Intel Expands Presence In Wireless Communication With InterDigital Patents

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 as it continues to maintain its dominant position in the semiconductor industry. However, with smartphones and tablets slated to replace PCs as the engines for growth in the semiconductor industry, the company has been stepping up efforts to increase its presence in mobile computing.

Marking its entry into the lucrative smartphone and tablet market this year, Intel is moving at a rapid pace with the launch of three Intel-powered smartphones so far and design wins from Motorola and ZTE up its sleeve later this year. Additionally, the fact that over 20 Intel-powered tablets are in the works and almost all of its Atom-based tablets will be Windows 8 compatible should be a cause of concern for established ARM players such as Qualcomm (NASDAQ:QCOM), Nvidia (NASDAQ:NVDA) and Texas Instruments (NYSE:TXN).

We believe the recent purchase of patents from InterDigital further bolsters the company’s growing efforts in this segment and is indicative of Intel’s willingness to alter its portfolio to cater to changing consumer trends.

See our complete analysis for Intel

Patents to Support Intel’s Strategy in Mobile Segment

Earlier this month, Intel announced the purchase of 1,700 patents and patent applications from InterDigital, further expanding its strong and diverse portfolio of intellectual property. InterDigital has licenses and strategic relationships with many of the world’s leading wireless companies and develops advanced wireless technologies that are at the core of mobile devices, networks and related services.

The patents purchased by Intel relate to key technologies in wireless communication, primarily 3G, LTE and 5th generation Wi-Fi technologies (802.11  technology). The transaction is expected to close by the end Q3 2012 and, by deploying the new technologies across platforms in handsets and tablet computing, Intel can grow its presence in mobile computing.

Intel’s Stand in Smartphone & Tablet Markets

As a relatively new player in this segment, Intel currently holds an insignificant market share, but it has made good progress so far. We saw the launch of first Intel architecture phone by Lava International in April this year, followed by the subsequent launch of Lenovo LePhone 800 and Android smartphone code-named “San Diego” last month. (See Related Articles: Intel Dials Up $31 With Smartphone Push And Intl. Growth and Intel Launches Lenovo & Orange Smartphones To Seize Mobile Opportunity)

This month Microsoft introduced its in-house tablet Surface, which is powered by Intel Core i5 chip. Additionally, the company has around 20 Intel-powered tablets in the works expected to be launched in the coming year.

Intel’s Atom processors platform for tablets and smartphones, code-named Medfield, could be a cornerstone in its strategy to move into mobile computing and expand away from the x86 PC market. As the company keeps abreast with changing consumer trends, the move might well turn out to be a good long-term strategy.

Our price estimate of $30.62 for Intel stands at a premium of above 10% 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.

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