New Platforms & Ultrabook Designs Could Fuel Intel’s Mobile Computing Plans

by Trefis Team
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Accelerating its progress in the fast growing mobile computing market seems to be the primary focus of leading chip maker Intel (NASDAQ:INTC) at the ongoing Consumer Electronic Show in Las Vegas. With new smartphone and tablet processors as well as improved ultrabook designs, the company looks determined to expand its footprint in mobile computing in 2013.

Currently, Intel has an insignificant presence in the smartphone and tablet market, which is highly dominated by ARM technology based players such as Qualcomm (NASDAQ:QCOM), Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:BRCM). Additionally, the launch of Intel-powered ultrabooks in 2011 failed to garner much attention and continue to struggle to achieve the desired level of popularity.

With a majority market share, Intel has been dominating the PC microprocessor market for the last two decades. However, the current slowdown in the PC market has negatively impacted the company’s performance. A shift in preference for ultra-thin notebooks and the growing adoption of smartphones and tablets are some of the key trends prevailing in the semiconductor industry. Determined to be the front-runner in the global technology revolution, Intel has stepped up efforts to expand its presence in mobile computing.

See our complete analysis for Intel

Earlier this week, Intel announced a number of new products to accelerate growth across its mobile device portfolio of smartphones, tablets and ultrabooks. We feel that developing new platforms would increase Intel’s share in the smartphone and tablet market and the overhaul of ultrabooks could enable it to retain its dominance in the notebook market in the future.

New smartphone platform for emerging markets

Intel introduced a new low-power Atom processor based platform, Lexington, a cheaper and improved version of its Medfield platform. With the new chipsets, Intel aims to target the fast growing low-end smartphone and tablet market, a segment that is estimated to reach 500 million units by 2015. [1] Acer, Lava International and Safaricom are some of the customers who have offered support for Intel’s new platform, so far.

Intel also highlighted details about its upcoming Clover Trail, a dual-core Atom Z2580 processor platform, targeted at performance and mainstream smartphones. Apart from higher power and an improved battery life, the company claims that the new platform will offer two times the performance benefits over its current solution (Z2460 platform).

Intel’s first quad-core SoC for tablets

Intel also announced details about its first quad-core Atom system-on-chip (SoC), code named Bay Trail. The new 22 nm Atom SoC processor will suit both Windows 8 and Android tablets. With over two times the computing performance of its current generation tablet offering, Intel claims that the upcoming processor will be the most powerful Atom processor offered by the company. In addition to better performance, it will also offer an improved battery life and include improved integrated security offerings.

Intel currently has six phones and 10 tablets powered by its mobile processors (does not include the convertible PCs that act as tablets). [2] The number could significantly increase this year with additional product wins based on the new platform.

We estimate Intel’s revenues from this division to almost triple and the market share to reach around 11% by the end of our forecast period. Apart from the booming growth in smartphones and tablets, we feel that other new Atom based devices such as Google TV, car infotainment systems, home and business energy management systems will improve Intel’s Atom processors share by increasing its available market.

New convertible designs can fuel ultrabook demand

Due to its steep price, the launch of Intel-powered ultrabooks in 2011 failed to garner much attention. Despite Intel stepping up efforts to fuel demand, ultrabooks have been unable to achieve the desired level of popularity. As per research firm IDC, only 500,000 ultrabooks were sold in the first half of 2012 and the number was estimated to reach 1 million for the entire year. At that number, ultrabooks merely account for less than 0.5% of worldwide notebook PC shipments in 2012. [3]

According to consumer market research firm NPD, the average market price for a Windows notebook is $510 whereas the average selling price for ultrabooks for the first five months of 2012 was $927. [4] Ultrabook prices have come down since then to as low as $699 and Intel intends to further reduce the price to $599 by the year end. We feel that a more competitive price range can be an important factor to accelerate ultrabook adoption.

At the recent conference, Intel announced a low power 7-watt version of Ivy Bridge line of processors for ultrabooks. The low power line of processors will enable OEMs to have greater flexibility in designing thinner and lighter touch based ultrabook convertibles. Intel has more than a dozen designs in the pipeline based on the new low-power offering.

Intel will also introduce its 4th generation core processor family, code-named Haswell, later this year. The processor will offer up to 13 hours of battery life, in turn enabling a broad new range of ultrabook convertibles, detachables and tablets.

With a lower price point and next generation processors with extended battery life and improved performance, we believe that Intel will retain its dominance in notebook processors. We estimate a slight decline in its market share as we feel that the entry of ARM technology in the PC market will intensify competition for the existing players.

Our price estimate of $32.88 for Intel is at a considerable premium to the current market price. (Read: Intel Could Be A $33 Stock As Market Overlooks Chip Dominance)

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Notes:
  1. Intel Delivers Broad Range of New Mobile Experiences, Intel Newsroom, January 7, 2013 []
  2. CES: Intel still struggling to crack smartphone and tablet markets, MercuryNews.com, January 9, 2013 []
  3. Are Ultrabooks an epic failure?, Digital Trends, July 2012, 2012 []
  4. Are Ultrabooks an epic failure?, Digital Trends, July 12, 2012 []
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