Megachip maker Intel has decided that the only way to get around the inscrutable Chinese is to invest in shed loads of scrute and buy its way into the market.
Intel is pouring billions of dollars into expanding its influence in China, where fewer than half the country’s roughly 500 million mobile phone users have smartphones and the market is ruled by Qualcomm.
Intel is apparently trying to use its relationship with PC clients in China as a foot in the door to mobile devices. It is chummy with Lenovo, the No. 1 global PC seller, and its hardware powers a handful of Lenovo smartphones. It is also mates with Chinese internet giant Tencent, which includes a joint research centre, helps ensure that the WeChat maker’s software works smoothly with Intel chips.
Intel paid $1.5 billion in September for a 20 percent stake in state-run Tsinghua Unigroup, which controls two domestic mobile chipmakers. It did not need to spend that much, in some observers thought that it was double the outfit’s value. In December, Intel said it would pay $1.6 billion to upgrade its factory in the central Chinese city of Chengdu, which cost $300 million to build a decade ago. The plant, designed for back-end testing, will absorb some of the work previously done in a shuttered Costa Rican facility.
That appears to suggest that Chipzilla is shifting a lot of its tech to China. The idea being that it will intergrate itself into the local supply chain and impress the Chinese officials, who are having a few problems with Qualcomm. Intel may be more favorably treated by Chinese regulators because of its stake in Tsinghua Unigroup—as well as its willingness to build high-end local labs. So far, Intel hasn’t been touched in China’s crackdown on foreign companies.
The next battle is believed to be for wearable tech and if Intel has invested in Chinese start-ups it might have a leg-up and a way to make these as cheap as possible.
Intel has been doing its best to explain why its Braswell chip has been delayed.
For those who came in late, Braswell was supposed to be a 1Q 2015 launch, but it kept being delayed. The latest news is that it will not be seen in the shops until June and August 2015.
Kirk Skaugen, who heads up the company’s PC Client Group said the main reason was cost.
Intel has been having problems getting its 14 nanometer manufacturing technology to yield at economically acceptable levels. Although the company describes the current yield rate of its 14 nanometer technology as being in a “healthy range,” Intel indicated that the yields still are not where the prior generation technology was at this stage of its ramp.
Broadwell costs will actually remain higher than those for the 22 nanometer Haswell family of products until the third quarter of 2015.
This is all very tricky considering that Braswell is intended to be a very low-cost part for entry-level desktops and notebooks. While Intel can take a couple of quarters of elevated costs to get Broadwell right for the higher-value segments of the PC business, it has the luxury of waiting until Braswell’s manufacturing costs are lower than last year’s 22 nanometer Bay Trail’s costs for more cost-sensitive PCs.
Intel has been all about platform cost reduction with Bay Trail-M/D and has been working to reduce the platform bill of materials costs for its Bay Trail-M/D products. Since the low-end PC market is focused more on cost than on performance, these Bay Trail products may continue to hold their own against AMD’s newly announced Carrizo-L until Braswell arrives.
Chipzilla has released eight new Pentium and Core i3 desktop microprocessors.
The Pentium G3250, G3460, Core i3-4160 and i3-4370 are being geared for PC’s. Intel also released Pentium G3250T, G3450T, Core i3-4160T and i3-4360T which are low-power models.
According to Tom’s Hardware all processors are 100MHz faster than their predecessors, which is a barely noticeable three to four percent improvement in clock speed.
The prices are pretty much the same for previously released Pentiums and Core i3s, particularly after Intel cut the price of existing Core i3-4360 SKU by 7 per cent, from $149 to $138, and the price of the Pentium G3450 was slashed by 13 per cent from $86 to $75.
The new Pentiums products are produced on 22nm manufacturing process, and they come with two CPU cores, running at 2.8 GHz – 3.5 GHz.
The Pentiums have 3 MB of L3 cache, integrated HD graphics, and provide the basics like VT-x Virtualization and SSE4. The Pentium G3250 and G3460 have 53 Watt TDP, and the G3250T and G3450T are rated at 35 Watt. The official prices of Pentiums range from $64 to $85.
It seems priced to complete with the AMD A6-6400K and A8-5500 APUs.
Core i3 microprocessors have support for Hyper-threading feature which means they can run twice as many threads at once. The i3s are generally clocked higher than the Pentiums, and they have GPU upgraded to HD 4400 on the i3-41xx series, and to HD 4600 on the i3-43xx series.
Low power Core i3-4160T and i3-4360T run at 3.1 GHz and 3.2 GHz, and have 35 Watt TDP. The standard power Core i3-4160 and i3-4370 operate at 3.6 GHz and 3.8 GHz but fit into 54 Watt thermal envelope.
All Core i3 models have the GPU clocked at 1.15 GHz, and they support DDR3-1600 memory. Core i3-4160 and i3-4160T have the official price of $117. The Core i3-4360T and i3-4370 are more expensive, and they are priced at $138 and $149.
Buried in Intel’s glowing results was one anomaly – its tablet business was taking off while its mobile unit revenue fell like a free falling team of elephants.
It was possible to see a significant spike in tablets using its chips, up 10 million last quarter, but its mobile revenue was just $51 million. This was an 83 percent drop from a year earlier.
While it is possible to explain some of that drop by a fall in its phone modem chip business it turns out that this was the cost of “contra revenue”,
As president Ronald Reagan found out, giving money to contras is always going to get you into trouble and what you are seeing is the cost of Intel buying its way into the market.
For 2014 anyway, Intel is selling a chip into low-end tablets that costly and complex to design into devices than rivals. Tablet makers are happy because they get a higher end Bay Trail chip for their cheap tablets but Intel’s bottom line suffers and it smacks of desperation.
It all means that Intel can say it is “on track” to reach its goal of selling 40 million tablet processors this year but this means that more “successful” Intel is at getting device makers to use its chips, the more money it will lose.
Intel does not seem to care either. It has said that it is tablet program is expected to take the company’s entire profit margin down by as much as 1.5 percentage points this year. Intel can afford it, but it is questionable if his makes sense and it if would be better to invest in the 3.30 at Ascot.
Intel thought Bay Trail chip it is selling to tablet makers would wind up in high-end devices which cost a fortune. Instead, Intel’s opportunities have been in lower-end devices such as the Asus Memo Pad, a device that costs around $150.
Intel does not expect the mobile unit to turn profitable next year, but the losses should narrow, CFO Stacy Smith told the world+dog.
CEO Brian Krzanich believes that over time we can make this a profitable business.
There’s more gloomy news for chip giant Intel.
A report by Digitimes Research estimates that a total of 20,000 units of ARM-based servers ship this year. And while that’s hardly made a dent in Chipzilla’s armour yet, only representing 0.2 percent of that market, that’s set to change.
By 2017 the volume will grow to 1.06 million with a CAGR of 170 percent.
ARM itself thinks that by 2016, chips based on its technology with account for five to 10 percent while that percentage will grow to 10 or 15 points by 2017.
A lot depends, according to Digitimes Research, on support from Microsoft on the Windows Server front.
It was formerly a chip giant but pretty soon now some archaeologist will uncover the bones of Chipzilla as the lumbering dinosaur nears the end of its existence.
At the Intel Developer Forum this year, Intel’s newly hatched CEO, Brian Krzanich, attempted to breathe new life into the diplodocus he tends by warbling on about healthcare and tablets. He must realise, of course, that to somewhat mix metaphors, Chipzilla has missed the boat.
The writing was on the wall for Intel some years ago but because the company is such a giant, the tiny brain wasn’t getting messages from its extremities that it was slowly dying.
It is a climate change in the egosystem that will spell the end for Intel because, in the marketing babble of the present age, its business model is clearly “unsustainable”.
Intel could only continue to churn out new processes and chips as long as it had a virtual monopoly in the market. A new fab costs billions to produce and profit is predicated on the fact that it essentially controlled the market.
The giant appears to have missed the fact that handset manufacturers didn’t and don’t want to be locked into the same model as the PC industry. Now, anyone with a smartphone or tablet is toting around an extremely sophisticated computer and no-one in their right minds wants to spend thousands on a PC unless they’re forced to. As recent market research has shown, the days of PCs are pretty much numbered and, of course, like its evil twin Microsoft, Intel forgot about the mantra it used to chant, that mantra called convergence.
It will take a while for Intel to die because it is such a lumbering creature, but a model that requires billions to develop new processes simply based on PC sales just won’t work anymore. And if Intel thinks that tablets or smartphones will save its bacon, then it is living in cloud cuckoo land.
In some ways, we must lament the coming death of Chipzilla. It had some fine people working for it and its process technology was next to none. But greed and its virtual monopoly meant that it was viewing the world wearing blinkers and its own momentum and size prevented it from taking vital decisions.