Insight for Intel: Small Chips Can Yield Big Profits

Intel

Source: http://www.flickr.com/photos/huangjiahui/

Intel Corporation (NASDAQ: INTC) President Renee James explained today in an interview that the Intel’s lack of strength in the mobile chip field did not denote an inability by the company to preform. “There’s a difference between not being capable of it, and not doing it,” James told Bloomberg.

There is also a difference between five years of growth contributing to shares of ARM Holdings Plc. (NASDAQ: ARMH) surging 888 percent over the past five-year period, while shares of Intel have climbed a relatively unimpressive 48 percent. Total revenue for Intel in the third quarter was up 5 percent compared to last year. But its performance relative to technology companies producing smaller processing chips is still lagging behind.

ARM designs chips for smartphones and tablets. The company’s success over the past five years has been partially due to its partnership with Apple Inc. (NASDAQ: AAPL). The recent iPhone 5S uses an ARM processing chip. Intel is now trying to push its presence in the mobile and tablet industry. A press release from October 24 gears Intel users up for the holiday season. It explains the popularity of electronic devices as Christmas gifts, especially laptops and tablets, and then gives consumers the chance to locate products using Intel processors.

Intel announced two new lines of processing chips, the Quark SoC X1000 and Atom E3800 earlier this month. AllThingsD.com explained the chips’s functions in plain English, saying they are part of an effort by Intel to make processors for smaller devices.

But five years is a long time, especially in the technological world. In covering a report by research firm IDCBloomberg noted that Intel has 92 percent of the PC market when it comes to processing chips, but only 3.2 percent of tablet-processor sales. Tablet sales, the IDC calculates, are projected to grow by 59 percent this year, mobile phone sales by 7.3 percent.

In trying to capture this market, Intel is playing catch-up to firms, like ARM, who saw the opportunity, or the reason for “doing it.” Earlier than Intel did. They have a leg up not only on how to make smaller processing chips, but also on strategic partnerships with companies like Apple. This could be important for the emerging “wearable technology” industry. ARM has already proven to Apple it can create small processing chips. Intel may be capable, but other firms have been pursuing the technology longer.

Don’t Miss: Is Wall Street Underestimating Apple’s Earnings?