Newsletter
Intel, founded on July 18, 1968, designed and manufactured the microprocessors that fueled the rapid expansion and adoption of the personal computer in the 90’s. They quickly became the dominant microprocessor supplier for desktop PCs and eventually laptop computers. However, their reluctance to stray from their core business has hampered their influence on the rise of mobile computing, which has been dominated by low powered and low-priced ARM-based chipsets. Most Android users are quite used to seeing devices powered by Qualcomm’s Snapdragon line of chipsets, Samsung’s Exynos, Nvidia’s Tegra, or even a MediaTek processor. Intel’s low-powered line of Atom CPUs are a relative rarity in tablets and smartphones; less than 1% of smartphones, and between 4%-5% of tablets utilize Intel chips.
In 2014, Intel made a concerted effort to increase adoption of their Atom chipset in tablets. They provided significant subsidies to tablet manufacturers in return for going Atom. While their goal of powering 40 million tablets by year-end was surpassed by 6 million units they paid a significant price. Intel’s mobile processor division reported $4.2 billion in losses in 2014. In their Q1 earnings call yesterday, Intel CEO Brian Krzanich told investors they aim to cut $800 million from their mobile division’s losses by reducing subsidies and powering devices with higher margins.
In 2014, Intel essentially paid manufacturers to put their high-powered chips into low-end devices that correspondingly have low margins. This obviously is not an effective long-term strategy for maximizing profit. At Mobile World Congress in March Intel announced a new line of Atom chips named the x3, x5, and x7 that are specifically designed for different segments of the market. The x3 is designed for low-cost smartphones, phablets, and tablets, which will reduce the costs Intel had to absorb in order to boost its presence in the entry-level smartphone and tablet market. Intel stated it has 20 customers who have committed to use the x3 chip in products being released this year, which will begin to effect profitability (or lack thereof) by the second half of 2015. Intel also appears to be increasing their presence in the mid to high-end market segment with devices such as the Nokia N1 tablet, Asus Zenfone 2, Dell Venue 8 7000, and Dell Venue 10 7000, which have already been released or will be soon.
Given Intel’s long history of producing some of the world’s most powerful, reliable, and technologically advanced chipsets, it can only be hoped they start bringing their best to mobile devices. It is also essential for Intel’s long-term financial health when one considers how mobile devices are shifting consumers (and dollars) away from traditional computing platforms such as the desktop PC and laptop. Although Atom is not a name that is often associated with mobile devices, Intel has the technology, brand, and budget to drastically disrupt the mobile microprocessor market and increase competition.