Intel’s Q2 Conference Call

Yesterday was Intel’s Q2 conference call. I think that there are some interesting little pieces of information. The financials were what analysts expected although they did take down their guidance for the rest of the year. But that is never the interesting point of Intel conference calls (they almost always hit guidance). There is a transcript at SeekingAlpha here if you want to follow along at home.

Oh and the call was also significant since it was Brian Krzanich’s first as CEO.

What is clear is that the PC market is not growing even as fast as people expected at the start of 2013. The world is going mobile When we started Semiwiki a couple of years ago, mobile access was around 10% (I’m doing this from memory of numbers Dan told me at lunch today, he can correct them if I’m wildly wrong) and now it is closer to 40%.

Of course it is no secret that Intel wants to get into the mobile market. In fact it has to get into the market through a combination of standard products, ASIC-type business and foundry, or it is doomed to decline. My view is it can’t mix all three. If it pursues an Atom-based mobile strategy then it can’t expect to be a foundry for an Apple or a Qualcomm. If it pursues a foundry business it needs a big IP strategy to match the sort of investments that TSMC and GF have made in their ecosystems.

It hopes to use a combination of things to do so:

• manufacturing technology. I don’t know if it is really significant but Intel reduced their capital spending forecast to $11B following a reduction to $12B in Q2 following start of year plans for $13B. My guess this is driven not from any wish to reduce capital spending but that the money pump from the PC industry is weakening and likely to continue to weaken
• Intel already announced a win for a Samsung tablet using an Atom-based SoC. What they announced on the conference call, which is significant, is that this is also a win for Intel’s LTE modem product. Since you can’t be anyone in mobile these days without LTE, this is significant. When Intel acquired Infineon’s wireless business they were heavily criticised for two things. Loss of Infineon’s largest customer, Apple, to Qualcomm (oops) and then later their tardiness in that group developing a viable LTE modem. In the future this gives them the possibility of building a fully integrated chip including the modem.
• Intel have also announced Silvermont, their next generation Atom architecture, which has a 5X reduction in power or a 3X increase in performance. Since Intel are experts at DVFS this can be changed on the fly dynamically. But as always they say the “architecture” reduces the power but actually most of the reduction, perhaps all, comes from comparing one process generation to the next, inviting you to make the false comparison with current generation ARM-based chips from Apple, Qualcomm etc. OMG ARM is dead. Except next generation ARM chips will also be on future processes (FinFET based so with lots of goodies in the power area).
• Intel has always considered its capability to run Windows compatibly on smartphones and especially tablets to be a huge advantage. Now they can run Android too and switch between them. Many analysts who follow Intel all seem to think that this is the killer app. In fact they have always said the game belongs to Intel. For instance here: “That little factoid…renders all other tablet processors obsolete. Period.” OMG Apple is dead too. Except I don’t see it. iPad is not going away because it can’t run Microsoft Office. People said it would never be successful for that reasons. How’s that prediction working out?
• Intel has always had an attitude that “the best transistors win” and they have done a brilliant job of executing on manufacturing and process to be out ahead. The jury is still out (despite Dan’s optimism that everything is on-track) on how fast TSMC and Global will be able to ramp 20nm and transition to 14/16nm and how competitive their processes (and especially manufacturing costs) will be against Intel. If Intel’s process really is years ahead and dramatically cheaper, it could be a game changer. Otherwise I’d bet on ARM/TSMC and the fabless ecosystem/business model.
• Cloud and storage are growing 40% year on year. Intel are kings there and, despite ARM having processors to attack the datacenter (the business model of ARM’s licensees in the space is essentially 10% cost, 10% physical volume and 10% power of Intel solutions) the jury is out on whether the big internet giants will switch to a hybrid Intel/ARM solution, Intel for single thread performance where they are unbeatable, and ARM for high threadcount internet servers where throughput and power are more important than single thread performance.

OK, that’s what I spotted in the call. BTW there is a transcript at SeekingAlpha here. Anyone spot any other interesting things I missed?