After weeks of speculation, Samsung (OTC:SSNGY) confirmed using an Intel (NASDAQ:INTC) processor for its Galaxy Tab 3 which will be available globally in the beginning of June. Samsung’s recently launched 10.1 inch Galaxy Tab 3 runs the latest version of the Android operating system and uses Intel’s Atom processor chip based on the new Clover Trail platform. Samsung’s decision to choose Intel over ARM-based processor and its own Exynos chip family is a significant win for Intel which has been focusing on increasing its foothold in the fast growing mobile market.
Intel has been dominating the PC microprocessor market for the last two decades. The declining global PC shipments combined with Intel’s late entry in the mobile computing space has significantly slowed its growth in the last few quarters. Intel’s ex-CEO Paul Otellini admitted that refusing a chance to supply chips for Apple’s (NASDAQ:AAPL) first iPhone six years ago was perhaps his biggest mistake. Having entered the market at the start of 2012, Intel’s Atom processors currently power 12 smartphones and 15 tablets. However, the company has been unable to make a significant mark in the mobile industry. The Samsung tablet design win can give Intel’s mobility ambition a much-needed push, in our opinion.
Samsung is the leading smartphone manufacturer in terms of global shipments and is now focusing on increasing its share in the tablet market. As per research firm IDC, Samsung’s market share in total tablet shipments increased from 11.3% in Q1 2012 to 17.9% in Q1 2013. In comparison, Apple’s tablet market share declined from 58.1% to 39.6% during the same period.  Samsung expects to double the sales of its Galaxy Tab range this year to approximately 33 million units. 
As Intel’s processor in general consumed more power, they were not considered suitable for use in mobile devices. However, it has worked towards developing more energy efficient chips and its processors now compete with ARM designs on performance, and have equal or better power and battery life. Intel continues to focus on producing more energy efficient chips and adding features for connectivity and security.
Upcoming Platforms To Help Continue The Growth Momentum
Last month, Intel introduced its new Silvermont chip which promises to offer three times more performance or a similar level of performance using five times less power compared to the Atom chips. Intel believes that Silvermont is one of the biggest chip architecture advances in its history. Intel’s first quad-core Atom SoC (Bay Trail) for tablets and the Merrifield platform for smartphones will be based on the new architecture. Both platforms will start shipping in the second half of 2013.
Intel recently introduced one of the industry’s smallest and lowest-power multimode-multiband LTE solutions (XMM 7160) that supports smartphones, tablets and ultrabooks. It currently ships the single-mode 4G LTE data solution, and remains on track to ship multimode voice and data LTE baseband solutions by the end of this year. Despite increasing competition, we believe that an expanding mobile portfolio will help Intel increase its penetration in the smartphone and tablet market.
Our $27.58 price estimate for Intel is at a premium of over 10% to the current market price.
- Worldwide Tablet Market Surges Ahead on Strong First Quarter Sales, Says IDC, Press Release, May 1, 2013
- Samsung Galaxy Tab 3 range will have Intel inside, Hexus, May 30, 2013
Disclosure: No positions.