Intel's Mobile Play: Just Warming Up


Like its longtime partner Microsoft, Intel is feverishly trying to increase its share of the mobile market. Also like Microsoft, the chip maker has to combat a number of competitors first.

Most notable among Intel's rivals is ARM, the U.K.-based chip licenser whose low-power architectures are leveraged by chip makers including Texas Instruments, Samsung and Qualcomm. ARM-based processors today dominate the smartphone and tablet markets, and Qualcomm, in particular, was projected by analyst firm IHS iSuppli to be the fastest-growing chip maker of 2012, with its revenue soaring more than 27 percent.

Intel, meanwhile, is expected to see its revenue slide 2.4 percent, as the PC market continues in its downward spiral.

[Related: The Post-PC Wintel: Striving To Remain Relevant]

But analysts and solution providers interviewed by CRN seemed far more optimistic about Intel's efforts in the mobile market than Microsoft's. Though clearly late to the smartphone and tablet game, Intel's new Atom processors, most agree, look promising, and prove that the chip giant is heading in the right direction.

Intel this year came to market with its new 32 nm Atom Z2460, code-named "Medfield," processor, which was targeted largely at the smartphone market. The Santa Clara, Calif.-based chip maker also announced a handful of smartphone design wins outside of the U.S., including ones with Motorola, Lenovo and ZTE.

According to Linley Gwennap, president and principal analyst at The Linley Group, a microprocessor-focused analyst firm, Intel is just warming up in the smartphone market. And, while the company has a way to go before catching up with ARM, that possibility should by no means be ruled out.

"I think it's pretty easy for people -- particularly in the United States -- to say, 'Well Intel isn't getting anywhere with smartphones'," Gwennap told CRN. "I do think in 2013 we will start to see Intel in some of the top-branded smartphones and some of the real marquee phones that big companies are pushing."

Much of Gwennap's confidence stems from Intel's upcoming 22 nm Atom processors, which are expected to be even more powerful and efficient than Medfield, and are slated to launch next year.

Even Intel's current 32 nm Medfield Atom chips have been found to be comparable to some ARM-based chips today. When AnandTech's Brian Klug reviewed the Lava Xolo X900 -- the first smartphone to run an Intel Medfield processor -- he proclaimed the myth of Intel's x86 architectures not being low-power enough for smartphones as officially "busted."

"While the X900 doesn't lead in battery life, it's competitive with the [Samsung] Galaxy S 2 and Galaxy Nexus," Klug wrote. "In terms of power efficiency, the phone is distinctly middle of the road -- competitive with many of the [Texas Instruments' ARM-based] OMAP 4-based devices on the market today. If you've been expecting the first x86 smartphone to end up at the bottom of every battery life chart, you'll be sorely disappointed."

NEXT: Catching UpIn terms of performance, a separate review from AnandTech based on JavaScript benchmarks found Motorola's new Razr i smartphone, which also uses Medfield, to be faster than the new iPhone 5, which runs Apple's ARM-based A6 chip.

Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, also believes Intel's Medfield Atom processors, along with its new "Clover Trail" Atom processors for tablets, show the progress the chip maker has made in driving down its processors' power consumption, a milestone it had to reach to succeed in the mobile space.

"I actually think Intel has accomplished more out of this move to mobility than Microsoft has," Moorhead said. "And Intel doesn't get enough credit for this right now, but its Medfield solution for smartphones and Clover Trail for tablets are very competitive mobile products, and the irony is that they are being fabbed on a legacy 32 nm process. So imagine when they get to a 22 nm process or 14 nm process. I think they are going to be a force in mobility."

Randy Copeland, CEO of Velocity Micro, a Richmond, Va.-based system builder, shares Moorhead's optimism. For years, Copeland explained, the smartphone and tablet market would have been a very low-margin business for Intel. The company was better served sticking to its bread-and-butter server and desktop markets. But now that mobility is booming, and Intel has made the decision to get a piece of that market, it's hard to imagine any rival chip company can stop it.

"Intel is making the right moves in moving into [mobility] slowly. In addition to that, I think ... Intel is certainly the top silicon manufacturer in the world," Copeland told CRN. "I mean, they have manufacturing power that just can't be rivaled. And if they wanted to own the mobile space, I think they would already."

The Linley Group's Gwennap noted one real hindrance to Intel's mobile strategy is that it lacks a completely integrated smartphone solution that consists not only of the processor itself, but other technologies like Bluetooth, WiFi and radio circuitry systems that are required to make a mobile handset run. Intel competitors like Qualcomm and MediaTek currently offer these packaged solutions.

That said, Intel is making strides to get there, Gwennap noted. In January 2011, for instance, Intel closed its acquisition of German chip design firm Infineon's Wireless Solutions unit, a move that strengthened its communications portfolio of WiFi and 4G WiMAX products and proved it was serious about the mobile space.

In December 2011, Intel also created a dedicated Mobile Communications Group (MCG) to accelerate its push into the mobile market. The group is spearheaded by Mike Bell, a former Apple employee who had a heavy hand in developing the first iPhone, and Herman Eul, who came to Intel from its Infineon acquisition.

According to Intel spokesperson Claudine Mangano, Intel's new MCG group, which launched last January to spearhead its push into the mobile market, is buzzing with energy. "Mike often talks about the atmosphere almost as if it's like a startup within Intel, so there's a lot of energy and excitement," Mangano said.

Mangano declined to provide sales figures for Intel's Atom Z2460 Medfield processors, but said the company is pleased with the progress so far.

NEXT: Moving Forward In MobileJohn Wallace, Intel's product marketing manager for tablets, also emphasized Intel's momentum in the mobile space, and told CRN he has noticed the "tone of the conversation" related to the company's mobile efforts is starting to change.

"Step one really was getting our products down to the power levels they needed to be to power this next generation of devices," Wallace said. "It's actually been really refreshing to see the skepticism or criticism changing. A year ago it was, 'Intel is never going to have a low-enough power chip to fit into one of these devices to compete with ARM.' Now, you don't really hear that challenge very much anymore, since we launched Medfield."

Regardless of whether Intel ever matches ARM in the mobile space, analyst Gwennap noted that the company is still benefiting from the mobile boom because of its server business. As smartphone and tablet adoption soars, so, too, does the need for servers that can handle the influx of information pouring into data centers around the globe.

In the third quarter of 2012, Intel saw its PC Client Group revenue drop 8 percent year-over-year to $8.6 billion. Its Data Center Group, however, grew during the three-month period, and saw its revenue shoot up 6 percent year-over-year to $2.7 billion.

"I think there is going to be a business for Intel for a long time in PCs, and the server market is really benefiting from growth with all these mobile devices," Gwennap said. "As people are using more of these mobile devices, they need more services from the cloud, and that's where these Intel servers come in."

IF YOU CAN'T BEAT 'EM JOIN 'EM

A new CEO may bring changes to Intel's mobile strategy. Intel in November shocked the tech world when it announced CEO Paul Otellini will retire in May. Otellini, 62, will retire three years before Intel's mandatory retirement age of 65; the company hasn't announced who will fill his shoes.

Otellini, who spent eight of his 40 years at Intel in the CEO seat, was a driving force behind Intel's alignment with its x86 architecture. When he steps down, The Linley Group's Gwennap said, it's possible the company could start exploring options for adopting ARM architectures for its tablet and smartphone chips.

"Otellini has just been very dogmatic about that whole thing, saying 'We don't want to use any other architecture than our own, never ever','" Gwennap said. "So if you brought in somebody who was a little more open-minded, that might open up that particular door."

The move wouldn't be a completely unprecedented one for Intel; the chip maker previously used ARM architectures within its former XScale business, but sold the unit off to Marvel Technology Group in June 2006.

Larry Chao, a former tablet marketing manager at Intel and now director of business development at Kno, a software company based in Santa Clara, Calif., agreed that, without Otellini in the CEO spot, ARM architectures could make their way into Intel's mobile chip line-up.

"I think with the change of guard that we will see Intel embrace ARM more than Paul [Otellini] did," Chao told CRN. "But what Intel has shown with the latest generation of Atom is that there is no power penalty with Intel architecture."

At the same time, Chao, who also spent a few years working directly under Otellini as a program manager, said Otellini was always a big advocate for Intel's mobile charge, and that his direction will no doubt be missed. "He definitely saw that smartphones were going to be, sort of, the next PC, and he was always really clear on that," Chao said. "He definitely helped bring the company in the right direction."

NEXT: Fractures In The Wintel AllianceFRACTURES IN THE WINTEL ALLIANCE

When it comes to mobility, it's clear that Microsoft and Intel have their own battles to fight. But as they forge their way into the mobile arena, the nature of that close-knit Wintel relationship that first propelled them to dominance is starting to fray.

Though Wintel hasn't officially broken at the seams, the Microsoft-Intel duo is definitely less exclusive than it used to be. Each company, in the interest of its own success in the mobile market, has struck new alliances with its partner's top competitors.

Intel, for its part, announced last January a "multiyear, multidevice" partnership with Google's Motorola Mobility, through which Intel will provide its Atom Z2460 Medfield processors to power some of Motorola's Android-based smartphones. The partnership came as a surprise to many; Intel was clearly throwing its support behind Google's Android, the most dominant smartphone platform in the world, and one of the biggest rivals to Microsoft's own Windows Phone OS.

According to Gartner, Windows Phone in the third quarter accounted for 2.4 percent of the worldwide smartphone market, while Google's Android and Apple's iOS accounted for a whopping 72.4 percent and 13.9 percent, respectively.

An Intel processor is used within the Windows 8 Pro version of Microsoft's Surface tablet, but Intel chips have yet to make their way into any Windows Phone-based smartphones. Intel spokesperson Mangano told CRN that, for now, Intel's strategy in the smartphone market is largely centered on Android, but that doesn't mean an Intel-powered Windows Phone device can be completely ruled out.

"So with smartphones right now, our first step is Android," Mangano said. "However, we will certainly look to support other [operating systems] when the market or our customers demand it."

Meanwhile, Microsoft this year made a move of its own that hinted the Wintel alliance was eroding: partnering with ARM. The software giant even optimized its new Windows RT OS, which runs on the lower-end model of its Surface tablet, for ARM architectures.

But despite this new alliance with ARM, a Microsoft spokesperson told CRN it will "continue to work closely with Intel to bring more amazing products to market."

Moorhead of Moor Insights & Strategy said it's good for Microsoft and Intel to branch out and form new partnerships as they continue to build their mobile strategies. Microsoft is poised to benefit from teaming up with ARM, just as Intel is with Android.

"Intel and Microsoft have the most fractured relationship they have ever had and it's growing wider by the day," Moorhead said. "But it's actually good for both of them. It's good for them to do something different."

Intel and Microsoft partners feel the same. Douglas Grosfield, president and CEO of Xylotek Solutions, an Ontario-based Microsoft partner, believes the broader Wintel alliance in PCs is here to stay. But, in the mobility space, he has noticed Intel and Microsoft pulling away from one another, and believes it's the right move for both companies.

"You ask anybody in the tech world what Wintel is, and they know. It's very compelling, and that's never going to change," Grosfield said. "The fact that Intel is branching off a little bit more ... [and] making more inroads than they have in the past, such as with Google's Android, that can't help but be a good thing."

Grosfield also said he's rooting for Microsoft and Intel to succeed in mobility just to keep Apple on its toes. He noted that the smartphone and tablet space today is dominated by Apple, a factor that could limit innovation and squash fair competition moving forward.

"I think you'll find a hard time finding anybody in the tech community who wouldn't root for somebody who is going head-to-head with Apple, just for the sheer pleasure of taking them down a peg or two. A monopoly is no good for anybody, and Apple, frankly, has a monopoly in the mobile space in a lot of ways," Grosfield said. "For the business-to-business space, that's not good for the market. Competition is where innovation truly happens."