Intel’s New Mobile Platform Expands Its Reach In Key Growth Market

by Trefis Team
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Quick Take

  • Intel entered the mobile market in early 2012 and has <10 smartphones shipping in 20 countries and close to 10 tablets powered by it processors. Intel’s Atom mobile processors currently have a <5% market share.
  • Intel presently has two main mobile platforms - Medfield for Android smartphones and Clover Trail – designed for Window 8 tablets. It launched Clover Trail+ this year – its first dual-core chip for smartphones and Android tablets.
  • Android tablets account for 43% of the tablet market and Intel does not have a presence in the Android tablet market so far.
  • Given the lackluster demand for Windows 8 OS, Clover Trails’s support for the Android tablet platform will expand Intel’s target market.
  • Owing to the robust demand for smartphones and tablets, Intel’s target market size (which includes both Windows & Android OS) has the potential to grow from 500 million in 2012 to 1.1 billion units by 2016.

Intel (NASDAQ:INTC) has always aimed to remain a front-runner in the global technology revolution as the largest PC-chip maker. However, the decline in global PC shipments due to their increasing cannibalization by tablets and smartphones has impacted its growth rate. To stay abreast of changing consumer preferences, Intel entered the mobile market early last year pitching itself against established ARM technology based players such as Qualcomm (NASDAQ:QCOM), Nvidia (NSDAQ:NVDA) and Broadcom (NASDAQ:BRCM).

As a relatively new entrant in the mobile market, Intel has fewer than 10 smartphones (shipping in over 20 countries) to its credit so far, including XOLO X900 by Lava International, Lenovo LePhone 800, Android smartphone code-named “San Diego”, LTE Grand X IN, Megafon Mint and Motorola Razor I. Additionally, around 10 tablets presently use Intel’s Clover Trail platform launched in September 2012.

Currently, Intel has two main platforms: Medfield for Android smartphones and Clover Trail designed for Windows 8 tablets. At 2013 Mobile World Conference (MWC), Intel launched its new dual-core Atom system-on-chip (SoC) platform, code named Clover Trail+, for smartphones and Android tablets. Considering that the Windows 8 platform, for PCs as well as tablets, has faced lackluster demand so far, we believe Clover Trails’s support for the Android tablet platform is a welcome move.

We estimate Intel’s revenues from Atom processor sales (includes smartphones, tablets, car infotainment systems, Google TV etc) to almost triple, and the market share to reach around 9% by the end of our forecast period.

In this article we discuss Intel’s long term growth potential in the smartphone and tablet markets, and estimate the target market size for Intel-powered devices that support both the Windows, as well as the Android operating system (OS).

See our complete analysis for Intel


Growing Demand For Mobile Devices

Despite macro headwinds, the mobile device market continues to grow at a rapid pace and is the fastest growing segment in the computer industry. While the worldwide mobile phone sales declined by 1.7%, the smartphone shipments increased by 43% in 2012, according to Gartner. Smartphones currently account for 39% of the mobile phone market, but the proportion is expected to increase in the future.

Gartner estimates the global mobile sales to reach 1.9 billion units and predicts the smartphone sales to rise to 1 billion units in 2013, compared to 675 million in 2012. [1] Gartner estimates mobile phone shipments to climb to 2.2 billion units by 2016. We forecast the smartphone penetration in mobile phones to rise to 60%, i.e. 1.3 billion units by 2016.

Research firm IDC estimates the global tablet shipments to have reached 117 million units in 2012, a 65% increase from 2011, and forecast the market to rise to over 260 million units by 2016. [2]

Intel’s Improving Processor Line-Up

As Intel’s processor in general consumed more power, they were not considered suitable for use in mobile devices. However, the company stepped up its R&D efforts (R&D expenditure increased by 22% in 2012) to work towards developing more energy efficient chips. Not only do its processors now compete with ARM designs on performance, offering equal or better power and battery life, but are also priced at a similar level. Intel powered Windows 8 tablets costs roughly the same amount compared to Windows RT devices. [3]

Intel launched its Medfield platform during Q2 2012, with the introduction of the first Intel-powered smartphone – Lava Xolo X900 – in April 2012. During Q4 2012, it announced its upcoming Clover Trail platform which supported the new Windows 8 OS. While the Medfield platform supported Android and Linux, the initial Clover Trail version did not support the two platforms.

However, earlier this year, Intel launched Clover Trail+, which is its first dual core chip for smartphones and Android tablets. Intel claims that the Clover Trail products deliver double the performance and up to three times the graphics capabilities compared to its predecessor, the Medfield platform. Offering longer battery life, high performance and advanced imaging capabilities, the Clover Trail is available in three variations - 2.0 GHz, 1.6GHz, and 1.2GHz – and come with a graphic media accelerator engine. Keeping in mind Intel’s near absence from the Android tablet market, we believe that Clover Trail+ will significantly expand its opportunities in the mobile market.

While Lenovo has already announced a new device powered by the Clover Trail platform, Asus and ZTE are expected to introduce new products soon.

Additionally, Intel recently introduced one of the industry’s smallest and lowest-power multimode-multiband LTE solutions (XMM 7160) that supports smartphones, tablets and ultrabooks. It currently ships the single-mode 4G LTE data solution, and the multi-mode solutions will start shipping later this year. It has also come up with a cheaper and improved version of its Medfield platform, Lexington, which targets the fast growing low-end smartphone and tablet market, a segment that is estimated to reach 500 million units by 2015. [4]

Currently most of Intel-powered phones use the 32-nanometer Medfield SoC. However, it plans to introduce its 22nm smartphone Atom SoC (Merrifield platform) and its first quad-core Atom SoC (Bay Trail) later this year. Both platforms promise to offer significant performance and power improvement over the current platforms.

Potential Market Size For Intel Mobile Platforms

With a 61% market share, the Android OS dominates the smartphone market. [5] However, Apple’s iOS is the clear winner in the tablet market, with a 53.8% market share. [6] Nevertheless, owing to growing demand for low-cost tablets, especially from emerging economies, Android is not far behind.

Smartphone OS

2012 Market Share (%)

2016 Market Share (%)

CAGR 2012-2016 (%)

Android

61.0%

52.9%

9.5%

Windows Phone 7/Windows Mobile

5.2%

19.2%

46.2%

iOS

20.5%

19.0%

10.9%

BlackBerry OS

6.0%

5.9%

5.9%

Others

7.2%

3.0%

-5.4%

Grand Total

100.0%

100.0%

12.7%

Despite the launch of Windows 8 and Microsoft Surface last year, Windows OS account for a very low market share in smartphones and tablets. However, research firm IDC predicts Windows to register the fastest growth in the tablet OS market in the next few years, and estimates its share to increase to 10.3% by 2016.

Supporting both the Android and the Windows OS for smartphones and tablets, we estimate Intel’s target market size to be around 500 million units (Smartphones = 675 million x 66.2% & Tablets = 117 million x 45.6%). With robust growth in mobile devices, Intel’s target market can rise to 1.1 billion units (Smartphones = 1.3 billion x 72.1% & Tablets = 260 million x 50%) by 2016.

Tablet OS

2012 Market Share (%)

2016 Market Share (%)

CAGR 2012-2016 (%)

iOS

53.8%

49.7%

20.9%

Android

42.7%

39.7%

21.0%

Windows

2.9%

10.3%

69.2%

Other

0.6%

0.3%

7.7%

Grand Total

100.0%

100.0%

23.3%

Our price estimate of $32.88 for Intel is at a premium of  close to 40% to the current market price.

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Notes:
  1. Gartner Says Worldwide Mobile Phone Sales Declined 1.7 Percent in 2012, Gartner Newsroom, February 13, 2013 []
  2. IDC Raises Its Worldwide Tablet Forecast on Continued Strong Demand and Forthcoming New Product Launches, IDC Press Release, September 19, 2012 []
  3. Sorry Windows RT, Windows 8 on an Atom has your number, Gigaom, January 15, 2013 []
  4. Intel Delivers Broad Range of New Mobile Experiences, Intel Newsroom, January 7, 2013 []
  5. Worlwide Mobile Phone Growth Expected to Drop to 1.4% in 2012 Despite Continued Growth Of Smartphones, IDC Press Release, December 4, 2012 []
  6. IDC Raises Tablet Forecast for 2012 and Beyond As iOS Picks Up Steam, Android Gains Traction, and Windows Finally Enters the Market, IDC Press Release, December 5, 2012 []
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