit microcontrollers.
In the table below, I work out the sizes of each "slice" of the pyramid visualized above using the data given:
|
Market |
Total Units |
ASP Range/Average |
Total Revenue Available |
|---|---|---|---|
|
High Performance MPU |
1 million |
$100-$2,000/$450 |
$450 million |
|
Mid Performance MPU |
100 million |
$30-$300/$75 |
$7.5 billion |
|
Entry Performance MPU |
500 million |
$5-$30/$15 |
$7.5 billion |
|
Embedded 32-bit MCU |
2 billion |
<$10/$1 |
$2 billion |
|
Embedded <32-bit MCU |
10 billion |
<$5/$1 |
$10 billion |
Source: Intel, Author calculations.
The data above suggests that even without Quark, Intel can still go after about $15.5 billion worth of business today. In fact, even if Intel were to very heavily invest in Quark to make it competitive with the incumbents in this space today, it would only add about $2 billion to the total market that Intel could go after.
It seems, then, that most of the IoT market is open to Intel today with its current assets, and if Quark becomes competitive, that will be icing on the cake.
How is Intel going after this market? It's not just hardware
Intel spent a lot of time at its investor meeting talking up how it can deliver more value by bringing to market platforms rather than simply silicon. In the slide below, Intel nicely conveys what it has to offer from both hardware and software perspectives:
Source: Intel.
Intel is keen to point out all of the software and developer tools that it offers for the IoT market and for developers building IoT-focused software and solutions. Intel's Renee James spoke about how Intel had to do a lot of work to convince developers to develop programs on x86, but that its early presence in new markets such as wearables and other parts of the IoT will allow Intel to avoid that headache.
Intel looks well positioned in the IoT
Based on Intel's presentation and, quite frankly, the revenue/profit numbers Intel's IoT group has been posting, the company looks very well positioned to tackle the IoT market. The total chip market in this space looks sizable, and there seems to be a lot of room for Intel to grow market share.
Perhaps the best part of this for Intel is that it can go after the vast majority of the market with its higher-end Atom/Core processors, so the story doesn't really depend on the company executing well with Quark. I'm also happy to see Intel's software assets play a big role, particularly as this allows Intel to be more than just a "component vendor" in this market -- helping it to keep margins relatively high.
As an Intel investor, I'm pleased with the presentation that the company gave and look forward to seeing what the future holds for Intel's IoT Group.
