Intel: Something That Doesn't Make Sense

| About: Intel Corporation (INTC)

I've been obsessively trying to understand Intel's (NASDAQ:INTC) cellular modem efforts, although admittedly I haven't had much in the way of success in doing so. The recent video series and write up from Anandtech helped to some extent, but I ultimately ended up very confused about a rather critical point that none of my contacts within Intel (PR, IR, and friends within the company) have helped me to understand. In this article, I detail just why I'm so confused and why the answers to these questions would shed some serious light on Intel's mobile strategy.

Contradictory Information: Intel Built Modems Or Not?

In the recent write-up from Anandtech, Mr. Anand Shimpi had the following to say with respect to the fabrication of Intel's modems:

The transition of modem to Intel Architecture (away from two different DSP architectures) also remains to be seen, and I'm told it will be two to three years before Intel's modems are ready to intercept the Intel fabrication roadmap and get built on Intel silicon instead of at TSMC.

So, Intel's current generation, as well as the next two to three generations, of discrete cellular modems will be built at TSMC (NYSE:TSM). Now, I understand completely why Intel would keep the status quo with respect to fabrication here. Intel's manufacturing processes are much more difficult/strict to design with and forcing a team that still has yet to ship a competitive leading edge modem to also deal with the added layer of complexity to transitioning to Intel process technology is just poor project management.

That's not the part that doesn't make sense, though. Take this quote from a recent interview from Intel's VP of the Intel Architecture group with respect to the company's LTE and apps processors:

Intel in 2014 will introduce a mobile chip that integrates LTE on the same piece of silicon as the application processor, Perlmutter added. The company has been gaining some traction in smartphones, but volumes remain low. Perlmutter expects higher volumes in 2014.

If Intel's modems are built on TSMC's manufacturing process, then how will Intel get an integrated apps processor + LTE shipping in 2014? Here are the possibilities as far as I can tell:

  1. The integrated modem isn't from "Infineon Wireless". Do note that Intel does have a separate modem team stationed in San Diego as part of Intel's mobile group. Perhaps while the Infineon team works on the RF transceivers as well as slim modems for use as standalone/discrete parts, Intel's San Diego team is hard at work at developing an Intel-built baseband to be integrated into the SoC complex?
  2. Multi-chip package: Intel has typically "reeled in" pieces that it eventually integrates into the main system-on-chip complex in stages. Perhaps instead of a modem and apps processor on the same die, Intel will adopt a multi-chip package approach as it did with graphics. That is, the company will put two dies side-by-side on the same chip.
  3. Communication error: Perhaps what was meant to be said was that Intel's platforms would ship with an LTE modem paired with an Intel SoC, but not necessarily on the same silicon?

In any case, something really doesn't make sense here, and I look forward to the investor meeting in November to get more details on Intel's smartphone strategy. Until then, intelligent speculation is all we have to work with.

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.