 "Intel has a go at the mobile chip market again")
In September, Intel announced an investment of $1.5 billion in Tsinghua Unigroup, a state-owned company that owns China's second- and third-largest chip designers, Spreadtrum Communications and RDA Microelectronics. The investment was to buy a 20 per cent stake in the tech firm. Earlier in May, Intel had announced a strategic alliance with Rockchip. Both these Chinese companies have strong presence in the entry-level tablet and smartphone segments.
For Intel, these investments were necessary to assist it in its aim to gain market share in the tablet and smartphone segment, currently dominated by Cambridge-headquartered ARM Holdings. All major original equipment makers in the smartphone and tablets business favour ARM's chip technology. Intel acknowledges that its Chinese forays will allow it to address the fast-growing entry-level smartphone and tablets market as well as the future market for wearable devices in the emerging market.
Kumud Srinivasan, president, Intel India, says: "With the alliances that we have announced in China, we believe that we have a good product strategy targeted at the low end of the smartphone range. We feel good about our product strategy."
"Have we been on the backfoot in the mobile segment? The answer is yes. In 2012, we were looking at an Intel strategy that was talking about mobile. Did we lose a couple of years? Yes," Srinivasan says. But she remains optimistic. "Not much has been lost. At this time, we are willing to say that we have not missed the market. We have this historic precedence where Intel has been late in the market and done well."
For Intel, this is the second attempt at gaining market share in India. In 2012, it had entered into an alliance with India's Lava International with its Atom processors as well as concluded a similar agreement with China's ZTE. But the expected boom did not happen. Srinivasan admits that where Intel lost out was in pricing strategy. "The products were not targeted right for the Indian market," she says.
Analysts tracking the sector feel that Intel may have got its strategy right this time round. Investments in China will mean cost savings as well as the ability to address the volume game in the entry- to mid-range segment of tablets and smartphones. “It is quite obvious that in its current state, x86 has miles to catch up in competing against ARM designs owing to low power consumption and primarily, cost. The Atom processor and the roadmap ahead may do little to accelerate Intel’s chances in the Mobile phone/tablet market and hence this partnership is a step in the right direction to penetrate faster, especially with smaller and local vendors in emerging markets” Kiran Kumar, Research Manager, Client Devices with IDC.
With the reach of smart devices increasing steadily in the emerging markets, Intel's position is not irretrievable, say analysts. Smartphone penetration in India is just about 10-12 percent (industry sources). According to IDC, the Indian mobile segment is still dominated by feature phones i.e. more than two thirds of the market share is contributed by the feature phone segment.
Globally, IDC expects total tablet shipment to reach 271 million units in 2014 and reach 386 million units by 2017, surpassing PC shiments. Smartphone, on the other hand is estimated to reach 1.5 billion units in 2017. Compared to such exponential growth, Intel's presence in the smartphone segment is less than or perhaps near 1 per cent and tablets is around 4-5 per cent, say analysts.
Sumanta Mukherjee, general manager (research and consulting), CyberMedia Research, says that it will be important for Intel to understand the market. "It all depends on the products that the company launches and how it addresses issues like power consumption," he says. "Frankly, Intel does not have much of a choice since the laptop and tablets segments are converging. If we are looking at mobility as a driver, then power consumption will be a key determinant."
Intel will roll out products from Rockchip by mid-2015 using its SoFIA technology. The company is betting on a new 3G-compatible chip called Sofia, which will be followed by a fourth-generation variant in the first half of 2015. The company has laid out an aggressive road map for both product segments. According to a report by PCWorld, Intel Chief Executive Brian Krzanich said in September, "By November or December, we should be able to set a goal for phones next year." The company aims at shipping 40 million tablet chips by the end of 2014.
In India, Intel's presence in the smartphone segment is at the bottom of the ladder, while in the tablet segment it has around 5 per cent share due to the adoption of tablets by the enterprise segment. “In CY2014, x86 tablets have recorded significant growth albeit a low base. The reasons primarily include growing focus of PC vendors such as HP, Lenovo, Asus and Dell in the Tablet market. Secondly, Intel is setting up partnerships with local vendors in India (branded and unbranded) which will drive their volumes further in the coming quarters. And last but not the least, the surge in enterprise buying (on WinIntel platform) has further aided this share growth for Intel," says Kumar.
If the company's current strategy proves correct, and if it can get its product right, then the Intel brand can still carve out a space for itself in the market.
The story has been modified on Nov 5, 2014 to rephrase analyst quotes