Intel Noses Its Way Into the Mobile Market

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Intel (INTC) was very, very late entering the mobile game.

But thanks to Samsung (SSNLF), late might very well be better than never.

Intel was once so focused on the PC business that it was caught off guard by the rapid rise of tablets and smartphones, which allowed chips based on ARM Holdings (ARMH) architecture to dominate the mobile space.

That strategic blunder has kept the stock value from going anywhere — in the seven years since Apple (AAPL) released its first iPhone, INTC has been up and down but has, all told, appreciated by less than 1.5% in value. This led to the surprise resignation of CEO Paul Otellini last year, who was replaced by former COO Brian Krzanich a few weeks ago.

Intel has managed to get its mobile CPUs in a few smartphones (none of them big sellers), and it’s supplying chips for Microsoft’s (MSFT) Windows tablets, but the company has made little progress in cracking the mobile mainstream.

Even the Nokia (NK) Lumia devices that dominate the Windows smartphone market are powered by processors from Qualcomm (QCOM). With struggling PC rival Advanced Micro Devices (AMD) now showing up in Windows tablets and Nvidia (NVDA) also targeting that space, Intel no longer has even the limited Windows tablet market to itself. It has been pushing its touchscreen-enabled Ultrabooks hard, but with the PC market in decline, that’s a defensive move — not one that’s going to result in long-term growth.

In short, Intel desperately needs a big win in the mobile space, especially in the tablets that are pushing out PCs.

And it might have just found one.

Rumors began circulating last week when a benchmarking website detected an Android tablet running on Intel’s Clovertrail mobile chip. Not only was this device pulling down the highest overall performance test scores recorded for an Android tablet, but its product designation revealed the mystery device to be Samsung’s forthcoming Galaxy Tab 3. VentureBeat is now saying it has confirmation that Intel will be powering the Galaxy Tab 3 when it’s released.

While it floundered a bit over the past few years and faced a series of court-ordered restrictions on sales of its Galaxy Tab tablets after objections from Apple, Samsung’s tablet business has been on fire in the past year. The company has grown its share of worldwide tablet sales from 11.3% in Q1 2012 to 17.9% in Q1 2013.

But here’s the head-scratcher: Samsung makes its own ARM-based mobile processors, including the powerful Exynos 5 chip found in some of its Galaxy S4 smartphones. It also manufactures CPUs for tablet competitors, including Apple’s iPads. So, if Samsung has its own tablet CPUs, why would it turn to Intel to power its newest flagship tablet?

The answer might lie in that Galaxy S4 smartphone, which has quickly become a bestseller. Currently, Samsung uses two different chips in the phone, depending on the region where the device is sold. The more powerful Exynos 5 CPU isn’t available for North American Galaxy S4 customers, who instead get a Qualcomm Snapdragon CPU.

The reason for the dual-chip strategy? According to Yahoo News, Samsung officials have said they were concerned about supply shortages if they stuck with just their own CPU. An even earlier prototype of the Galaxy Tab was spotted in the wild sporting an Exynos 5 CPU, suggesting that Samsung’s first choice was to put its own processor in the tablet. However, with concerns about running short of the CPUs for the Galaxy S4 — and given that device’s sales streak as the fastest-selling Android smartphone in history — it’s not a stretch to imagine that Samsung doesn’t want to risk the continued success of its hot smartphone or risk supply shortages of its latest tablet on release.

Thus, Intel gets its foot in the door.

However it got here, this is Intel’s chance to make an impression. The company has only made it into one other Android tablet that I’m aware of — the 7-inch FonePad from Asus, which is really a niche device — and that was a small victory. Having the flagship tablet from Samsung — a dominant player in an increasingly important Android tablet market — sporting an “Intel Inside” sticker on its back is a big win.

And if the Galaxy Tab 3’s performance specs live up to those early test results, you can bet that other Android tablet manufacturers are going to sit up and take notice.

We’ve been saying for a while that Intel could be poised for growth. Even if Windows 8 hasn’t delivered a boost in the company’s core PC business, breaking into the Android tablet market would show that Intel has finally overcome the mobile block that has plagued it for years.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2013/05/intel-noses-its-way-into-the-mobile-market/.

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