Intel outlined its plan to catch up in the smartphone processor business at its annual investor day in Santa Clara, California, Thursday: crush competitors with the weight of its multi-billion-dollar fabs and the thousands of developers it can throw at the problem of tuning mobile software to run on its processors.
The goal: keep the attention of key customers such as Apple as smartphones, tablets, and personal computing devices converge. Apple relies on Intel processors for its notebook and desktop computers, and ARM-based designs for its booming smartphone and tablet products — leading some to fret that Apple could one day switch to ARM-based chips for the Mac.
“Our job is to ensure our silicon is so compelling, in terms off running the Mac better or being a better iPad device, that as they make those decisions they can’t ignore us,” Intel Chief Executive Paul Otellini said.
Earlier this year Motorola Mobility and Lenovo — among others — announced plans to build phones using Intel’s mobile processors. More are coming, Otellini promised. “A year ago there was no one who was not an Intel employee who thought Intel stood a chance in this business,” Otellini said. “And now you’re asking what our market share goals are.”
While Intel may be an underdog in smartphone processors, Herman Eul, who co-managers Intel’s mobile and communications group with Mike Bell, argued that Intel is already an “incumbent” in the broader wireless semiconductor business, particularly in radio-frequency chips. Since Intel closed its acquisition of German semiconductor manufacturer Infineon’s wireless assets, Intel has shipped 500 million wireless chipsets.
Intel’s formula for addressing its challenge in the smartphone processor business is the same one the Santa Clara, Calif.-based processor manufacturer has used to dominate everything from server rooms to personal computers: use its size to support manufacturing capabilities its rivals can’t match.
Intel is racing to pair its smartphone processor designs — which are based on the same x86 processor architecture that now dominates the notebook business — with its latest manufacturing processes. “What the process technology does is gives us better performance, at better power at better size,” Intel’s Bell said. “We think this is a fundamental advantage that we have.”
While rivals are struggling to crank enough processors with features 28 nanometers wide to meet demand this year, Bell said Intel plans to leapfrog them with an upcoming part, the Intel XMM 7260, with features just 22 nanometers wide next year. Intel will follow up with processors built using Intel’s 14 nanometer manufacturing process in 2014.
Rivals, meanwhile, are counting on cheap chips built by contract manufacturers to knock Intel off its game. “You don’t want to be dragging around an asset base based on a model that might be changing,” AMD Chief Executive Rory Read told Forbes in February. Nvidia CEO Jen Hsun-Huang has even cheekily suggested that Intel build Nvidia’s chips in its factories.
Intel’s secret weapon: a massive corps of software engineers. Intel is the second largest contributor to the open-source Linux operating system. It’s using that expertise to help tune mobile software for its chips: it has 1200 engineers helping Google with its Android mobile operating system. It also helped Apple manage its shift from PowerPC processors to Intel’s processors for the Mac. There can be doubt Intel would be happy to help Apple make a similar shift in its smartphone and tablet businesses.
Intel shares rose 5 cents to $27.24 in Thursday trading.
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