Intel to Combine PC, Mobile Chip Businesses

The move by the world's largest chip maker comes as the lines between PCs, tablets and smartphones become less defined.

Intel financials

For the past few years, Intel executives every three months have had to go before financial analysts and journalists and talk about a mobile chip business in which they've invested billions with little to show in return.

Now, according to a report in the Wall Street Journal, the giant chip maker will combine its mobile business—which includes silicon for smartphones and tablets—with its strong PC unit, creating a business that will focus on everything from desktops to handhelds.

The new client unit comes as the distinctions between the various units continue to fade. Two-in-one and convertible systems can be used as a traditional notebook or a tablet, while the displays on smartphones continue to get bigger while those on tablets shrink, giving birth to what are being called "phablets." Intel spokesman Chuck Mulloy, confirming the reorganization to Businessweek, said that given the rapidly evolving form factors, the changes within the company will enable it "to accelerate the implementation and create some efficiency so that we can move even faster.”

The new group will be led by Kirk Skaugen, senior vice president and general manager of Intel's PC Client Group. Meanwhile, Herman Eul, vice president and general manager of the chip maker's Mobile Communication Group, will remain in the position to help with the transition, and then will be given another job within the company, according to a memo CEO Brian Krzanich reportedly sent to employees.

The reorganization reportedly will take until early next year to complete.

Intel for years has been the world's largest chip maker, dominating the silicon markets for PCs and servers. However, it was among the established tech players that was late responding to the rapid industry shift toward mobile devices, starting with Apple's launching of the iPhone in 2007 and continuing when the device maker rejuvenated the tablet space with the release of the iPad in 2010. Now the bulk of the chips running these devices are built on the ARM architecture and made by the likes of Qualcomm and Samsung.

When he took over as Intel CEO last year, Krzanich admitted that the company missed the mobile trend, but promised to make up the lost ground, working to drive down the power consumption of its Atom platform. He also said Intel would aggressively go after new emerging markets, including the Internet of things (IoT) and wearable devices.

Intel has had some success. For example, the company will meet its goal of having 40 million Intel-based tablets ship this year. However, reportedly helping to drive those sales were subsidies it paid to device makers to put Intel chips into the tablets. And it hasn't paid off in strong financial numbers for the mobile business, which lost $1 billion in the third quarter while seeing revenues come in at $1 million, a huge drop from the $353 million in sales in the same period in 2013.

Meanwhile, after struggling through several years, when global sales of PCs declined in the face of competition from tablets, Intel's PC chip business is rolling along again. In the third quarter, revenues for the PC Client Group jumped 9 percent over the same period in 2013, to $9.2 billion.