Intel Launches Lenovo & Orange Smartphones To Seize Mobile Opportunity

by Trefis Team
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For over 20 years Intel (NASDAQ:INTC) has been a force to be reckoned with in the PC microprocessor market. Even amidst a sagging PC market in 2011, the company not only retained its dominance but also managed to increase its market share to nearly 17%. [1] However, the slated entry of ARM based players in the PC market this year is expected to threaten the foothold enjoyed by players such as Intel and AMD (NYSE:AMD).

However, with the launch of three Intel powered smartphones this year, the company has marked its entry in the smartphone and tablet market, an area where ARM based players such as Qualcomm (NASDAQ:QCOM), Nvidia (NASDAQ:NVDA) and Texas Instruments (NYSE:TXN) are well established. By incorporating mobile computing in its portfolio, Intel ensures that it stays on top of the changing consumer needs and gets a piece of the rapidly expanding smartphone and tablet market.

See our complete analysis for Intel

Growing Potential In The Smartphone Market

With the exponential growth in sales, smartphones and tablets are expected to replace PCs as the future engines of growth for the semiconductor  market. According to research firm Gartner, the mobile devices sale to end user are expected to grow at about 7% in 2012, while the growth in smartphone is estimated to be around 39%. [2] Research firm IDC predicts that the smartphone shipments will grow from 494 million in 2011 to 1.16 billion in 2016. [3]

The lucrative smartphone and tablet markets continue to be dominated by ARM based players, and Intel with a number of design wins on it plate this year, is hoping to make inroads.

With the launch of XOLO X900, the world’s first Intel architecture based smartphone by Lava International in April this year, Intel marked its much awaited entry in the lucrative tablets and smartphone market. (See Our Article: Intel Dials Up $31 With Smartphone Push And Intl. Growth) Last month, the company proudly announced the launch of two more smartphones powered by the Intel Atom processors.

1. Lenovo Introduces First Intel Powered Smartphone

Intel along with Lenovo announced the availability of Lenovo LePhone 800; that brings the high performance of “Intel Inside” with advanced imaging capabilities and a wireless display sharing experience. The new Lenovo K800 smartphone adopts Intel’s Atom processors and brings to mobile phone users in China a high performance, low power computing experience. With a price tag of around $524, the phone is targeted at the high-end Chinese market. [4]

As the worldwide demand for smartphones continue to grow, China is expected to overtake U.S. as the leading market for smartphone shipments, accounting for almost 21% share of the global smartphone market this year. [5]

2. Orange Unveils Smartphone Powered By Intel Chips

Orange announced the soon to be launched Android smartphone called the “San Diego” powered by Intel Atom processors. The smartphones are expected to go on sale in UK starting June 6. While the Intel based Lenovo smartphone are aimed at China’s high-end market, the Orange smartphone target the masses in UK with a lower price band. The new phone will be compatible with the HSPA+ network through the Intel platform, which promises to provide a fast and responsive browsing experience.

Where Does Intel Stand In The Smartphone Market ?

Currently, Intel holds an insignificant share in the smartphone and tablet markets; so, we do not see the Intel based smartphone launches so far to have a significant effect on its current price. However, it does have a few more design wins lined up that it announced early this year; primarily Motorola and ZTE. Considering the growing potential in this segment and keeping in mind the future launch of other Intel-based smartphones, we estimate the revenues from this division to almost triple and Intel’s market share to reach around 9%, by the end of our forecast period.

The Atom processors could be a cornerstone in Intel’s strategy to move into the mobile computing space and expand away from the x86 PC market. Keeping the company abreast with the changing consumer trends, the move might well turn out to be a good long term strategy for Intel.

Our current price estimate of $30.62 for Intel stands at a premium of almost 19% to the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

The hard drive shortage that resulted from flooding in Thailand in October 2011, led to a decrease in demand for chipsets by PC manufacturers in anticipation of shortage in supplies. The impact of the shortage resulted in depressed revenues for Intel and almost all its competitors and is likely to persist till the first half of this year.

However, we feel that due to the supply shortage OEMs (original equipment manufacturers) are likely to give preference to high-end PCs, which might become advantageous to Intel, as it sells lower-priced processors compared to its competitors AMD.

Notes:
  1. Intel grabs record share of growing chip market, Computer World, April 17, 2012 []
  2. Gartner Says Worldwide Smartphone Sales Soared in Fourth Quarter of 2011 With 47 Percent Growth, Gartner Press Release, February 15, 2012 []
  3. Smartphone shipments to top 1 billion by 2012, Claims IDC, Mobile Burn, March 2009, 2012 []
  4. Lenovo’s First Smartphone with Intel Inside Launched in China, Intel Newsroom, May 30, 2012 []
  5. China to Overtake US as Top Smartphone Market in 2012, PCMag, March 15, 2012 []
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