It happened today. As I have predicted for over a year, Intel would not be successful in mobile and would be forced to exit the market. Last quarter they lost $1B on revenues of $1M (as Dave Barry would say, I am not making this up, that M is not a typo). They ship “contra revenue” with their chips for the tablet market, meaning that instead of just showing a huge loss on a reasonable amount of revenue, they take the marketing subsidy off the revenue line meaning that there is basically no revenue.
There has been no formal announcement but an internal Intel email from CEO Krzanich has been leaked that early next year Intel will merge its mobile group into its PC client group. My reading is that they have given up on mobile and are putting tablets together with client PCs as a single business which will be known as the Client Computing Group. They still have their LTE modem unit which they will continue with and technically they still have a group focused on mobile. But it is clear that their heart is no longer in it. ARM and Apple and Qualcomm and Mediatek have won.
Intel spokesman Chuck Mulloy put some spin on it:The lines are blurring between PCs, tablets, phablets and phones. The idea is to accelerate the implementation and create some efficiency so that we can move even faster.
At least for tablets and notebooks this arguably true. But the biggest mobile market, chips for smartphones, doesn’t really have any synergy at all with the PC market. Nobody cares about x86 compatibility, if they care about any compatibility it is with the ARM instruction set. Intel has an ARM license, I assume, from when they acquired Infineon’s wireless unit. And they certainly have one to be able to manufacture Altera FPGAs with embedded ARMs. But Intel’s strategy in mobile has never been to use their manufacturing to compete in the ARM-based application processor market, it has always been to leverage the x86 instruction set and their Atom family to get an “unfair share” of the market. Today it became clear even to them that this was not going to happen.
The tablet market isn’t really even growing. Even Apple’s iPad sales are flat. It was a market that appeared out of nowhere (and I confess I was one of the people who was dubious when the iPad was announced) and just a few years later is already commoditized. In the smartphone market that is happening too. The winners in the latest market share data are all Chinese manufacturers at very low price points. Apple is making all the profits but its market share is declining slowly (not last quarter when it announced new models but over the last couple of years).
Samsung is also struggling in mobile and has said that it will transfer a lot of engineering effort away from smartphones, where it is still #1 but with declining share and even faster declining profitability, towards sectors where it anticipates growth.
We live in interesting times!
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