Intel is certainly a brand name when it comes to processors, but mobile devices, specifically smartphones and tablets, don’t exactly “move the needle” for the company — yet. With current CEO, Paul Otellini, planning to step down this month, and Brian Krzanich named as the successor effective May 16, that is all likely to change, fast. And it will have to, since PCs are on the decline.
A long-time Intel employee, Krzanich served as COO, overseeing the company’s China strategy and Technology and Manufacturing Group. The 31-year veteran was chosen for his proven record of leadership, said Intel Chairman Andy Bryant in a public interview. He told CNBC that the board’s decision, however, ultimately came down to who had the best mobile vision.
Although Intel may have initially missed the mark in the space, it’s now making a huge play for mobile that is likely to pay off.
“We are making significant progress in tablets and phones,” confirmed Stacy J. Smith, SVP and CFO, Intel, during the company’s recent earnings call. Tablet volume in the first quarter more than doubled from the fourth quarter, she said, adding “and we expect it to double again in the second quarter.” Although phones were “good” in Q1, Intel does not expect the device to make an impact in the second half.
Re-Enter the Enterprise
Intel has always been a significant part of the business landscape, strictly because of the prevalence of PCs. With that form factor on the decline, the traditional enterprise segment for Intel has seen low growth rate on a year-over-year basis, with some quarters significantly worse than others.
Even with the release of Intel’s Haswell chip that enables Windows 8 laptops, the PC market is just not going to regain traction. Cloud, on the other hand, is consistently on the upswing. In fact, Smith noted that the data center now accounts for almost 20% of revenue with expected growth in the double digits.
Although PCs are trending downhill, Ultrabooks, convertibles and tablets are all on the table. There is a “reinvention going on just broadly across the notebook,” Smith said, with premium, touch-based Ultrabooks emerging alongside convertibles and detachables.
Investing in the Future
When the iPhone debuted, Intel controlled the desktop, but for some reason ignored the mobile space. As a result, the dominant processor for mobile devices is currently ARM which accounts for 95% of the market (including licensed designs). Intel no longer finds this acceptable. The company expects to dole out $4.7B for research and development, and mergers and acquisitions in the second quarter, up $200M from the quarter before.
“And we are at the point now, where roughly half of our spending is focused on System-on-Chip inside the microprocessor world,” Otellini said during the earnings call. “The System-on-Chip environment is really a lot of the ultra-mobile products, it's the phones, it's the tablets, it's embedded system, it's automotive, etc., where we have fairly strong growth opportunities. So it's not the same monolithic tick-tock model that we put in place eight years ago.”
In addition to mobile components, the company is strategically branching out with solutions. Intel Capital, the funding arm of Intel, is the lead investor in FeedHenry, a provider of a mobile enterprise application platform. (With additional capital coming from Kernel Capital, VMware Inc., and others, total funding is $9 million.)
“We wanted an international player, a brand name and a company not afraid to invest in an Irish company,” said Cathal McGloin, CEO, FeedHenry, in an interview with Mobile Enterprise, regarding Intel.
If that is what FeedHenry wanted and obtained, what did Intel want? “The convergence of smart access devices, apps and cloud presents enterprises with great opportunities,” replied Damien Callaghan, Director, Intel Capital. “This investment will help us better understand how CIOs worldwide are utilizing APIs to mobilize their organizations.”
The FeedHenry platform allows businesses to build apps however they want — native, HML5, etc. — but once in the enterprise, deploy from a secure layer managed by IT. The platform also enables companies to create multiple “easy-to-use apps” that address single business processes, instead of one app that connects to a legacy system and does 354 different things.
“Enterprise mobility was previously defined by vertically-focused solutions,” McGloin said. “We think it’s going mass market, because everyone wants smart devices.” And along with devices come the apps. The mobile apps market segment is expected to reach $37 billion by 2015, according to Forrester’s Enterprise Mobility Research Report.
The platform has been rolled out in Ireland and the U.K., with Spain and Germany not far behind. In the U.S, several healthcare clients are already building apps with the platform, and thanks to Intel’s investment, more verticals are expected to come on board.
According to Intel’s recent earnings call, new smartphone and tablets processors will be shipped this month. Bay Trail, a quad-core Atom SoC processor designed for Windows 8 and Android tablets, for example, is scheduled to launch in the second half of the year, to extend Intel’s product line across lower price points.
The new processors will incorporate existing 22-nanometer (nm) technology. “We’ll begin the transition to 14nm products later this year,” a company representative told Mobile Enterprise, via email. What’s the difference? Is it smaller, faster, cooler? Is it just a number?
It’s definitely not just a number, and cooler is up to debate, but it IS smaller and faster. “Smaller is important, because the transistor will switch faster at lower power,” said Dan Hutcheson of VLSI Research. For example, due to the rapid development over the years, today’s smartphone is equivalent to a computer from the mid-1990s, in terms of computing power. The component cost is also less. Bottom line, “The end user gets more computing power for the same price,” Hutcheson said.
Taking a step back to 2010, the industry analyst was enthusiastic about Intel’s multi-billion dollar investment into 22nm technology, especially because it was “U.S. centric” – promoting manufacturing jobs within the states. It was exciting, he said, because the technology was not even thought possible. Now it’s only three years later, and we are already moving towards 14-nanometer.
“The last big change in mobile was touchscreen capability in terms of the interface,” he said. “The processor is what makes that possible economically. The question now is: what comes next?”