Intel no longer inside, at least with mobiles

Because of its late entry into the smartphone market, Intel risks becoming a dinosaur as mobiles and tablets become dominant.

Intel, the leading computer chip maker, is rushing to develop microchips designed for Android smartphones. Justin Sullivan / Getty Images / AFP

Intel, the giant US chip maker, is floundering while trying to follow the transition from fixed to mobile devices that is now taking place in the communications industry.

Intel is understood to be rushing to develop microchips designed for the mushrooming number of smartphones now powered by Google's Android operating system. But this may already be a case of too little too late as Intel is now seen as being in danger of being relegated to becoming a niche player catering for yesterday's market of PCs and laptops while consumers flock to new hand-held devices such as smartphones.

"Intel has regularly talked up its capabilities and stated its intent to power mobile devices and smartphones, but the products simply have not come to market," says Tim Shepherd, a senior analyst at Canalys, a research company.

"Intel does need to succeed in mobile. Around the world, the computing paradigm is shifting with more people using smartphones and tablets to connect to the internet, to produce and edit files and documents, and to consume content and services. Intel's lack of success in this major growth area threatens its broader market leadership position."

Intel's Christmas product offering comes in the form of microchips powering a new generation of thin lightweight laptops, known as ultrabooks, similar to Apple's MacBook Air but powered by Microsoft's Windows operating system and assembled by electronics manufacturers such as Sony.

Richard Fichera, the principal analyst at the research company Forrester, is still confident the Intel juggernaut will continue to crush any opposition in the sector and that the company will continue as a dominant player because of the excellence of its microchip foundry operations.

But there is now also a growing belief that, despite its successes in the past, Intel may be a dinosaur rather than a juggernaut in today's rapidly evolving communications market.

The new generation of handheld communications devices, smartphones, require a very different chip technology to PCs and laptops.

"The critical challenge for Intel is to balance processing speed and power with the low power consumption needed for products such as smartphones," says Mr Shepherd.

"Without a significant breakthrough in this area, it will be unlikely to pose a real threat to the likes of Qualcomm and Texas Instruments, who provide capable yet power-efficient ARM-based chipsets to device vendors."

ARM designs and licences fast, low-power consumption chips that are ideally suited to the new generation of powerful, small smartphones. Driven by the need not to lose out on this fast-growing market, Intel's old ally, Microsoft, is supporting smartphone software running on ARM's chips.

"As Microsoft embraces ARM processor-based devices with Windows 8, the 'Wintel' (Microsoft Windows, powered by Intel processors) hegemony that has been pervasive for years in the PC space also faces a threat on its home turf, with ARM processors crossing the line from mobile to PC successfully while Intel struggles to achieve the opposite," says Mr Shepherd.

As consumers become used to increasingly lightweight and powerful devices, Intel may well start to lose some of its existing market share to competitors such as ARM.

ARM chips are not only better suited to smartphones but also to the new lightweight devices that are gradually replacing traditional laptops.

Intel also faces competition in its traditional market from Advanced Micro Devices (AMD), a US-based chip company.

AMD is a close partner of Globalfoundries, which supplies it with some of its key chips. Majority-owned by Abu Dhabi'sAdvanced Technology Investment Company (Atic), GlobalFoundries has nevertheless postponed plans to start building the Gulf's first microprocessor-fabrication plant in Abu Dhabi next year. The company cited the uncertain global economic outlook as the reason for the temporary delay.

However, Intel cannot afford competition in its traditional PC market from other manufacturers, be they established players in the field such as AMD, or newcomers such as ARM.

"AMD continues to be a credible competitive threat to Intel in the PC space," says Mr Shepherd.

Unlike Intel, AMD is not having to fight a war in the mobile market while defending its home turf in the PC chip business.

"But it does not at present share Intel's drive to push into the mobility space. I do not expect to see an AMD-powered smartphone any time soon."

But, although Intel may be late getting into the booming mobile market, it still has an unassailable reputation for research and development of new chips, if it can get them to market quickly enough.

"Intel is very late with its mobile offering, although as technological advance in the mobile space continues at a frenetic pace, it does have a chance to become a relevant player if it can deliver a differentiated offering," says Mr Shepherd.

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