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Even before taking over as Intel CEO in 2013, Brian Krzanich had his eyes focused on the mobile space.
The world’s largest chip maker, which several years ago famously misread the rapid shift in end-user device demand, concentrated on making PCs more powerful and energy-efficient, while consumers and business users were buying smartphones and tablets, most of them running on systems-on-a-chip (SoCs) from Qualcomm, Samsung and others and based on ARM’s low-power architecture.
As global shipments of PCs began their multiyear decline after 2011, Intel and other top-tier tech vendors—such as Microsoft—started to make sharp pivots toward the booming mobile space in hopes of making up for lost time and grabbing some of the market that hadn’t already been swept up by the likes of ARM, Google and Apple. Krzanich, then Intel’s chief operating officer, told journalists in 2012 that the vendor’s manufacturing facilities and supply chain were being revved up to churn out more Atom and Core chips to be used in devices like smartphones and tablets. He told Reuters that “we will start to see more and more of our capacity and our output go to things that are mobile.”
As CEO—replacing Paul Otellini in May 2013—Krzanich immediately began leading an aggressive push by Intel in the mobile space and other growth areas, such as the Internet of things (IoT) and wearable devices. He reconfigured some business units and created others, accelerated the development cycle for the low-power, energy-efficient Atom platform, sacrificed profits to grow market share in the tablet space and remade the company’s leadership team.
Whether all these moves will help gain ground in the competitive and highly dynamic mobile space remains to be seen. Intel executives admit the company is starting from behind, but they like where they are and where they’re going. They also note that in a highly connected world, the definition of mobile continues to evolve. It’s no longer simply smartphones and tablets, but also can be phablets, sensors, wearables and myriad devices and systems that make up the IoT. Company executives believe the work Intel is doing with its Atom and Core platforms and in its communications technologies—including integrated and discrete modems—will help fuel the tech giant’s push into these other areas.
“There’s no question that when analyzing the mobile market—and the multiple facets to the market—we need to be selective in how we pursue that market,” Navin Shenoy, corporate vice president and general manager of mobility client platforms at Intel, told eWEEK.
In the areas being targeted, Intel is well on its way to establishing a solid footprint and improved profitability, Shenoy said.
However, not everyone is as optimistic.
Nathan Brookwood, principal analyst with market research firm Insight 64, said Intel is being squeezed by top-tier vendors that increasingly are making their own processors for their devices and smaller chip makers that compete primarily on price. Intel continues to trail the likes of Qualcomm in such critical areas as wireless modems, he said, adding that new areas like the IoT and wearables can offer some relief, but not a lot.
“Clearly they’re struggling,” Brookwood told eWEEK. “I don’t know any other way to put it. They were late to the party, and their products are a little pricey. And, clearly, the only way to address that is through radical pricing.”
Inside Intel’s Mobile Strategy: Opportunities and Challenges
Krzanich and other Intel executives like to say that if it computes, it runs best on the Intel Architecture. During Krzanich’s tenure, they have made efforts to prove that is true in the mobile space as well, both in tablets and smartphones, though the results have been a mixed bag. Intel was able to muscle its way into the tablet space in 2014 by offering OEMs huge cash subsidies to use its Atom “Bay Trail-T” platform.
The company that year was able to move 46 million Intel-based tablets into the market—beyond its goal of 40 million—but it came at a cost: The mobile business lost more than $4 billion. However, now established in the space, Intel officials this year set a goal of narrowing those losses by $800 million in 2015, which is well within reach with two months to go, Shenoy said.
What the tablet experience showed was that Intel can leverage its strengths to gain share and credibility in a market in which it held little presence, he said. And even as tablet shipments begin to decline, the company expects to be a player in the devices—”phablets” from underneath and two-in-ones from above—that are putting pressure on tablet sales.
Intel is hoping to have similar success in the competitive smartphone space, which saw 1.3 billion units shipped worldwide in 2014. Intel has continued to lag behind such ARM partners as Qualcomm, but officials expect to make gains over the next few years. The company’s chips support both Microsoft’s Windows and Google’s Android operating systems, and the first of the Atom x3, x5 and x7 products, based on the “Cherry Trail” architecture are ramping.
In addition, a key step came this year when Intel rolled out the Atom x3 SoFIA chip, the first to include integrated cellular modem technology. The chips currently offer 3G connectivity. Chips with LTE connectivity are sampling now and scheduled to ship in the first half of next year. Intel is partnering with Chinese chip maker Rockchip to help get its SoFIA chips into the market.
Shenoy expects OEMs over the next few quarters to unveil new device designs that use the SoFIA technologies.
What makes the communications technologies—both integrated and discrete—so important is that in a highly connected and mobile world, many people are looking to their smartphones to be central computing devices. “It is about having a computer in your pocket and not just a phone,” Shenoy said.
Aicha Evans, corporate vice president and general manager of Intel’s Communication and Devices Group in the Platform Engineering Group, told eWEEK that the chips “are the bus drivers of information. … Our job is to transfer information as quickly and efficiently as possible.”
Over the past several years, Intel has done well building out its expertise and features for its communications offerings, Evans said. It’s now become about growing the number of chips they sell, which she expects will happen as the company adds to its current 3G capabilities with LTE next year and, down the road, 5G for which Intel is “uniquely positioned” because of its broad technology portfolio and ecosystem.
And Evans believes Intel is closing the gap in the modem space with Qualcomm, which has been more than a generation ahead.
Inside Intel’s Mobile Strategy: Opportunities and Challenges
“We’re not talking years away,” she said of being behind Qualcomm. “When you’re going after volume, you can’t be years away. Otherwise, you’re just a hockey stick [a marketing analogy for hyping sharp growth] and PowerPoints. We’re 12 to 18 months to getting to that volume. … This is all about volume at the end of the day.”
Shenoy echoed her sentiments. Intel doesn’t get into markets to lose money. The plan is always to establish a strong presence and to make money, he said. That will happen with the mobility business as well.
He also noted that SoFIA was an example of how quickly Intel can move when it wants to get into a market. It took two years from the first internal discussions to the time the technology hit the market, Shenoy said. Traditionally, such a process takes three to four years.
Insight 64 analyst Brookwood said market dynamics will continue to make it difficult for Intel. A key problem is figuring out where Intel will find the volume it needs. Apple and Samsung hold the lion’s share of the high end of the mobile market, and they are increasingly making their own ARM-based processors. The low end is populated by the likes of MediaTek and various Chinese chip makers who compete primarily on price.
Intel will get some wins—for example, Asus’ ZenFone 2—but it will still be a difficult market for it, he said.
“That just doesn’t leave a lot of sockets” for Intel to go after, Brookwood said. “I think it’s going to continue to be a challenge for them.”
At the same time, while having integrated 3G modem capabilities is good, the world is turning to LTE, which Qualcomm already has but Intel is still months away from offering. Missing out on the beginning of the mobile push in the market has put Intel in the position of trying to catch up with competitors that are not only well ahead but also continuously improving, Brookwood said.
“It’s very difficult to displace an incumbent, and to do that, you can’t be as good,” he said. “You have to be way better. Intel is hoisted on the same petard that others were hoisted on when they tried to displace Intel in PCs.”
In that sense, Intel finds itself in the same position in the mobile market as ARM does in its effort to gain traction against Intel in the server space, Brookwood said. However, he noted that Intel has the resources to continue pushing its efforts in smartphones until it either has success or shifts focus, and that “the market for smartphones is vast, much more vast than PCs were.” He pointed to the A8 and A9 processors Apple uses in its iPhones and iPads, and suggested that given the size of the mobile market, Apple at this point has probably shipped more 64-bit processors than Intel.
That said, there may be opportunities out there as more people and devices get connected. Shenoy noted that the next 4 billion people to be connected will come from outside established regions like the United States and Western Europe, making emerging markets more of a greenfield opportunity for Intel. Some users in these areas will start with a smartphone, then eventually, will buy a PC. If their first purchase is an Intel-based smartphone, it opens up greater possibilities for the company.
“People in emerging markets have a variety of needs,” he said, noting that right now, most of Intel’s Atom x3 and SoFIA chips are finding their way into smartphones for the Chinese market. “We want to make sure we reach these people as early as possible.”
Inside Intel’s Mobile Strategy: Opportunities and Challenges
Partnerships with regional tech vendors like Rockchip and Spreadtrum in China provide a smart way to get into these markets, according to Jeff Orr, research director at ABI Research.
“Intel figured out that the way to be successful in the U.S. and Europe doesn’t work in China,” Orr told eWEEK. “There is a huge amount of ‘made in China’ pride in China.”
In addition, the definition of the mobile space may be expanding to include the tens of billions of devices that make up the fast-growing Internet of things, wearable devices, sensors and drones. Performance, power efficiency and connectivity will all be ingredients for the silicon that will go into these devices, and the work Intel has done with Atom and other mobile technologies will apply to these newly connected systems, Shenoy said.
While acknowledging Intel’s missteps in the smartphone and tablet markets, Orr said Intel’s ability to recognize and react to the mobile space and the growing IoT opportunity has been impressive.
“The company had to go through some major upheavals of the business units to right the ship to align with the future, rather than how it’s made its money in the past,” he said. “It is a problem for any company—Intel included—to see a potential disruption in their space. They don’t tend to see the cliff in front of them, and don’t know how to react when they see that cliff.”
Once they understood what was happening, Intel was able to react quickly, Orr said. That included such moves as understanding the importance of battery life in a mobile device and finding ways to optimize the power consumption, such as not using all the chip’s cores for all applications, but rather using as many as necessary to process the workload while keeping the rest idle and saving power.
It also means being able to develop two different product lines at the same time—such as Core and Atom—and stretching product families across platforms rather than assign chips to particular systems, he said. The chip maker, through the scalability of its processors, also has been able to drive the development of systems that can be used in multiple ways, such as two-in-ones and detachables—which can be used as a traditional PC or a tablet—mobile all-in-ones, which can be used in multiple ways, and tablets that can use keyboards or a stylus.
“You can see where these kinds of blended-use cases are the direction that the market is going,” Orr said.
Intel most likely won’t dislodge ARM from the smartphone space, but the company is driving new markets, thanks to the capabilities and features it’s putting into its silicon, such as multiple OS support. Intel’s RealSense 3D camera technology is another such capability, enabling OEMs to build devices that let users change the focal depth of their photos or to leverage its ability to accurately measure height, length and depth of objects in the photo for a range of uses, from comparison shopping to mapping, he said. It can be used for everything from collision avoidance systems in cars to helping people with visual impairments.
Inside Intel’s Mobile Strategy: Opportunities and Challenges
In response to the rapid changes in the technology space—including mobility—Intel executives changed the way the business units operated, and it has helped the company drive such innovations, which in turn, has helped it open up new markets and new opportunities, Orr said. In talking with Intel engineers, he said he found that they no longer discuss what the company does and doesn’t do, but instead, “it’s more about prioritizing the ‘what-ifs.'” Now, with the changes made and a larger array of applications for its technology, Intel has a “bigger swath of many opportunities.”
Brookwood agreed that the IoT presented an opportunity for Intel though it also came with its share of challenges. It’s a new market where the Intel and ARM ecosystems are fairly evenly matched, and where energy efficiency is important—where metrics like performance carry less weight than performance-per-watt. It’s also big and getting bigger—Cisco Systems officials expect the number of connected devices worldwide to jump from 25 billion last year to more than 50 billion by 2020.
However, a hurdle again is pricing, he said. Chips for such devices sell for less than what Intel gets for its PC processors. Intel needs to sell enough chips to help drive profits in the space. However, Intel executives are confident about the opportunity. Over the past few years, they have created an IoT business unit and another group for new devices, such as wearables. They’ve created the small, low-power Quark chip family and development boards and modules like Edison, Galileo and Curie, and are partnering or investing in companies that make everything from fashionable connected watches to drones.
In the most recent quarter, Intel’s IoT business saw 4 percent growth, Krzanich said.
Brookwood also noted another opportunity for Intel in the mobile space. Connected devices are linked to the cloud, which is creating huge demand for infrastructure products for these cloud environments. Intel’s silicon touches every part of the chain, from the end-user devices through the network and into the data centers, which is helping drive strong growth in the chip maker’s Data Center Group. In the most recent quarter, the group saw its revenues hit $3.9 billion, a 10 percent jump from the same period in 2014.
“As people move to smartphones, all smartphones need cloud services, which need infrastructure, which is significantly x86,” he said.