Intel has revised and revisited its mobile strategy several times in the last decade, but regardless of their efforts they have yet to see any real adoption from major handset and tablet vendors. Now with Brian Krzanich at the helm, we hear the same bold predictions of serious market penetration in relation to entry-level tablets. We would shrug our shoulders, but this time around, we can feel strong winds of change arriving from Shenzhen China. Is possible that Intel has finally cracked the entry-level tablet space? Mobile Geeks investigate:
In the last few decades Intel has enjoyed one of the most lucrative revenue streams the PC industry has to offer, with incredible margins that placed its processors at the top of the bill of materials for any notebook or desktop PC. Intel’s Core i7 and i5 processors today are some of the most expensive semi conductor components on the market, especially compared to ARM-based chips which typically cost considerably less.
Don’t forget to watch this video I made with Nicole Scott at Computex 2014, where we cover the themes introduced in this article.
The traditional PC market however is dwindling. Tablets and smartphones are now the growth vehicles of the industry, and despite annual posturing from Intel and a seemingly never ending stream of new ‘Mobile Strategies’, Intel has utterly failed to penetrate these new mobile device markets, currently dominated by players like Samsung and Qualcomm at the high-end, and MediaTek at the entry-level.
Powering Down to Mobile
Of course Intel’s inability to go mobile was initially due to the technical restraints of the x86 architecture compared to the seriously low power tech achieved by ARM’s Cortex technology which was much better positioned to fuel the new and quickly evolving handheld device segment. Going back as far as the first Atom processors in 2008, the strategy from Intel was clear – we need to get the power down and get in to mobile.
Intel managed to achieve its technical goals with each revision of its Atom platform. After Silvermont, came Lincroft, followed by Diamondville, Pineview and Cedarview. By 2012 Intel was armed with Medfield, the company’s first true System-on-Chip, a platform it hoped would woo smartphone manufacturers – it did not happen. Medfield was a complete failure, due largely to its 2-3 watt power needs and lack of integrated 3G/4G. Intel will attack Smartphones full on once again with its SoFIA platform early next year.
40 Million Tablets
If a high volume smartphone market is proving difficult and currently out of reach, could Intel then push its substantial weight into the growing tablet space? Since Medfield Intel has really worked hard to develop its SoC offering with Clover Trail being succeeded by Bay Trail. This week at Computex 2014, we have seen plenty of Bay Trail tablet offerings from Asus and Acer among many others, but would this mean they have finally arrived?
Tablets are proving to be a real growth space, but there has been segmentation between sizes with, larger 10inch tablets running Windows 8 (ala Surface) commanding higher ASPs, but lacking any serious volumes. Cheaper Android-based 7-8 inch devices however have been the real stars of the tablet stage, with solid sales of Chinese-made Android tablet devices remaining strong.
Intel Finally Getting It?
At IDF Shenzhen back in early April, we saw CEO Brian Krzanich talk about how Intel had managed to develop partnerships with ODMs in Shenzhen, about how Intel was attempting to insert itself into the complex and dynamic supply chain of China’s technology hub. This comes of the back of his bold statement that Intel would ship 40 Million tablets in 2014. Clearly Intel was once again altering its strategy to gain a foothold in the Tablet gold rush of China.
IDF Shenzhen saw Intel announce that they had altered their approach – bringing to the table a turnkey approach where the firmware, drivers, software optimizations, apps and even hardware reference designs are offered to make manufacturing as simple and non-R&D intensive as possible. Intel had finally gotten the memo – China differs from Taiwan and the mature PC industry, where manufacturing had evolved lock and step, steadily over several decades.
At Computex this week, we saw lots of Bay Trail tablets from well established players that you could certainly describe as ‘Intel Partners’; ASUS, Acer, Dell, Toshiba… and more. But these companies would walk across hot stones for Intel if it meant extra marketing funds, or an edge over a competitor. We have seen many flagship ‘design wins’ before, and we know that they don’t always equal broad industry adoption.
The real eye opener was when visited the 2nd Floor of Hall 1 World trade center Building where you will find a large room dominated by Mainland Chinese, predominantly Shenzhen-based manufacturers. Having visited Shenzhen just a few weeks ago, I was prepared to see a plethora of entry-level, sub-$100 Android Tablets running on MediaTek, Rockhip and Allwinner processors. What I did not expect was a broad range of Intel Bay Trail-based entry-level tablets – most of them running Windows 8.1.
Sure, many of the vendors we spoke to had only been working with Intel for around 6 months or less, and often the tablet product in the brochure or the poster remained an engineering sample with protective plastic film to keep it safe. Clearly many of the devices were still in development, but there was no doubt at all that Intel had arrived.
Intel’s attempt to insert itself into the China supply chain was clearly paying off. Some vendors we spoke to explained that they were buying tablet motherboards with Intel Bay Trail SoCs from Foxcomm. Others were dealing directly with Intel to purchase chips alone. There is also the news last week that Intel has an ‘agreement’ with Rockchip – clearly an attempt to exploit Rockchip’s position in the entry-level supply chain. Three are even rumors that Intel will soon bring MediaTek to
heel its side.
Paying to Play
The real story here of course is that Intel is using its huge finacial clout to wedge itself into the entry-level tablet space. One vendor told us how Intel is all but paying him to use Bay Trail – pointing to the Intel posters that decorated his booth on the 2nd floor, he told us they were virtually financing his presence at the show.
Check out the images below. You will see how Intel is already exerting its influence on a the marketing budgets of Shenzhen, in this case South Holdings, a Shenzhen player now specializing in devices that combine Bay Trail with Windows 8.1 for Bing. Go figure.
Intel has always used its MDF (Marketing Development Fund) to exert control and influence over its ‘partners’ in Taiwan as well as key global distribution channels, but here we are seeing what Intel refers to as ‘contra revenue’, a strategy that does not involve making immediate returns, but facilitates instead a massive shift in market presence. Brian Krzanich wants to be inside 40 million tablets this year, and he’s willing to pay for it. Having sunk around 300 million dollars into its Ultrabook Fund in 2011, Intel is not afraid to spend in order to play.
Intel VP Herman Eul told us in a meeting in Shenzhen that in China, you need to adjust your strategy roughly every 6 months, such is the pace and dynamism of the market. It seems that Intel’s current strategy is to actually become a player in the tablet game of Shenzhen where according to Stephanie Halford, Intel’s top brass in China, 130 million tablets will be made this year alone. Krzanich is determined to gain a substantial foothold in this segment, even if it means losing revenue in the short term. Intel will is clearly willing to pay to play.
I wonder what the plan will be in the next six months. At the Computex keynote Intel briefly mentioned that there would be a Bay Trail refresh later this year pinpointing a $199 tablet price point. Cherry Trail will also come along at the end of this year, again targeting tablets. Having gained a foothold, it would appear that the company has hopes of becoming the dominant player in the market.