Intel Will Be Major Player in Smartphones, Company Execs Say

The debut of the Lava XOLO X900 in India is the first step in the latest efforts by Intel to gain traction in a mobile chip market dominated by ARM.

Intel executives say that Lava International€™s launch of its Intel-based XOLO X900 smartphone this week is the first step in the giant chip maker€™s push to become a significant player in the booming market.

The XOLO X900, running on Intel€™s low-power Atom Z2460 Medfield processor, debuted in India April 23, marking the latest attempt by Intel to make headway in a space dominated by low-power chips designed by ARM Holdings and manufactured by the likes of Qualcomm, Texas Instruments, Samsung Electronics and Nvidia.

Over the past few days, high-level Intel executives have been making their case that the company will make significant inroads into the smartphone market over the next couple of years, as more device makers embrace Intel€™s Atom platform. Already Lenovo, Motorola Mobility, ZTE in China and Orange in France have announced their intentions of building Intel-based phones.

Intel also has created a smartphone reference design around Medfield, hoping to encourage device makers to build products using the Atom chip.

Speaking to April 25, Intel CFO Stacy Smith said he expects the company to have €œmeaningful sales€ of smartphones by this time next year and be a €œsignificant portion€ of the market within five years.

€œIntel doesn€™t go into markets to be a small player,€ Smith told the news site. €œIt€™s a billion-unit market, so there€™s huge opportunity for us. €¦ As of a week ago, we had zero share. As of this week, it€™s zero-point-something, because the first phones are selling.€

Intel President and CEO Paul Otellini told The Wall Street Journal April 24 that he €œwould be disappointed if we're not a major player in a few years."

Otellini said he expects that eventually there will be two or three mainstream mobile chip makers, and implied that Intel will be one of them. He also said that device makers like Apple and Samsung eventually will stop designing their own chips and opt instead to use processors from third parties.

With smartphones taking on more characteristics of computers, Intel€™s expertise in PCs and servers€”the chip maker owns more than 80 percent of the world€™s processor market€”will give it an edge over rivals, he said. Otellini noted the growing need for capabilities in everything from power management to integrated security technology to advanced processor architecture as playing to Intel€™s strengths.

"When you list up the assets of us versus anybody else, I think we come [out] ahead of anybody," he said.

Though Intel makes billions of dollars from its core PC and server businesses, those markets are maturing, and the company is looking to expand into stronger growth areas. The smartphone space is one of those areas. According to market research firm Gartner, smartphone shipments in the fourth quarter of 2011 reached 149 million units, a 47.3 percent increase from the same period in 2010. Much of that was due to the release of Apple€™s iPhone 4S, the analysts said. For the year, vendors sold 472 million smartphones, a 58 percent jump from the previous year. In 2012, sales of smartphones should jump another 39 percent.

Wireless carriers will become key partners in Intel€™s mobile chip efforts, Otellini said. The carriers€”including Verizon, AT&T, T-Mobile and Sprint€”are facing mounting costs, paying high fees to subsidize smartphones from Apple and other device makers. Many are looking for ways to reduce those costs, and are showing interest in Intel, Otellini said.

"The people who have the most interest in optimizing feature sets for the phones at the end of the day are the carriers who own the networks and want to get the maximum return from them," he said. "I don't think all of them have been heard from yet.

"We're at the early stage of a lot of change in the industry that Apple revolutionized with the iPhone. They did it on their terms and made a lot of money for them and their shareholders. The next thing is for the people who own the networks. How will they be able to optimize their networks? What's best for them?"

ARM officials have acknowledged that Intel will have some success in the market, but argue that the larger company still lags in chip power efficiency.

"It's inevitable Intel will get a few smartphone design wins,€ ARM CEO Warren East said in January. "We regard Intel as a serious competitor. Are they ever going to be the leaders in power efficiency? No, of course not. But they have a lot more to offer."