After having captured the lion's share in the PC and server processor segment, Intel (INTC) is now targeting the fast growing smartphone and tablet semiconductor space. Intel never had a big presence in the mobile industry as it was focused on the much larger server and desktop processor space. However, the huge growth in the sales of smartphones and tablets has made the mobile semiconductor pie much larger. Intel is all set to launch its low power 22 nm Baytrail chip in the next month. This will mark Intel's first major entry into the tablet space (Surface and Asustek tablets used the older 32 nm chips). There are also reports that Intel plans to accelerate the production of Atom chips at the 14 nm node. Even if the new generation of 22 nm chips is not able to give Intel a big lead in the mobile space, the 14 nm chips (which will be 2 generations ahead) should give Intel a definite lead over ARM (ARMH) chips. I remain extremely positive on Intel stock given its recent pullback and its aggressive move into the mobile market.
Intel Continues to be very Aggressive on the Mobile Front
a) Accelerating the 14nm Atom Launch Schedule
Intel's new CEO had indicated that Atom will now become at least as important for Intel as its Core line of chips. Intel produces higher end and higher priced Core processors for PCs and servers, while it is marketing Atom processors for lower power consuming devices such as tablets and smartphones. Intel has never really put too much focus and money on developing Atom which had languished even as rival ARM processors dominated the mobile processor space. Now with Intel putting all of its formidable resources behind mobile, Atom is going to get the pride of place. According to Digitimes, Intel will launch 2 new 14 nm Atom platforms in 2014. This is a big move from Intel and will put significant pressure on its competitors. Note TSMC (TSM), Global Foundries, United Microelectronics (UMC) and Samsung are still stuck at the 28 nm node. Intel is already one Moore generation ahead of everyone and by 2014, there is a significant probability that it will be 2 Moore generations ahead of all others. This will give Intel a very significant power and performance advantage over all the other mobile processors.
Intel will launch new tablet platforms, 14nm Cherry Trail in the third quarter and 14nm Willow Trail in the fourth quarter of 2014, as well as new smartphone SoC, 22nm Merrifield, at the end of 2013, Moorefield in the first half of 2014 and 14nm Morganfield in the first quarter of 2015, according to Taiwan-based makers ... The Bay Trail-T platform also adopts the Silvermont architecture and supports a battery life over eight hours when active and weeks while idling. The Bay Trail-T will have two clock speed specifications, 1.8GHz and 2.4GHz and a Gen 7 GPU, the sources noted. Intel will distribute its Cherry Trail samples to partners at the end of 2013, unveil the platform at Computex 2014 in June and announce the CPUs in the third quarter of 2014. The Cherry Trail features Intel's 14nm Airmont architecture with a clock speed of 2.7GHz and a GEN 8 GPU. The Willow Trail and Derivatives series will adopt Intel's 14nm Goldmont architecture with a Gen9 GPU, supporting both Windows and Android operating systems.
Source - DigiTimes
If Foundries Fail, Then Fabless Customers will Fail
Major Intel competitors like Advanced Micro Devices (AMD), Qualcomm (QCOM), Nvidia (NVDA) etc., depend on TSMC, Global Foundries and United Microelectronics to build their chips. These companies design the chips while the manufacturing is done by the foundries. The "foundry" model has the advantage of specialization as fabless companies can concentrate on design and marketing, while foundries can focus on the actual production of chips. However, all these fabless companies will be left high and dry if the foundries cannot advance to smaller design geometries. QUALCOMM will be the biggest loser as the company has captured over 50% of the mobile SoC market using its CDMA expertise.
Intel is already one generation ahead of its competitors as it is already making IvyBridge and Haswell chips on 22 nm. It will produce new generation Silvermont chips for mobile devices on 22nm during late 2013. Intel is also executing faster on its roadmap as it will start producing both Atom and Core chips on 14 nm next year. If the foundries fail or get delayed by one year, then Intel will sweep the industry through a huge advantage in cost and performance.
b) LTE continues to be a focus area, Fujitsu acquisition follows Infineon buy
Intel is pouring huge resources into the mobile chip space and leaving no stone unturned to gain a significant edge over the leaders such as Qualcomm, Nvidia and others. The company recently bought Fujitsu's wireless division to accelerate the development of LTE chips. This follows Intel's acquisition of Infineon's communication division for $1.4 billion a couple of years ago. Intel has also announced the launch of a multimode LTE chip XMM 7160 in the next month. Till date Intel only had a single mode LTE chip in the market. This new chip won't be as advanced as QCOM's given QCOM's ability to integrate the LTE functionality within the SoC. However, Intel is pushing the foot on the accelerator in LTE. QCOM has been winning most of the high end mobile designs because of its communications expertise. To get a solid break in the mobile market, Intel has to become a leader in communications technology as well.
Buying Fujitsu's wireless division doesn't give Intel a top-to-bottom LTE stack. Right now, the company is shipping a single-mode LTE RF transceiver, courtesy of the Infineon acquisition of several years ago. Fujitsu is one of the few companies with a multi-mode LTE RF transceiver, which gives Intel more options when designing products for multiple markets. That's critically important given that some of its major mobile partners to date have Indian and Chinese OEMs.
Source- Extreme Tech
Wholesale Abandonment of Windows RT is Good News for Intel
The Wintel duopoly has been making aggressive moves into the mobile market as its traditional PC market crumbles against competition from cheaper and smaller computing devices. Microsoft (MSFT) has not been too successful in its mobile endeavors with its Surface tablet falling flat on its face. The new flavor of the Windows operating system which was optimized to run on ARM designed chips has proven to be a big flop. Almost every major OEM is now abandoning Windows RT to focus on the normal Windows product running on Intel's x86 chips. This means that Intel has another tailwind as MSFT products will sell more on its chips. Intel is also the only maker of chips which can make both Windows and Android run on the same system. There are already some products featuring the two operating systems and I expect Intel will get more design wins due to this ability.
It takes a big company to admit it's wrong - and Taiwanese PC maker Asus has finally conceded that it can't keep making Windows RT tablets that folks simply don't want to buy. "It's not only our opinion, the industry sentiment is also that Windows RT has not been successful," Asus CEO Jerry Shen told the WSJ ahead of its earnings call with analysts for the second quarter of 2013. Vendors hardly flocked to push out the Surface RT, a family of Windows 8-powered touchscreen-laptop-tablet devices specified by Microsoft: HP and Acer steered clear of the new computers while Samsung, HTC and Lenovo all pulled their models.
Source - Channel Register
Stock Performance and Valuation
Intel's stock has pulled back into the ~$20 to $22 range after the company lowered its full year guidance due to the weaker PC market. The stock is very cheap in my view being the only mega cap technology company to give a 4% plus dividend yield. Intel's stock trades at a low forward P/E of 10.8x with a P/B of 2.1x and P/S both at 2.2x. However, as Intel starts to increase its mobile chip marketshare, the stock should see its valuation multiple increase.
Intel has been underperforming the market as PC sales decline faster than expected. Despite its dominance in the PC and server processor, Intel has been hurt as the industry has shifted toward mobile devices dominated by ARM chips. However, Intel is moving aggressively into the mobile processor chip area. The company is not sitting on its laurels waiting to see how its new Silvermont 22 nm chips will perform. It is already planning a very aggressive production schedule when it introduces the next generation of 14 nm chips which will further increase its lead over competitor mobile chips. I see the recent pullback in Intel chips as a good buying opportunity. I think it's an opportune time to buy Intel stock as the company is embarking on a major product cycle.