At the ongoing 2015 Mobile World Congress in Barcelona, Spain, Intel unveiled a series or new products and refreshes for its mobile processor and modem lineup, as well as new security software OEM deals and alliances with various telecom equipment vendors. The announcements made by the company include:
- Intel Atom x3 processor series (code-named SoFIA) - the company’s first integrated communications platform for low-cost tablets, phablets and smartphones. Combining 64-bit multi-core Intel Atom processors together with 3G or 4G LTE connectivity, the integrated communications Sytem-on-Chip (SoC) combines the applications processor, image sensor processor, graphics, audio, connectivity and power management components in a single system chipset. Intel claims that around twenty companies have committed to delivering its Atom x3 designs in the near future.
- The first 14nm Atom SoC – the Intel Atom x5 and x7 processor series (code-named Cherry Trail) for next-generation tablets and small-screen convertible PCs. The processors will power a range of mainstream to premium devices. Acer, ASUS, Dell, HP, Lenovo and Toshiba have already committed to deliver devices on the Cherry Trail platform.
- Intel also announced its third-generation five-mode, LTE Advanced Category 10 modem, XMM 7360. The compact size and power efficiency enable the Intel XMM 7360 to accommodate a wide range of form factors, from smartphones and phablets to tablets and PCs. It also expands Intel’s portfolio of LTE solutions, giving device manufacturers a competitive option to quickly design and launch LTE devices in various market segments and geographies.
- Brightstar Corp, Deutsche Telekom, LG Electronics, Prestigio and Samsung selected Intel’s Security technologies to help secure personal data.
- Intel is partnering with Alcatel-Lucent, Ericsson, and Huawei on creating a variety of network management and radio network hardware running on (Intel-powered) servers.
See our complete analysis for Intel
Intel’s Expanding Presence In Mobile Can Spur Future Growth; Contra Revenue To Decline In The Future
Despite significant decline in revenue and heavy operating losses from the segment (the mobile business reported an operating loss of $4.2 billion in 2014), Intel's mobile business is showing considerable momentum. Although Intel's Mobile and Communications Group revenue declined drastically last year , the company in fact gained market share in the segment.
Intel had set a target to ship 40 million tablets in 2014 but ended up shipping 46 million tablets, becoming one of the industries largest merchant silicon providers in tablets. For much of last year, the ramp up in its tablet volumes is being offset by an increase in contra revenue dollars - hence the decline in revenues. With contra revenue, Intel is paying tablet makers to cover the additional bill of materials costs of switching from ARM-based processors. The goal was to establish Intel architecture in the marketplace and scale the supply chain and the chart developers.
For 2015, Intel's key goal is to improve its profitability in the mobile segment as the company believes that it has done a good job establishing itself as one of the top producers of silicon in tablets. As Intel’s SoFIA SoC ramps, it will progressively reduce the building material cost that have adversely affected the company’s gross margins in the mobile business. Intel believes that it will no longer have to pay the subsidies for the SoFIA products. The bill of materials cost for a Broxton tablet is estimated to be $20 less than for Bay Trail, and SoFIA, with its greater integration and smaller die size, is expected to cost even less. In sum, Intel is leveraging its advance along the technology road-map to lower the price and eliminate the subsidy.
Intel's LTE technology, which was originally developed for phones, is becoming increasingly valuable in tablets and even PCs, as wireless wide area network connectivity becomes increasingly common. Intel estimates the rate of baseband attached to tablets will roughly double and that of PCs will rise to over 15% by 2018.
We believe the above developments can help the company expand its footprint in the smartphone and tablet market. Intel targets to drive $800 million out of its mobile business in 2015.
Our current price of $34 for Intel is in line with the current market price.
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