Mobile chips leave $4b gap in Intel's figures

Caroline Gabriel/Wireless Watch
27 Jan 2015

As featured in Wireless Watch

Although Intel, for the first time, can claim to be a credible mobile processor vendor, it has spent billions of dollars in acquisitions, R&D, subsidies and losses to get there, and is still tiny compared to Qualcomm (it sold 46 million mobile SoCs last year, according to its filings).

Its use of subsidies to boost its tablet market share meant that the mobile division made negative sales in the fourth quarter of 2014, as well as a loss which would have wiped out the total profits of most rivals (all of them except Qualcomm and TSMC, according to Bloomberg).

Nonetheless, Intel’s stock was a strong performer on the Dow Jones index last year though investors are likely to be rewarding the strong growth prospects in high profit data center chips, more than the perhaps bull-headed persistence in mobile.

Intel’s dominant market share and high margins in server platforms have enabled it to pursue its expensive mobile dream, though its real opportunity lies not in going head-to-head with Qualcomm in a saturated smartphone space, but in ‘post-PC’ form factors – reinvented, highly mobile PCs, such as Chromebooks and Ultrabooks, which tend to come from Intel’s familiar ecosystem, and which have significant growth potential ahead. The surprising resilience of the PC market last year, thanks to these new designs, has squeezed tablet growth and given Intel hope that the devices of the future will not be all dictated by the Qualcomm approach to design.

To reflect that post-PC opportunity, and to reduce costs, Intel has merged its mobile and communications unit into its PC chip division, while reducing its reliance on subsidies. It should slash costs in the mobile activity by $800 million this year, it said, though clearly that comes nowhere near to eradicating the scale of losses in the unit. However, revenues from the newly merged PC Client group exceeded targets in 2014, up 4% to $34.7 billion – despite an 85% fall in revenue from the mobile business – as the PC sector defied dire predictions of its demise.

“We’re proud that the company reached these milestones, but we have more work ahead of us in 2015,” CEO Brian Krzanich said on a conference call. “A key goal for mobility is to improve profitability.”

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