Talk about ill-timed! I recently published a piece titled, "Intel's Future Lies In Infineon Wireless's Hands" in which I believe I did a pretty good job laying out Intel's (NASDAQ:INTC) advantages as well as challenges in the mobile world. While I have been optimistic of the inflection point in the traditional computing space (thanks to TAM expansion into tablets), I believe I was thoroughly negative on Intel's current progress in cellular modem solutions (although, to be fair, I was pretty positive that the company at least had the right fire lit under its behind). Be it my luck that the company would actually go ahead and announce that its very first multimode LTE modem - known as the XMM 7160 - would begin shipping this month! In addition to the launch, Intel held a press conference at which it conveyed several very useful tidbits about how progress within the company's wireless division is going. I'd like to provide some updated thoughts.
Intel Now Has A Multimode LTE Solution - And An Aggressive Roadmap
In my previous article, I raised the following concern,
It is my view that while Merrifield with XMM 7160 will allow the company to gain significantly more traction in phones than it currently sees today, I would hope that Intel will be able to roll out an LTE-Advanced solution fairly quickly following the LTE solution, although color will not likely be available until the Investor Meeting.
The problem was that Intel's 2012 Investor Meeting roadmap had indicated that the Merrifield platform ("Silvermont" based smartphone chip) would ship with the XMM 7260 modem while the "Clover Trail+" platform would come paired with the XMM 7160 modem. It seems that with the XMM 7160 shipping today, the modem will support Category 3 LTE (which is capable of 100Mb/s throughput). The 7160 will be updated by the end of the year (perhaps to ship with Merrifield?) to support Category 4 LTE which boosts peak throughput to 150Mb/s.
Of note, Will Strauss, a leading wireless analyst (who told the world that Intel had acquired Fujitsu Wireless before anybody else knew), made the claim that the XMM 7160 is qualified on both Verizon (NYSE:VZ) and AT&T (NYSE:T).
What's even more interesting is that Intel also plans to ship its next generation XMM 7260 modem during 1H 2014 which will support advanced features such as LTE-Advanced (and other goodies that haven't quite been disclosed yet). Intel even went so far as to demonstrate a development board with the 7260.
However, there's still one nagging issue.
How About An Integrated Part?
All of this talk about Intel's LTE progress is encouraging - for the first time, Intel will be able to seriously bid on LTE enabled phones in the US, and just a few visible designs will be enough to drive sentiment (and the stock) upward. However, the question remains, "when will Intel do an integrated baseband + apps processor part"?
The reason that this is a concern is that all of Intel's cellular modems are actually built by TSMC (NYSE:TSM) and NOT at Intel's own facilities. This is due to the fact that this is where the former Infineon team had previously built their chips, and it is very likely that work on the XMM 7160 and XMM 7260 had begun shortly after. Also, one part of the reason that Intel's process technology typically exhibits the density/performance superiority is that Intel's manufacturing process design rules are typically much more complex/restrictive than a general purpose process from the likes of TSMC or UMC (NYSE:UMC). I expect that the follow-on to the XMM 7260 will be built at Intel's facilities (probably on a leading-edge process, too), which will lend itself well to the integration of the cellular baseband chip onto the applications processor at the leading edge.
In short, I expect that when Intel rolls out its first 14nm "Airmont" system-on-chip solutions either in late 2014 or early 2015, it will come paired with a high end third generation LTE baseband.
The Point Is Clear: It's Only A Matter Of Time
I'm not saying that Intel is a cellular leader today - that's just not the case. But Intel is accelerating rather quickly and spending quite a lot of money and hiring a lot of hardware and software personnel. Intel realizes that cellular technology (as well as the other connectivity components) is integral to computing devices today and going forward, and they will spend whatever it takes to become a leading edge competitor in this area. While I would certainly not underestimate Qualcomm (NASDAQ:QCOM), it is my view that over the next 5 years, the top two players in the cellular/smartphone space will in fact be Intel and Qualcomm.
Disclosure: I am long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.