Chip giant Intel (NASDAQ:INTC) derives the vast majority of its revenue and profit from two business units. The first is the Data Center Group, which sells processors and other related platform components into data centers. The second is the Client Computing Group, which mainly sells processors and other components into notebook, desktop, and 2-in-1 computers.
However, as the PC market has declined -- a decline that's at least partially attributable to the rise of ultramobile devices such as tablets and smartphones -- the chipmaker has sought to enter the market for processors targeted at such devices.
Intel serves this market with essentially two types of products: stand-alone cellular modems that pair with a separate applications processor or cellular modems integrated onto the same chip.
I submit to the reader that these two products -- mobile applications processors and stand-alone modems -- were Intel's most disappointing in 2015.
No integrated LTE, little traction for stand-alone LTE modem
The only integrated applications processor and modem products that Intel brought to market this year were chips known as SoFIA 3G -- a very weak, undifferentiated applications processor with support for only the 3G cellular standard -- and SoFIA 3G-R in collaboration with Rockchip, a slightly less-bad applications processor still with only 3G support.
Intel had originally said that a SoFIA chip with integrated LTE would make it to the market this year, but this part ultimately got pushed to the first half of 2016. By the time this part makes it to market, it will have been lapped by offerings from competitors Qualcomm (NASDAQ:QCOM) and MediaTek.
On the stand-alone LTE modem side, Intel has been shipping its XMM 7260 modem (which is roughly equivalent in terms of features to Qualcomm's MDM9635 found inside of the iPhone 6s/6s Plus) for a while now. Although this modem found its way into a few designs (such as the ASUS ZenFone 2 and the Surface 3 LTE edition), the modem seems to have underwhelmed compared to Intel's own expectations.
Indeed, here's what Intel CFO Stacy Smith had to say about it:
The one place where we didn't hit the goals that we had for the year here -- although we made it up in other places -- was that we expected to see an LTE ramp. We didn't see an LTE ramp. We saw some, but not nearly the extent that we thought this year.
Further, Intel had previously said that it expected its next generation modem, the XMM 7360, to begin showing up in commercial devices in the second half of 2015. However, on the company's most recent earnings call, CEO Brian Krzanich is now saying the modem will ship to customers "by the end of the year" for devices that pop up in 2016.
We'll soon see how much traction Intel's next attempt at a stand-alone LTE modem does, particularly as it faces quite stiff competition from Qualcomm's MDM9x45, which offers a more robust feature-set and is likely more efficient as it is manufactured on a more advanced manufacturing process.
Will 2016 be better for the company's mobile efforts?
According to Smith, Intel expects to reduce the amount that loses in the mobile market by another $800 million in 2016.
However, in contrast to the situation 2015 in which only a third of the loss reduction came from product margin improvements (the other two-thirds came from reducing operating expenses), Intel expects product margin improvements (i.e., greater revenue at better margins) to drive the bulk of the loss reductions.
If Intel hits its goals, then 2016 should at least be a better year for the company's mobile efforts than 2015 was.
Ashraf Eassa owns shares of Intel and Qualcomm. The Motley Fool owns shares of and recommends Qualcomm. The Motley Fool recommends 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.