Intel Can Drive Growth by Selling Fancier Chips in Emerging Markets
Source: Trefis Estimates
Intel (NASDAQ:INTC) released its Q4 and full year 2011 earnings last week, and the significant growth in average selling prices was one of the prime factors behind the impressive growth. The company expects high single digit growth in revenues in 2012 despite the fact that popularity of tablets is affecting PC sales and economic recovery remains uncertain. Moreover ARM-based players will try to make a dent with launch of Microsoft’s (NASDAQ:MSFT) ARM-compatible Windows operating system and AMD (NYSE:AMD) will look to improve its low share under new management.
Despite the above, Intel will look to grow its revenues aided by expected growth in PC shipments and modest growth in average selling prices. What can support the latter? It could be the launch of Ivy Bridge & the drive towards a richer mix in emerging markets. But there also exists risk in terms of Intel allowing subsidies for pushing ultrabooks into the market.
Our price estimate for Intel stands at $30.37, implying a premium of more than 10% to the market price.
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See our complete analysis for Intel
The Ivy Bridge is an improvement over previous generation of APUs (accelerated processor unit) – Sandy Bridge. The new chips will be based on 22nm process technology and will be launched in spring of 2012. [1] These chips will provide 70% more graphics performance compared to Sandy Bridge chips. [1]. The mix of CPUs has been improving over past couple of years and this could improve further. Incremental demand is mainly coming from emerging markets, and the microprocessor mix in these markets will play a critical role.
You can modify our forecast above to see how Intel’s stock can be impacted by change in average notebook processor price. We forecast declines beyond 2012 as we expect that the entry of ARM-based players in PC microprocessor market will fuel price competition.
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