Will Intel Make the Transition to Mobile?

As consumers begin favoring smartphones over PCs, the chipmaker has a lot of catching up to do

   
Will Intel Make the Transition to Mobile?

In the post-PC world, where mobile devices outnumber desktops and notebooks as the personal computing device of choice, Intel (NASDAQ:INTC) has a problem. While its x86 processor architecture dominated the PC era, it has virtually no presence in smartphones or tablets, which are fast becoming the dominant personal computing platform.

Intel faces an uphill battle to get back in the game. An estimated 90% of smartphones are powered by chips licensed from ARM (NASDAQ:ARMH), the UK-based processor technology company. While Intel continued to market powerful but power hungry CPUs for desktop and laptop computers, ARM has grown into the dominant producer of the compact, energy efficient, system-on-chip technology that’s in demand for mobile devices. According to ARM’s latest report, it shipped 1.2 billion processors for mobile devices in the fourth quarter of 2011 alone.

Intel has made moves in the past to capitalize on the growing mobile market, but for all the talk about going mobile, the company has little to show for it. A 2010 partnership with LG Electronics for an Intel-powered handset ended without any product being released.

In May, 2011, CEO Paul Otellini announced that Intel was going to refocus from PC processors to chips for mobile devices, but the company spent most of the year pushing the so-called Ultrabook class of compact laptops, powered by the company’s Ivy Bridge processors. Even longtime strategic partner Microsoft (NASDAQ:MSFT) dealt Intel a significant blow when it announced that the forthcoming Windows 8 operating system would run on mobile devices using ARM chips.

Reaching for the brass ring

However, at the International Consumer Electronics Show in January, Intel’s mobile plans appeared to taking shape when the company announced that both Lenovo (PINK:LNVGY) and Motorola (NYSE:MMI) would be releasing Intel-powered smartphones in 2012. Lenovo is coming off its own mobile challenges, having sold off its smartphone division in 2008, then paying twice the selling price to buy it back again in 2009. Motorola saw its smartphone sales drop in 2011, despite high hopes for its new Droid Razr.

Perhaps not the most inspiring hardware partners; then again, Intel would likely have a hard time convincing a smartphone manufacturer enjoying booming sales, such as Samsung (PINK:SSNLF), to take a chance on an unproven chip.

The new Lenovo and Motorola smartphones will use Intel’s Medfield system-on-chip, which is smaller than a fingertip and designed to maximize battery life while delivering capable performance. Whether Intel will be able to compete with ARM —and other mobile processor manufacturers such as Qualcomm (NASDAQ:QCOM) and Nvidia (NASDAQ:NVDA)— is likely going to be decided in the next year or two.

Competition in all quarters

Apple (NASDAQ:AAPL) is highly unlikely to switch chip suppliers since it now designs its own chips (under a licensing deal with ARM). Other manufacturers will likely take a wait-and-see attitude to gauge whether the Intel offerings are able to compete in terms of battery life, performance, and price. Then there’s the matter of all the mobile applications that have been compiled specifically for ARM chips—they would need to be recompiled (or run more slowly in emulation) if used on a device powered with one of Intel’s chips.

As if things weren’t challenging enough for Intel, it faces a real threat in its core market. ARM processors are moving beyond smartphones and tablets and into notebook computers where their low power capabilities mean extended battery life. As noted in a recent Businessweek article, researchers from IHS Inc. estimated ARM processors will be in almost 25% of all notebooks by 2015, while ARM itself indicated it was shooting for 40%.

With the PC market slowing and ARM planning to move into what’s left of it, Intel has no choice but to make the transition to mobile. Competitive, powerful, energy efficient system-on-chip solutions are what Intel needs to gain a foothold in the mobile market as well as to hold on to its own turf.


Article printed from InvestorPlace Media, http://investorplace.com/2012/02/will-intel-make-the-transition-to-mobile-intc-msft-armh-mmi-ssnlf/.

©2014 InvestorPlace Media, LLC

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