Intel (INTC) is the world's largest semiconductor manufacturer by sales. The company supplies over 80% of the CPU chips used in modern PCs and dominates the sale of processors used to power the huge data centers that support cloud computing.
The PC business has been flat to declining for the past two years, leading many pundits to predict the demise of the WinTel personal computer. History, by its very nature, is very cloudy while it is unfolding.
In 2005, Intel published a 10-year road map white paper that clearly set out the challenges and opportunities of future computing, including low power requirements. So, understanding what it needed to do was not Intel's problem.
There are times when a company's strengths become temporary weaknesses. This was the case with Intel's Tick-Tock strategy back in early 2010. The Sandy Bridge processor was introduced as a "Tock" in January 2010, which means it was a new architecture that had emphasis on performance and not power efficiency. Also, if you understand Tick-Tock, Sandy Bridge had to become Ivy Bridge with very little architectural change, except that it was shrunk to 22nm. Still no power efficiency emphasis.
So, Intel had basically the same CPU from January 2010 to today. That's over three years of no competition to power efficient, but pretty weak ARM (ARMH)-based tablet computers. For Intel, there is no shortcut to these incredibly complex devices and manufacturing processes. The Tick-Tock cadence is shrink, new architecture, shrink, new architecture, wash and repeat. For the past three years, Intel has been a slave to the strategy that will, ultimately, come to obsolete the ARM-based tablet toys.
In April 2010, the Apple (AAPL) iPad was released with the blessing of Prince Jobs and the declaration that the iPad was just the first wave of the "Post PC Era" devices. Jobs, a smart guy, knew that Intel wouldn't have a chip at low enough power to compete with the iPad for three years. Apple and others had the weakling ARM-based tablet business to themselves. Two and a half years of consumer confusion ensured. The fact that the iPad sales were explosive is testament to the fact that consumers are still buying computing devices. Since the WinTel PC manufacturers were busy shooting themselves in their feet, Hewlett-Packard (HPQ) and Dell (DELL) in particular, little innovation was done on the clamshell notebook PC for these years. The one exception seemed to be Toshiba (OTCPK:TOSBF) which embraced the Utrabook in the form of a 2.5 pound delightful machine to compete with the Apple Macbook Air.
Now that the Sandy/Ivy Bridge "valley of death" is over with, the benefit of Tick-Tock will be felt this year with the introduction of the Haswell CPU. Haswell is a new architecture (Tock) and the prime directive from here is power efficiency and long battery life. The Haswell is built on the inherently low power 22nm TriGate process and has power sipping features not seen on any computing device to date. Intel is officially releasing the Haswell on June 3, 2013; however the company has been shipping the Haswell to PC OEMs for a couple of weeks already. The June 3 release will be accompanied by immediate availability of PC products that a consumer might be willing or even anxious to buy.
You just know that someone has moved the North Cape Intel reference design into production. The North Cape is a twofer; a light, efficient, 13 hour battery life clamshell notebook PC and a 10 hour battery life tablet when you need it. Presumably, the price will be less than a PC and a separate tablet.
Toshiba is covering a deficiency in all WinTel PCs by offering its KIRAbook with a display that competes with the retina display on high end Macbooks. The KIRAbook will likely be upgraded with the Haswell CPU by the June 3rd release date.
There are even rumors of Apple using Intel processors in the iPad in return for having Intel build the iPhone "A" chips.
During the last half of 2013, the power/performance - power/battery life fog should lift with the Haswell giving both high performance at extraordinary low power. The Haswell is reported to reduce idle power to 5% of the preceding CPU. This needs some explanation for those of you who are fortunate enough to NOT think about chips every day.
Computers spend most of their time in idle mode. Even when you are pounding on your keyboard like crazy, the CPU is yawning most of the time. Consider: a fast typist might do 60 words per minute. That is about 300 keystrokes per minute. That is .2 seconds between keystrokes. Let's say each keystroke results in 100 instructions at the CPU level. At even a 2 GHz clock, those 100 instructions take about 50nsec. This is what 50 nanoseconds looks like: .000000050 seconds. So, you are typing like mad and the processor is being lit up less than 1/10,000% of the time! That means the Haswell can have a pretty good nap (idle) in between your "furious" keystrokes. In previous versions, the CPU would idle (at 20 times more power) while waiting for that next keystroke.
Running video, calculating big spreadsheets, game playing, etc. tax the processor more, but in the end your PC CPU chip is idling the vast majority of the time, so the 95% reduction in idle power is a big deal.
As the above begins to be understood later this year, we might expect a large spike in WinTel PC sales. When consumers see that they can truly "have it all", we might see some backlash against those who took computer level money for a toy masquerading as a computer. The Intel multi-year misery in the PC market will be over. Right after that the Intel crosshairs move to the smartphone market.
I am very long Intel 2014 and 2015 call options.