8/16/13

Intel and Qualcomm step up chip battle - FT.com

By continuing to use this site you consent to the use of cookies on your device as described in our cookie policy unless you have disabled them. You can change your cookie settings at any time but parts of our site will not function correctly without them.

January 11, 2012 1:03 am

Intel and Qualcomm step up chip battle

By Chris Nuttall in Las Vegas

Qualcomm and Intel, respectively the worlds leading mobile phone and PC chipmaker, announced deep incursions into each others territory in duelling speeches at the Consumer Electronics Show in Las Vegas on Tuesday. A range of devices will form the battleground for semiconductor superpowers that are now closer to matching each other on battery life and performance. Paul Jacobs, Qualcomms chief executive, said its latest S4 Snapdragon processor would find its way into laptops before the end of the year. Paul Otellini, Intels chief executive, introduced the first smartphone to feature its Atom chips a Lenovo device that will go on sale in China in the first half of the year. The growth of smartphones and tablets as alternatives to the PC is also producing new alliances. Qualcomms processors, based on designs of the UKs Arm, have enjoyed exclusivity in Windows-based smartphones a relationship that echoes the old Wintel PC partnership between Microsoft and Intel. Intel has established a partnership with Google, adapting its Android operating system to work on Intels x86 designs as well as Arms. Mr Otellini and Sanjay Jha, chief executive of Motorola Mobility, the handset maker being bought by Google, announced a multiyear, multidevice strategic relationship, beginning with Motorola shipping smartphones using Atom processors with Android in the second half of the year. Lenovos K800 smartphone, available in China in the second quarter, will also run Android and use the Atom Z2460 processor, formerly codenamed Medfield. This is the first system-on-a-chip from Intel to be competitive with chipsets from established mobile phone chipmakers it marks a dramatic reduction in size and power requirements. It still lacks the multicore capabilities of smartphone and tablet rivals both Qualcomm and Nvidia are moving to quadcore chips but Intel said the chips hyperthreading technology still enabled multitasking. On the sidelines of the show, Intel executives have been demonstrating a prototype smartphone with features such as its cameras ability to take 15 8Mp pictures a second in a burst mode.
In depth: International CES 2012

They also claim that their work on software means many Android apps will be able to run faster on Intel chips than comparable Arm-based ones. Qualcomm will take advantage of Microsofts decision to bring Arm compatibility to its latest operating system Windows 8 when it is launched later this year. Mr Jacobs, who demonstrated a prototype Windows 8 tablet running on a Qualcomm S4 Snapdragon processor, said 20 manufacturers had more than 70 designs in the pipeline for Snapdragon devices that were not phones.

The worlds largest consumer electronics show this year sees 2,700 exhibitors displaying their wares in Las Vegas between January 10 and 13

Your next PC will deliver an always-on, always-connected experience ... something we in the mobile industry know something about, he said, adding that Qualcomm was talking to PC makers about building thin and light computers with long battery life, based on its chips. These could challenge the new ultrabook category being pushed by Intel at the show, which has the same features.

Mr Otellini said Intel would raise the bar on tablet experiences when Windows 8 was introduced. Its chips would ensure compatibility with the millions of existing applications and devices, as well as supporting Metro, the operating systems touch-based interface for tablets that
www.ft.com/cms/s/2/828b38dc-3be1-11e1-82d3-00144feabdc0.html#axzz2c5AVYH7L 1/2

8/16/13

Intel and Qualcomm step up chip battle - FT.com

will be offered as an alternative to the standard Windows desktop.

Most Popular on Social Networks

We are all prisoners of the rise in inequality Eurozone recovers in spite of itself Herbalife kept links to Canada pyramid scheme for a decade Barack Obama declines to correct his Egyptian mistake Britain should worry about the return of Swampy How would you fare? Questions from last year's economics A-level Norway sees Liu Xiaobo's Nobel Prize hurt salmon exports to China India restricts outward investment to bolster rupee 'Hindenburg Omen' portends fiery crash US files 'London whale' charges against ex-JPMorgan traders
Printed from: Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others. THE FINANCIAL TIMES LTD 2013 FT and Financial Times are trademarks of The Financial Times Ltd.

State of emergency declared as forces storm Cairo protest camps Microsoft to fund remake of BBC's sci-fi cult classic 'Blake's 7' Berlin and Brussels credit fiscal discipline and reform for eurozone recovery Private schools are heading for a crunch Android's momentum eats into Apple's bragging rights Egypt takes a step back towards bloodshed and tyranny Central banks struggle to convince investors Joan Edwards - a curious case of a generous donation A simple word of advice - plan ahead EM de-coupling story was always over-hyped

www.ft.com/cms/s/2/828b38dc-3be1-11e1-82d3-00144feabdc0.html#axzz2c5AVYH7L

2/2

E # 6
Mobile: Intel Will Overtake Qualcomm In Three Years
By Mark , JANUARY 17, 2012 9:00 PM

1. Is A Changing Of The Guard Imminent?

When you are done reading this article, you will agree that Intel is going to overtake Qualcomm in three years. We know that Intel's technology hasn't gone into any smartphones yet, while Qualcomm realized more than $4 billion of revenue in the last quarter. So, to make our point, we have to perform a magic trick. All magic tricks have three acts. The first part is called "The Pledge." That's where we do something ordinary: talk about CPU architecture. Any editorial team can do that. The second act is called "The Turn." We take our ordinary article and make it do something extraordinary. This is where we get into the details of chip fabrication and the history of mobile GPUs, something only a few editorial teams can do. Now you're looking for the punchline. You still don't believe Intel has what it takes. But you won't see the secret because you don't know where to look. You don't really want to know. You are waiting to be fooled, and you're not yet ready to clap because writing about CPU architecture, chip fabrication, and mobile graphics isn't enough. That's why every magic trick has a third act, the hardest part, the part we call "The Prestige." Three years ago, Internet Explorer was the industrys dominant Web browser. Today, Google Chrome is in the lead. Today, Qualcomm is the dominant player in the mobile system-on-a-chip (MSoC) industry. In less than three years, Intel will take that position away. Thats a bold claim, sure. But our team has been following the tech industry for over 15 years, and wed like to think that experience gives us a unique perspective. Weve seen AMD and Intel duke it out, ARM overtake MIPS and Super-H, and PowerVR and BitBoys rise from the ashes. MSoCs are going to be a hot topic for the next three years, so youre going to see a lot of prognostication. Youll have completely crazy predictions, such as Robert X. Cringleys. Hes the former tech writer for PBS.org who was once caught faking a Ph.D. from Stanford University and recently predicted that Intel was going to buy Qualcomm. In our analysis, Intel will actually prove itself the company to beat.

A Difference Of Opinion White papers and architectural analysis are very different from actual implementation and real-world testing. When most tech writers discuss a companys developments, they use the abstract. But companies dont create technologies; individual people do. Take sports teams as an example. The Lakers might be better some years than others, but players like Kobe Bryant and coaches like Phil Jackson make Los Angeles a championship team. Put simply, when a company gets bought, rarely does the buyer want the whole company. Rather, its paying a premium for access to certain patents and, more importantly, access to critical human talent within the company. To that end, the future of MSoCs will depend on, first, SoC architecture, second, fabrication skill, and third, graphics technology. FTC disclosure: We own no stock in any of the companies discussed today. We work with all of them, though, and we review hardware that includes technology from each of the involved organizations.

2. The Pledge: CPU Architecture

A lot of people assume that all MSoCs are the same. A company takes a licensed core from ARM (say a Cortex-A9 or a Cortex-A15), combines it with a graphics processor like Mali or technology from PowerVR, it adds memory and I/O, and then ships it off to manufacturing. It's suggested, then, that all licensed cores perform exactly the same way. More savvy techies know that ARM is an instruction set, and while companies can buy a fully-capable CPU core from ARM, layout design (such

as what Intrinsity did for Apple and Samsung) can improve performance. Companies can also develop a brand new chip on their own, without using any of the ARM design. Thats what Qualcomm has been doing with its Scorpion core, and soon, its Krait design. Nvidia is doing the same thing with Project Denver, relying on its patent/technology acquisitions and human expertise from PortalPlayer, Transmeta, and ULi. But the computational core only plays a small part of the overall systems performance. You have to deal with variables like memory bandwidth, bus architecture, and cache policies. Its not just bandwidth either, but also memory latency. That was one of the many reasons why AMDs Athlon 64 was superior to Intels Pentium 4, and the biggest reason why Apples iPad 2 does so much better than its competition in terms of responsiveness and performance. Its not simply an off-the-shelf design. In order to predict which company will have the dominant MSoC in three years, we have to figure out two different things: which team is best set up to achieve the highest raw performance, and which team is most likely to go the furthest with power consumption?

Raw CPU Performance Lets talk about raw performance before we discuss power consumption. There is no question whether Intel has the best resources to achieve the fastest processors. ARM and Qualcomm are going to face the same growing pains that the x86 world has already struggled through. In the next processor generation, Qualcomm is transitioning from its partially out-of-order Scorpion architecture to Krait, a full out-of-order design. Krait should more effectively facilitate peak CPU utilization, maximizing efficiency.

At the same time, Qualcomm is now navigating uncharted territory, where its engineers have less expertise. ARM already has some experience with its Cortex-A9, which is out-of-order-capable. But even with the upcoming Cortex-A15, the company will be relying on dedicated reservation stations (the instruction queue) for each of the execution units. While Intel and AMD used dedicated reservation stations in the past, both now employ unified reservation stations to improve performance and utilization. Unlike ARM, Qualcomm is attempting to jump directly to a unified reservation station design. The original Pentium Pro used a unified reservation station, so its not inconceivable to think that a company could pull this off successfully. The Atom architecture doesnt incorporate any of Intels advanced technology. Its a single-core, in-order design that is more reminiscent of the Pentium CPU than anything modern. But heres the thing: its already faster than the ARM-based competition. As performance demands start to increase, Intel has access to decades of expertise to drop into Atom. Weve heard that Atom would go to an out-of-order core within five

years of its launch, landing it in the 2013 range. So, ignoring power consumption, there is little doubt that Intel can put out faster processor designs.

3. Raw Platform Performance

The same can be said about memory architecture and latency. With the exception of Apples solution, todays MSoCs have pretty miserable performance. Apples bus architecture is unique among current MSoCs, and it has talent from P.A. Semi (started by the lead designer of the DEC Alpha and StrongARM CPUs) and Intrinsity (started by Paul Nixon, who headed Exponential Technologys x86 CPU project; Paul is now with TI, but in the MCU division). We have yet to see a demonstration of a high-performance bus from ARM, TI, or Qualcomm. The Tegra lineup from Nvidia doesn't have a memory bus that is significantly different from the competition (its shipping Tegra 3 still has less memory bandwidth than last years Apple A5). But we're not going count Nvidia out because it has experience with NV2s ring memory bus, a proven track record with the nForce2 platform, and experience with crossbar memory controllers on its GPUs. It just hasnt prioritized those things in its Tegra family.

Intel, on the other hand, has always done pretty well with the performance of its platforms (just look at its current Sandy Bridge-E architecture). Again, the challenge for Intel is power consumption, rather than performance.

Raw Wireless Performance Intel has zero expertise with wireless 3G/LTE. But it has an excellent track record with 802.11-based performance. The companys Centrino platform was responsible for Intels dominance in the PC laptop world. With the acquisition of Infineon Wireless, Intel gained significant expertise with 3G/LTE. Qualcomm, on the

other hand, has always had a strong 3G/LTE offering. But its 802.11 had to be acquired, and that was achieved with the purchase of Atheros. For wireless, Qualcomm has the lead in 3G. The advantage isnt as clear in LTE, though. Both Intel and Qualcomm also face pressure from Nvidia, which owns Icera, a software baseband company, and Samsung, NTT DoCoMo, Fujitsu, and NEC, collaborating to develop 3G/LTE products.

Performance Summary In the next three years, ARM and Qualcomm need to invest significant resources to advancing CPU performance. Their engineers are navigating uncharted territory, attempting to push technology in the same way that the x86 segment had to struggle through several decades ago. From a pure performance standpoint, and ignoring power consumption, Intel, AMD, and Apple (through its acquisitions, which include Intrinsity and PA Semi) have the most human equity in high-performance mobile computing, particularly in the areas of bus architecture and memory management. Nvidia is a wild card, with a seemingly rich portfolio of technologiesthough weve yet to see an implementation of its more complex bus and memory designs. But of course, an emphasis on power efficiency is what makes MSoCs so unique, and that is supposed to be Intels unconquered challenge.

4. The Turn: Fabrication

The reason ARM is dominant on the mobile side is that, to date, Intel has been unable to demonstrate a power-efficient MSoC. In this world, trumpeting impressive performance-per-watt numbers isnt enough. You actually have to be able to show off a full days worth of talk time and impressive standby numbers in order to be functional. With Medfield, Intel demonstrates that its team has the technical know-how to produce an MSoC within striking distance of ARM. As Intel put it, Medfield buys the company a seat at the table.

You hear a lot about the relative pros and cons of the ARM and x86 architectures, and it is true that Qualcomm and ARM have more success with low power consumption. Until Medfield, no one was sure how much betteroff those companies were compared to Intel. Now we can say that they had a four-year head start, since it took Intel that long after the launch of Atom to come up with a competitive mobile platform. What happens in the next three years, though? Given that Medfield is competitive with currently-shipping ARM MSoCs, we have to look to the next generation. On the previous page, we suggested that ARM and Qualcomm face at least as significant of a challenge scaling performance up as Intel faces in scaling power down.

We can be perhaps most objective in looking at manufacturing technology. Intel has the best chip fabs in the industry, which allowed it to out-compete AMD during the K6 and K7 era, and maintain its position when AMD introduced the successful K8-era processors. Medfield is currently based on a 32 nm node and is already competitive with ARM-based solutions. Intels next move is to make a jump to 22 nm on a 3D FinFET design, representing two steps forward in process technology. Intel has never failed to execute with a fabrication process, and it will already have plenty of experience from its Ivy Bridge-based processors. If the company stays on track, its about 18 months ahead of the competition in manufacturing. As soon as the competition starts shipping 28 nm, Intel will follow with 22 nm, and it will be even longer before competing fabs can implement FinFET. This gives Intel another 20-30% improvement in power consumption over its current technology, while basically doubling density.

High-K/Metal Gate ARM-based vendors are also in a race to enable MSoCS manufactured with high-K/metal gate technology. Besides Intel and Samsung, all of the other players are dependent on outside foundries like IBM, Globalfoundries, and TSMC. Samsung opens its foundries to other companies, so theyre on that list too. Qualcomm signed on with Globalfoundries to manufacture its 28 nm MSoCs. Globalfoundries uses a gate-first high-k/metal gate 28 nm process. This is also what IBM and Samsung will be doing. They wont attempt to make the switch to gate-last until 20 nm lithography is available. TSMC, the original foundry-for-hire (and the expected manufacturing partner for Apples A6) is going with a gate-last approach. Intel has always gone with a gate-last approach.

Gate-first and gate-last describe the way you implement modern high-k insulators with metal gates, and the laymans explanation is that were talking about a shift from pure silicon dioxide-based chips to those containing a different insulator called hafnium. In a gate-first design, you put the metal gate and hafnium components on the wafer before heating it, and in a gate-last design (like Intels) you do the replacement afterwards. Gate-first buys you more density, which is great for performance, but it comes at the expense of yield. You have more failures in manufacturing. Gate-last is more reliable for manufacturing. But there are more restrictive design rules that you have to get around. Intel has been shipping high-k chips since its Penryn core in 2007. Globalfoundries didnt successfully ship high-k chips until 2011. Intel isnt wrong for choosing gate-last. It has a proven track record with its Penryn, Nehalem, and Sandy Bridge architectures. Qualcomm may be wrong for choosing gate-first. Globalfoundries has a working gate-first process, used to manufacture AMDs APUs. Unfortunately, as noted in AMDs third quarter earnings report, yields werent as good as previously hoped, leading to lower-than-expected revenue growth.

5. That's Two For Intel

Importantly, TSMCs decision to go with gate-last is steeped in history, according to the companys senior VP in charge of R&D. Part of the reason why gate-first manufacturing results in low yields is that you have to control threshold voltage carefully, since the N- and P-channels use the exact same metal. The semiconductor industry tried to carefully control the voltage this way two decades ago and found it very difficult. The gate-last approach doesnt require the same control because the metal for the P channel is different than the metal for the N channel. You lose some density, but yields are a lot higher, and the easiest way to lose a fight is to not show up at all. Its not trivial to switch a design from gate-first to gate-last. It requires additional redesign time. To that end, you cant just change your order from Globalfoundries to TSMC by checking a different box on a form. It seems that Qualcomm figured out it cant get the yields it needs on a gate-first approach. At the 2010 International Electron Devices Meeting held in San Francisco, the company stated that it wouldnt be using high-k/metal gate technology for the majority of its 28 nm products. This is a big disadvantage for Qualcomm.

Summary Intels 32 nm high-k design (Medfield) is competing favorably against current 40/45 nm ARM-based CPUs. In the next iteration of its product, Intel will jump from 32 nm to 22 nm FinFET, equivalent to two process jumps. Qualcomm is going from 45 nm to 28 nm (1.5 nodes). But it isnt able to make a jump to high-K, translating to a loss of clock rate and a power consumption sacrifice. Apple and Nvidia are both expected to rely on TSMC for their next-generation chips. Apple will go from 45 nm to 28 nm high-k (1.5 nodes) and Nvidia will go from 40 nm to 28 nm high-k (1 node). With 28 nm high-k, both Apple and Nvidia should have extra performance compared to Qualcomms jump to 28 nm silicon. All things equal, Intel gets the biggest boosts to power and performance from process technology advances. Qualcomm, gambling on gate-first 28 nm, would have enjoyed more chip density if yields were good enough. Now, though, its forced to back off and go with a silicon-dioxide 28 nm process. But all things arent equal. In order to compete, Qualcomm has to roll out new tricks like out-of-order execution and an improved memory architecture. The companys engineers are doing this for the first time with Krait. They have to be flawless in their execution. Intel, on the other hand, is already doing well with a relatively low-tech Atom that doesnt incorporate any of the advancements seen from many, many years of designing x86 processors. Of course, Intels process technology lead will continue moving forward. While everyone else tries catching up to the firms high-k/metal gate manufacturing, it has already publicly demoed Claremont, a Near-Threshold Voltage Processor that operates at less than 10 mW. Interestingly, this chip was built around the original Pentium core, much like the Atom. So, Intel leads with regard to architectural challenges and on the manufacturing side. Theres just one more piece of the puzzle: graphics.

6. A History Of Mobile GPUs

In 2011, the dominant players in mobile graphics were PowerVR and Qualcomms Adreno. Both trace their roots back to failed x86 gaming products. PowerVR is the most prominent contender, as Intel, Apple, and even TI use its technology. Back in the 90s, Imagination Technologies (then known as VideoLogic) started working on an infinite planes, deferred renderer graphics chip with the assistance of NEC. The PowerVR architecture was the first consumer deferred renderer in which visible pixels were drawn and occluded, or covered pixels were thrown away. At that time, other graphics chips were drawing everything, even if the person on the other side of the screen would never see the rendered output. Thus, PowerVR made much better use of available memory bandwidth, and its effective fill rate was higher, too.

The problem with PowerVR was that its team was built by visionary mathematicians and engineers without experience in chip-building and gaming. The original PowerVR PCX chip lacked bilinear filtering, which meant that buyers of the $300 graphics card saw the same pixelated textures as anyone gaming on the original PlayStation, rather than the smooth, bilinear-filtered images associated with the Nintendo 64 and 3Dfx graphics cards from the same time period. It wasnt that bilinear filtering was a particularly challenging concept; it just wasnt something that the engineers thought to include when they developed the chip. VideoLogic quickly came back with the PowerVR PCX2, which had a higher clock rate and bilinear filtering. Unfortunately, the PowerVR team wasnt run by people with game development expertise. And as a result, they did not anticipate the need for src*dst texture blending. This was required for colored lightingbasically the effect needed for awesome explosions, laser beams, and alien-looking hallways. Again, that wasnt any sort of technical challenge, but rather an issue of just not thinking about the need for this texture blending mode. Everything was supposed to change with PowerVR Series 2, the platform used for Segas Dreamcast. A PC equivalent could have been the most popular graphics chip in the industry. Unfortunately, VideoLogic ran into problem after problem with its chip design. Itd tape-out and get prototypes back, only to discover a fatal glitch somewhere. One of the last problems had to do with the Windows hardware mouse cursor. Again, that wasnt an engineering challenge, but a mistake nonetheless. The failure of PowerVR Series 2 in the PC world was ultimately what caused the company to exit the high-performance market and focus on low-power designs. It did have a short run of Series 3 chips, which lacked a hardware transformation and lighting engine, and it saw some financial success by powering digital poker machines in casinos, where the magic of deferred rendering was immediate. PowerVR then switched from a true graphics chip manufacturer to a designer, selling its efforts the same way as ARM. This was the smartest move it could have made because it meant concentrating on core competencies based on math and block design, rather than making sure the logic was laid out ideally for a physical product. Since the companys original architecture from the late 90s was already engineered for multi-chip design, it has been easy for PowerVR to continue to grow and evolve into the superb platform it offers today.

7. The Crazy Story Of BitBoys

The other dominant player is Qualcomm and its Adreno graphics technology. The story of Adreno is worth noting because Qualcomm bought it from AMD. AMD bought this technology from ATI. And ATI bought it by acquiring BitBoys.

Now, anyone who knows tech history will remember that BitBoys is one of those companies infamous for its vaporware. But products based on its technology really did exist. Its a crazy story, actually, and we like telling crazy stories. Everything starts back in 1991. In the early 90s, Finland was home to the demo scene, which is where programmers (many of whom were just high school kids) would get together and write software able to push computer hardware to its limit. The idea was to pull off visual effects so awesome that you couldnt believe they were running on commodity components, and to pull that off so efficiently that the data would fit into an absurdly small file. These demos combined creativity, video and audio talent, and pure programming genius. Competitions included stuff like the best intro (with graphics and audio) in 4 KB of space, or the best 64 KB demo (you owe it to yourself to check this out). And then there was the best mega demo, which had no constraints. Think of it like Step-Up 2: The Streets, only with software engineers instead of dancers.

Notice: This Site Is Being Blocked

This site is being blocked because it meets Sensata's Web filtering criteria. The filtering criteria are based on Sensata's Acceptable Use Policy. If you feel that you have received this notice incorrectly, please contact IT Security via e-mail at SensataNet@Sensata.com. You can also contact the Help Desk at 866-201-4580 or by submitting a Help Desk ticket. Please include the blocked URL and business reason for needing access. Sensata has implemented Web filtering to reduce Sensata's virus risk, improve resource utilization, and increase employee productivity. Fourth place in combined demo competition at Assembly 2005 One of the most respected groups at the time was Future Crew, who took first place at the biggest competition of the time: Assembly. Mika Tuomi (also known as Trug) was one of the lead coders. He and his brother, along with their friends, started a company called BitBoys. At first, they just paid the bills with software development for local businesses. But when they tackled the Second Reality demo, they found their calling for 3D graphics. Some connections and contacts were made and soon they were engineering a graphics chip known as the Pyramid3D for a company called TriTech. Most folks consider that to be the first piece of vaporware from BitBoys, but Pyramid3D did make it past the design stage. There are stacks of prototype boards out there, many in the wild, and the hardware was demoed at various Microsoft events. Development definitely took longer than expected, and there were multiple respins and failures. But, in the end, the product really existed. The problem was that TriTech also happened to make audio chips, which also happened to violate Cirrus Logics patents. TriTech lost a lawsuit and, in light of royalties owed, the company shut down before Pyramid3D could reach consumers. Doh. Of course, you cant keep a demo coder down. So the BitBoys team regrouped and tried again. This time, they went to companies like Real3D (a spin-off of Lockheed, bought out by Intel), Rendition (bought out by Micron), Creative Labs (which ended up buying 3DLabs), ATI, Nvidia, and even Diamond Multimedia. No one wanted to work with them, so they decided they would do it on their own. This was when they started working on Glaze3D, which promised amazing fill rate performance with 9 MB of embedded DRAM. The company got its first round of venture capital and selected Infineon as its manufacturing partner, owing to significant embedded DRAM expertise.

8. From High-End To Mobile Graphics

Kaj Tuomi, Mikas brother, started work on developing software that would allow a programmer to code a unit in C and then have automated tools that converted into VHDL, which could then be used to make actual chips incorporating the design. Clock-accurate simulation capabilities let them build their chips in a software simulator before actually doing work. As the 3D graphics world changed, this meant it was easier for them to adapt. Glaze3D became Axe, and the promised performance was even higher. And then BitBoys got screwed again.

This all happened back in 2001, during the first dot com crash. Memory prices were dropping quickly and Infineon, the only factory in the world that could manufacture Axe, was going to shut down its embedded DRAM unit. This meant that BitBoys had a functional chip that couldnt be manufactured by anyone. (Incidentally, this is the same problem Qualcomm faces by gambling on a foundry with gate-first high-K). But Axe wasnt vaporware either. A limited number of Axe chips were produced before the end of Infineons embedded DRAM business so that BitBoys could show venture capitalists what they were capable of doing. You cant keep a demo coder down. The team started working on Hammer, which would have been a flagship PC graphics product. This proved to be a challenge for the small team because, in 2002, Nvidia had its GeForce 4 and ATI was selling its Radeon 9700/9800some of the best products ever seen from the two companies. Somewhere along the way, Nokia approached them. They did a Finnish secret handshake and the BitBoys started working on a design for a mobile graphics chip. Thanks to Kajs early work with the C-based chip development system, they were able to quickly code a mobile GPU and export it to a FPGA, a programmable general-purpose chip. Even though it wasnt actual silicon, performance was superb. BitBoys had found its niche. By 2006, the company was purchased by ATI and driving the Imageon product line-up. After ATI and AMD merged, Imageon was sold off to Qualcomm in 2009, meaning about 50 employees were transferred from AMD Finland to Qualcomm Finland. And thats where Adreno comes from, built with legendary BitBoys technology. The Adreno 225 thats going to be the used in the initial Krait CPU is supposed to beat the Apple A5 with its PowerVR SGX 543MP2 at high resolutions. Both PowerVR SGX 543MP2 and Adreno 225 are faster than Tegra 3s graphics performance, through Nvidia insists that its investment in extra CPU power will prove more valuable in the long-run.

9. The Prestige
So, on one hand, you have PowerVR with its proven track record in Intel, Apple, and TI chips, and Qualcomm with its access to legends of the Finnish demo scene. Only thats the thing: Most of the key team from BitBoys left Qualcomm a year ago to start SIRU Innovations Oy. SIRU Innovations Oy is a start-up that has been running in stealth mode for the past year. It claims to be developing a licensable low-power graphics IP core. Youve probably never even heard of SIRU, which goes to show you the difference between technology journalists who like to follow companies and talk about the organization's expertise and those who follow the human talent. SIRUs team is still flying low enough under the radar to the point where we dont know who all of the members are. But brothers Mika and Kaj Tuomi are co-founders, along with Mikko Alho. Mikko, SIRUs CEO, was the graphics processor hardware project manager for Qualcomm Finland. Importantly, although Mikko is in a management position, keeping things on-track with project planning, resourcing, design definition, day-to-day project leading, and project status reporting, he was doing the block design for BitBoys in the 90s, including the C- and RTL-model implementation. That means SIRUs management is run by an engineer and not just a suit. Jarkko Makivaara, Qualcomm Finlands former director of engineering, is also with SIRU. Jari Komppa, a senior engineer with Qualcomm Finland, is now with SIRU. He is a demo legend, winning first place at the Text Mode Demo Competition XI, first innovation, second theme in ludum dare 48 game design contest #4, second place at the Assembly99 3d-accelerated demo competition, first place at the Assembly98 demo competition, and first place at the Assembly96 demo competition. There are other engineers at SIRU as well, all from BitBoys. So, the top graphics engineers who joined Qualcomm in 2009 and have almost a decade of experience working on mobile graphics havent been contributing exclusively to Qualcomm for roughly a year. Remember that PowerVRs missteps came from a lack of engineers able to anticipate the needs of software developers and users. Thats not a problem with SIRU, built with a cadre of demo coders, as well as former programmers from Fathammer, a game development studio. Additionally, we all know that graphics hardware is only as good as its supporting software driver. Updated GPU drivers for the Adreno 205 were responsible for an almost-50% performance improvement. And thats where the final piece of the puzzle comes together. The team at SIRU is filled with engineers who are legends and wizards with x86 technology, whose expertise in the early 90s with single-core, in-order execution CPUs remain unmatched. Do you think its still unusual that the Atom and Near Threshold Voltage Concept are built around the Pentium? Can the Qualcomm Finland software team extract enough performance from the hardware, even in the absence of many of contributing members of the Adreno GPU team? Oh wait; a lot of those guys are gone, too. Marko Laiho, BitBoys chief software architect and a director of engineering with Qualcomm Finland left half a year ago to start another stealth start-up, Vire Labs.Joining him is Joonas Torkelli, the BitBoys product manager for handheld IP, who was the graphics software lead in Finland for Qualcomm, Jani Huhtanen, a senior staff engineer with Qualcomm with expertise in GPU drivers and 2D/3D graphics algorithms, and Jusso Heikkila as the Vire Labss lead Android developer.They even have Kari Malmber as their creative director, a graphic designer who was with the BitBoys team and most recently worked at Qualcomm Finland on 3D material for demos and designing mobile phone user interfaces. With the exodus of several important players, there is no question that Qualcomm's graphics division was

dealt a big blow. Human talent that was once exclusive to Qualcomm is now found in two stealth start-ups that clearly intend to license their technology to as many customers as possible.

Closing Thoughts There are exactly zero shipping Intel-based smartphones today. Qualcomm brought in $4.12 billion of revenue in Q4 2011. But things will change over the next three years the same way things changed for Kodak. You have Qualcomm, which faces challenges on the manufacturing side due to gambling on gate-first high-k and now being forced to go with standard silicon, challenges on the CPU engineering side as it moves to a true out-of-order execution design, and challenges on the GPU side from losing a substantial amount of exclusive talent. Then, you have Intel, which dominates manufacturing, has demonstrated a competitive 32 nm product before even tapping into out-of-order CPU designs, and the freedom to choose between PowerVRs graphics technology, whatever emerges from SIRU, or perhaps even a future design derived from its own engineers. I'm calling it right here: three years from now, Intel will overtake Qualcomm in the MSoC business. Discuss.

This ad is supporting your extension Bookmark Sentry: More info | Privacy Policy | Hide on this page

se e kingalpha.co m

http://seekingalpha.co m/article/1068881-intel-and-qualco mm-the-mo ment-o f-truth-is-near

Intel And Qualcomm: The Moment Of Truth Is Near

Disclosure: I am long INT C. I wrote this article myself , and it expresses my own opinions. I am not receiving compensation f or it (other than f rom Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...) Two great American companies are soon to engage in some "Bump and Rub," as they say in the racing world. Intel (INT C) is the leading and largest true and pure play semiconductor manuf acturer on the planet. Intel makes integrated circuits intended f or computing applications at all levels. As such, the Intel strategy is simple: Supply the f inest high technology computing products to all equipment manuf acturers. Qualcomm is the world largest f abless semiconductor company. T he company specializes and virtually "owns" the baseband radio section in a large percentage of the dumb, f eature and smart phone market. Qualcomm is also one of the leading suppliers of ARM (ARMH) based application processors to the smart phone and tablet market. Qualcomm buys their semiconductor products primarily f rom T SMC (T SM), and is beginning to use other f oundries such as Samsung and Global Foundries, due to T SMC's inability to supply all of the Qualcomm product requirements. T he IP (Intellectual Property) division of the company is about a third of revenue but produces nearly three quarters of the operating prof it. As a late starter, Intel has been at a disadvantage in two areas. Intel does not have a 4G LT E solution today and the company has been thought to be lagging in low power consumption of their x86 application processors. T he 4G LT E solution is expected to be here by the end of the year. I would f orgive Intel if the LT E debut was delayed until CES in early January. T he power issue was never a real issue, since the single core Medf ield was competitive with the best in class in real world applications. Intel is expected to announce a dual core Medf ield SoC along with the LT E chip. I would expect the dual core Medf ield will be tweaked f or power so that it beats all competition on power consumption. T he mule to carry these parts to a worldwide market is likely to be a Motorola/Google (GOOG) 4G LT E smart phone with f eatures superior to the Apple (AAPL) iPhone and the best f rom Samsung. A perf ect venue to announce such a smart phone would be the upcoming CES. With Intel shipping a low power AP and 4G LT E solution, Qualcomm will be competing directly with the world's leading semiconductor producer with no f unctional or cost advantage. Here's the problem f or Qualcomm: Qualcomm generates 64% of revenue and about 25% of operating income f rom the sale of application processors and radio chips. T he company generates 32% of revenue and 71% of operating income f rom patent licenses and royalty payments. Qualcomm doesn't need the semiconductor division to be a very successf ul company. To make matters worse f or Qualcomm, the Intel parts will be made on f ully depreciated 32nm production lines while the Qualcomm parts will be coming f rom a low yield, high cost T SMC f ab. T he Intel parts could sell to the end customers f or a price that is below the Qualcomm cost f rom T SMC. To make matters even worse, if that is possible, Qualcomm will be able to see and know what is in store f or them when Intel moves to a new Atom architecture SoC built on the 22nm Trigate process later in 2013. Qualcomm will soldier on in order to see if T SMC can actually build anything on a planar 20nm process. T his should be known by June of 2013. T he chance of T SMC success is low due to the leakage problems with a

planar process at 20nm (that's why Intel moved to Trigate). T SMC talks about running a 16nm "f inf et" process, but not until 2015. Even if successf ul, by that time, Intel will be ramping their 10nm node, so T SMC/Qualcomm will still be 1+ node behind and, theref ore, signif icantly behind on speed perf ormance and power perf ormance, never to catch up. So, af ter six months of "Rubing and Bumping," if T SMC is unable to deliver 20nm sometime in 2013, Qualcomm has a giant decision to make. T hat decision is whether to even stay in the semiconductor business or pull a Texas Instruments (T XN) and withdraw f rom the mobile business altogether. T I stopped leading edge process development at 65nm, deciding that competing with Intel just created f inancial nightmares. T I f urther decided that they, in combination with T SMC, would still be at an ultimate disadvantage with regard to Intel. Qualcomm could well make the decision to withdraw, since they would still retain a sweet IP business, and by the time the "Moment of Truth" arrived, Intel could have priced Qualcomm into a loss position on their f abless semiconductor operation. T he reverberations of such a decision would be violent and wide ranging. T SMC would instantly lose their largest f ab customer. T SMC would then be f aced with the same decision that Qualcomm was f aced with. Apple, if they had not already made the decision to move their f ab business to Intel, would now be crystal clear on that issue. With Qualcomm and T SMC gone, Apple at Intel, the Samsung Semiconductor division would f ind itself in big trouble. T he Samsung smart phone division could well decide to use Intel f or the brains in their products. Within a year, Intel could go f rom "Z ero to Hero" in the mobile semiconductor business. Maybe this is what Morris Chang was thinking when he thought losing the process technology race to Intel was "horrible" to contemplate. T he move here is to buy Intel and sell Qualcomm. Also, owning the overpriced ARM Holdings would not lead to rocking chair money. Source: Intel And Qualcomm: T he Moment Of Truth Is Near

8/16/13

Intel Corporation (INTC): Intel And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha

Comments (64)

EassaComments (199)

Interesting scenario Russ. INTC longs like me would dearly wish (and expect) for it to come true. Great article.
17 Dec 2012, 02:48 PM
! Report Abuse

Like

Reply

JeffreyHF Comments (138)

What total nonsense. Are you being paid by Intel to wear their fantasy glasses? 17 Dec 2012, 02:59 PM ! Report Abuse Like 2 Reply

techy46Comments (4075)
Sounds pretty reasonable to a retire software systems engineer that's long AAPL, Dell, HP, INTC, MSFT and NOK. Maybe you should change your glasses? 17 Dec 2012, 05:52 PM ! Report Abuse Like 3 Reply

nospam2012Comments (5)
JeffreyHF -- either you are a young person or an Apple devotee. In either case, it doesn't seem like you have a good grasp of Intel's capabilities, R&D, fab plants, etc. 19 Dec 2012, 12:57 AM ! Report Abuse Like 4 Reply

gmmpaComments (125)
Techy46... A word of advice. A retired software engineer should be smart enough to diversified his portfolio before a major market correct drives him back into the work force along with 15 million other Obama unemployed. You should keep INTC. It is yielding 4.17% and still has upside until at least $25. You should dump the rest your tech holders and buy something in the commodities sector before interest rates begin to rise and eat your bank account. 12 Mar, 04:09 AM ! Report Abuse Like 0 Reply

Humble EaglesComments (488)

Most investors have forgotten about Intel's Infineon purchase, but Intel hasn't. Time and process will help Intel, so they will get stronger as time goes by. 17 Dec 2012, 03:00 PM ! Report Abuse Like 4 Reply

Ashraf EassaComments (6427)

Russ, I believe fundamentally that Intel will easily pull ahead on the applications processor side of things (it is already at parity with the best w/ a 5 year old microarchitecture), but it is not clear how long it will take until the baseband side of things can really be on the same competitive level as Qualcomm. That is Intel's one and only "problem" in the space which, fortunately, will probably be solved by pumping money into the Infineon group that it acquired. I do see that Intel is aggressively hiring for its communications group to build next generation LTE modems, and I suspect that the "6331" part listed on the roadmaps will feature an integrated baseband processor. What I do not agree with you on is that TSMC will fall so behind in process tech that Qualcomm and other just give up. There will be other competitors to Intel in the mobile space in addition to semiconductors needed for other areas of the market (think GPUs from AMD/Nvidia, for instance). They will not have the best process tech, so Intel will own the high end, but there's still plenty of room for others, should they be willing to take the GM hit.
seekingalpha.com/article/1068881-intel-and-qualcomm-the-moment-of-truth-is-near 1/4

8/16/13

Intel Corporation (INTC): Intel And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha

Anyway, great article, Russ.

17 Dec 2012, 03:02 PM

! Report Abuse

Like

Reply

Russ Fischer Comments (1409)

Ashraf, I've always said that this struggle is only over the bleeding edge of semiconductor technology. I would estimate that to be about what Intel now has (~15% of $300 billion), plus another 15% for complex mobile, other communications and networking (Cisco, etc.), maybe even foundry for the nocompetitive-threat FPGA guys. That still leaves 70% of the dollars and probably 85% of the wafers to be produced by someone else. TI just gave up. They saw a far better future in analog that could be run in much less expensive fabs than in running billions of dollars into a contest that they couldn't win. A little side deal....Morris Chang came from TI.....learned most of what he knows at TI....BS and everything....He would be tickled pink being stuck at 28nm and above as long as it didn't lose money for TSMC or screw the end customers. TSMC will be around and thrive, but they could make a conscious decision to stop chasing Intel. Discrete GPUs will be the tiniest of niches in a couple of years, and maybe 28nm will be just fine for that niche. Just last week, Otellini said the LTE modem and radio would be integrated on the AP chip OR in a multi chip module (most probable) or power management becomes impossible. I will watch what comes from CES this year with great interest. Interesting the QCOM is doing the Keynote at CES this year....Intel maybe set up to steal their thunder? 17 Dec 2012, 04:54 PM ! Report Abuse Like 4 Reply

fidgewinkle Comments (388)

Qualcomm will not lay down so easily. While they may lose TSMC as a viable foundry, they still will have the option to use an IBM alliance foundry like Global or Samsung, or the shared Fab in New York. 17 Dec 2012, 06:34 PM ! Report Abuse Like 1 Reply

ephud Comments (1533)

fidgewinkle "While they may lose TSMC as a viable foundry, they still will have the option to use an IBM alliance foundry like Global or Samsung, or the shared Fab in New York." Global Foundries uses IBM's process and they have suffered worse yield problems than TSMC. There is no assurance whatsoever that either IBM and it's licensees, or TSMC will deliver on the next process generation on time or if at all. Schedules come from the Marketing department, not the process development people. 17 Dec 2012, 06:55 PM ! Report Abuse Like 2 Reply

Russ Fischer Comments (1409)

fidge, GF is so bad that AMD "sold" their residual interest in GF (which was the AMD fab, so AMD knew what the capabilities were), in this case "sold" means that AMD sent GF $300+ million AND their shares in order to get out of a commitment to take wafers from GF. For AMD to do that just screeches that GF is garbage...and likely to stay that way. Intel and TSMC were the only two companies to NOT use the IBM gate first process....and that was because TSMC copied Intel. I would say that IBM, et al better stick to 45-65nm stuff. 18 Dec 2012, 12:05 AM ! Report Abuse Like 3 Reply

fidgewinkle Comments (388)

seekingalpha.com/article/1068881-intel-and-qualcomm-the-moment-of-truth-is-near 2/4

8/16/13

Intel Corporation (INTC): Intel And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha

Yes, GF is not very good, but Samsung is IBM process as well, and are doing just fine. More importantly, looking at performance characteristics, IBM alliance technology is the only one competitive with Intel. 18 Dec 2012, 03:49 AM ! Report Abuse Like 1 Reply

systemBuilder Comments (131)

Qualcomm provides a IP Core solution, an entire multimedia Android or Feature phone, to the phone makers, ready to customize, a complete hardware/software solution. Intel has not traditionally provided a total solution, i.e. they don't (singlehandedly) make a complete PC with working operating system, with all drivers, ready to customize, let alone, a complete phone that is ready to customize. Intel has traditionally been dependent on outside software vendors. This is something to consider very carefully when reading this article. 17 Dec 2012, 03:02 PM ! Report Abuse Like 2 Reply

Ashraf EassaComments (6427)

systemBuilder You are mistaken. The Lava "Xolo 900" and other phones are based on Intel's Form Factor Reference design. This phone was completely designed by Intel. Further, Intel did a lot of the software/optimization work to get Android working well on X86. The work they did with binary translation was nothing short of amazing. Intel is quite advanced on the software side of this equation.
17 Dec 2012, 03:07 PM
! Report Abuse

Like

Reply

newbie06Comments (155)
Ashraf: "Intel is quite advanced on the software side of this equation." This is so true! And it explains why they win some benchmarks over Cortex-A9 or Qualcomm S4 SoCs. Medfield performance is not that good, but Intel did a tremendous work on Android that makes it look good. 18 Dec 2012, 03:51 AM ! Report Abuse Like 2 Reply

AlphaSeeker2Comments (7)
The Intel victory may not be this decisive, but its coming.
17 Dec 2012, 03:30 PM
! Report Abuse

Like

Reply

user 1869665Comments (51)

Complete wrong assumption. The ecosystem for the mobile devices is ARM, period. No company is interested in x86 platform for the mobile devices due the failure in the last a couple of years. Last year, Leveno was talking about x86 phone. Where is it now ? It is stopped because Leveno forsee there is no demand. The most important part is the ecosystem. Performance or power consumption is no longer that important these days unless Intel can come up something that's 2-3 times faster for the same power consumption. I seriously doubt. Anyhow, the days for Intel high margin is gradually gone. Nvidia, QCOM, Samsung and Apple and even Chinesee company Huawei all are interested in get into server market beside the mobile space. Intel used to be able to make 60-80% margin on its high end server CPU. Everyone is eyeing on that business. In the past no one can challenge x86 ecosystem. These few years mobile devices booming make ARM to be a good alternative platform. Be really careful if you are long on INTC. 17 Dec 2012, 03:54 PM ! Report Abuse Like 2 Reply

treyanasComments (67)
User,
seekingalpha.com/article/1068881-intel-and-qualcomm-the-moment-of-truth-is-near 3/4

8/16/13

Intel Corporation (INTC): Intel And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha

I'm long INTC and like the picture painted in the article, but kinda agree with the caveats you raise. First, the smart phone ecosystem is overwhelmingly ARMbased. Even with the best combination of process, design, and costs, the ecosystem represents inertia. Intel will need to build and maintain a lead for a couple years to change it. Second, Intel will not be able to maintain its current margins in this business. It may increase revenue and earnings, and there may be derivative benefits to other parts of the business, but it's hard to see how they'd maintain 55% margins selling silicon into phones. 17 Dec 2012, 07:41 PM ! Report Abuse Like 1 Reply

lotus position Comments (181)

I don't know but here it says Lenovo will be the market leader in China: http://bit.ly/UNeXkU 17 Dec 2012, 09:04 PM ! Report Abuse Like 1 Reply

Russ Fischer Comments (1409)

treyanas, Why would you EVER think that Intel will not be able to maintain margins in the mobile business? Take the Apple A6 for example. The chip is 97 mm^2. With a new 32nm process at Samsung, still in a learning curve, the yield is probably 250 good parts per wafer. That wafer at Samsung has a cost of about $5000 including depreciation. That pretty close to a $20 part at cost. Samsung knows they have Apple by the soft parts, so they would have to be dumb as a box of rocks to sell that wafer for anything under $10,000...and probably $15,000. So the A6 part costs ~$20 and sells for $40-60. Don't believe the BS from iSuppli about a $27 chip. They are very wrong. If intel made the same part with no changes on a fully depreciated, high yielding 32nm line, they would yield about 400 good parts on a wafer that cost $3000 (no depreciation). That's $7.50 cost. Intel selling the part for $25 would get 70% gross margins. Imagine for a minute that same part built on a 22nm line. We would be back to $5000 wafers (damn depreciation). The chip size would go to about 50mm^2 and the yield would be much higher just due to smaller die size. About 800 good parts per wafer would make the cost ~$6.25. Selling that part at the current Samsung cost of $20 would give Intel a 69% margin. This low margin mobile chip thing is just a crock. Even today a chip from TSMC with a $5 cost sells to the fabless guy for a 50% margin or $10. Maybe the fabless guy can get 40% margin or $16.66. The overall margin from TSMC to the end customer is 70%. 18 Dec 2012, 12:53 AM ! Report Abuse Like 9 Reply

seekingalpha.com/article/1068881-intel-and-qualcomm-the-moment-of-truth-is-near

4/4

se e kingalpha.co m

http://seekingalpha.co m/article/1061221-a-value-co mpariso n-between-intel-and-qualco mm

A Value Comparison Between Intel And Qualcomm

Disclosure: I am long AAPL, INT C. I wrote this article myself , and it expresses my own opinions. I am not receiving compensation f or it (other than f rom Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...) Intel (INT C) stock has had a rough time of late, f alling over 16% year to date and over 30% f rom its 52-week high of $29.27 set earlier this year. On top of that, Paul Otellini announced that he will be stepping down as CEO next year, creating even more uncertainty among shareholders. T his all comes as the company f aces intense pressure in its chip business f rom the mobile and tablet markets. Qualcomm (QCOM), which recently took away Intel's position as the world's largest chip maker, is leading the way with its smartphone chips. Qualcomm chips are in basically all mobile devices, ranging f rom the Google's (GOOG) Droid RAZ R M to Nokia's (NOK) and Microsof t's (MSFT ) Lumia 920. T his loss in market share has resulted in a contracting of margins f or Intel. Intel's margins, which used to be as high as 65%, are now averaging 55%. As more and more consumers make the move to mobile devices, PC sales will continue to decrease, which ultimately has negative ef f ects on the overall revenue that Intel can realize. Qualcomm, on the other hand, currently is in a perf ect position to capitalize on this move to mobile devices, and consequently has seen its margins continue to expand. Even though it already seems clear that Intel is not adapting to the times, it is rumored that the company is proposing the idea of supporting Apple (AAPL) with all of its ARM chips. With tensions currently high between Apple and Samsung Electronics Co., Intel is hoping to capitalize on this opportunity to increase overall market share and gain penetration into the mobile market. Unf ortunately, the overall consensus f rom the analyst community is that the total impact to Intel's bottom line would be minimal. In a Morgan Stanley report released Monday, the analysts wrote that with strains in the relationship between Apple and Samsung, recent media speculation has been that they could win some business making ARM chips f or Apple. We analyzed the opportunity with some key questions/assumptions about prof itability, and conclude the impact is likely "small." T he report goes on to estimate that the total f inancial impact that Intel could possibly receive if this deal did indeed go through would be about $1.7 billion, with 12.5% in operating margin. As Intel works to begin making and selling chips in the mobile market, Qualcomm is working to increase its exposure in other markets. Last week, it was announced that Qualcomm planned to acquire a 5% stake in electronics maker Sharp, Inc. Sharp, which has been experiencing heavy losses in its electronics sector, has been looking f or a large capital inf usion to help repair its cash-strapped balance sheet. T he deal with Qualcomm would allow the two to start working on developing energy-ef f icient LCD panels f or smartphones using Sharp technology. Both Intel and Qualcomm currently trade at very god valuations, but they represent two dif f erent types of stocks. Intel is an extremely large company with a market cap of $100 billion and trades f or around 9 times earnings. T he stock, at current levels, is yielding about 4.40% and has a book value of $9.89 per share. In my opinion, Intel is the true representation of a value stock. Qualcomm, on the other hand, has a market cap of $109 billion and trades f or around 21 times earnings. At current levels, the stock is yielding about 1.55% and has a book value of $19.65 per share. I think it is also important to mention that Qualcomm, unlike Intel, has no debt on its balance sheet. T his gives the company a

great deal of f lexibility to expand operations or buy back stock/increase its dividend. I would classif y Qualcomm as a classic example of technology growth stock. T he table below compares Intel and Qualcomm against several metrics that I f eel are important when trying to assess which company is not only the stronger of the two, but also the better value. Intel Stock Price Book Value P/E Forward P/E EPS Market Cap Current Dividend Rate Annual Revenue Cash on Balance Sheet Long-Term Debt Net Prof it Margin $20.65 $9.88 9.05 7.67 2.29 102.75 B 4.4% $54 B $16.99 B $7.1 B 22.90% Qualcomm $64.33 $19.65 21.01 13.51 3.06 109.65 B 1.55% $19.12 B $26.83 B $0 25.44%

Intel is clearly the company that is late to the mobile chip party, but the bigger question regarding Intel's f uture is whether the company will take a path similar to that of Yahoo (YHOO). Ideally, this is where the company hires someone f rom the outside with experience and innovative ideas that will reinvent the company and push it to be more competitive. T he other option is f or the company to continue down its current path and stick to what it has traditionally done. By not moving f orward with a new product line, the company would be taking a path very similar to that of Hewlett-Packard (HPQ), thus costing the shareholders a lot. Af ter examining both possible options, the f act that Intel's CEO himself has stated that the board is considering an outside hire and the f act that Intel has already approached Apple to move into that market, I am inclined to believe that Intel will choose to be innovative and progressive. T hat said, when looking at the above two f irms I am more prone to be a buyer of Intel vs. Qualcomm. At f irst glance, that logic might not make the most sense, but there are several reasons why I like Intel better and believe that it is the better overall choice and value. When doing a value comparison Intel is the clear winner f rom a consistent growth approach, current and f uture valuation, and dividend growth. I am sure that the arguments against this are that Intel currently is representing a value trap. I understand that logic and argument, but don't necessarily agree. Based on next year's EPS estimate of $2.69 per share, I f eel that the stock has already put in a bottom f or the year and should not go much lower than $18 per share. I f eel that Intel also beats Qualcomm f rom a steady and consistent growth standpoint. Intel has consistently beaten both its revenue and EPS numbers by 4.5%-6% each quarter f or the past several quarters. Now, I will be the f irst to say that Qualcomm has posted some spectacular numbers and has beat its revenue targets in excess of 20% in several of the past quarters, but during last June's quarter it missed EPS estimates by 1.20%. Also, throughout this past year Qualcomm has been continually lowering its overall guidance below analysts' original estimates. As a growth stock, Qualcomm is

lowering its overall guidance below analysts' original estimates. As a growth stock, Qualcomm is inconsistent and tends to be much more volatile, making it very hard to assess a real valuation f or the stock and to avoid overpaying. Due to the f act that Intel is more of a typical value stock, the type of f unds and individuals that own the stock are interested in owning the stock f or the long term and are not as motivated to sell based on day-to-day f luctuations. T his type of mentality creates a strong base in the stock price and creates consistency in pricing. Now, with Qualcomm being more of a growth stock, the type of investor and f und that buy this stock are more interested in short-term bursts (up or down) and are more apt to sell quicker, creating more volatility and less consistency. One of the main reasons why I like Intel better than Qualcomm is the old notion of "buying when there is blood in the streets." Intel has gotten kicked down and is widely hated among the analyst community. Current price targets on the stock range f rom $15-$21 per share. In my opinion, it won't take a lot f or Intel to do something that exceeds the market's expectations and ultimately result in a huge run-up in the share price. Qualcomm, on the other hand, has a lot to live up to and expectations are already quite high. In the case of Qualcomm, it will only take a slight miss or a little bit of bad news f or the stock to sell of f and correct down. Qualcomm was surely f irst to the mobile chip party, but with such high expectations f or it I f eel as if there is greater risk in owning Qualcomm over the long run vs. Intel. Ultimately, with the amount of potential bad news that is already baked into Intel, the chance of increased value coming f rom even a minor amount of good news will be much higher than that of Qualcomm. Source: A Value Comparison Between Intel And Qualcomm

ibt im e s.co m

http://www.ibtimes.co m/qualco mm-vs-intel-challenger-starts-majo r-push-be-no -1-1001876

Qualcomm vs. Intel: Challenger Starts Major Push To Be No. 1

By David Zielenziger

It doesn't look like a mistake: In the f ourth quarter of 2012, the market value of Qualcomm Inc. (NASDAQ:QCOM), the No. 1 designer of mobile chips, exceeded that of Intel Corp. (NASDAQ:INT C), the No. 1 chipmaker, f or the f irst time. At the close of Wednesday trading, Qualcomm, of San Diego, was valued at $110.6 billion, about $3.5 billion more than Intel, of Santa Clara, Calif ., the company whose explosive growth will be f orever linked to the era of the PC. Former Intel CEO and Chairman Gordon E. Moore, a legendary electrical engineer, is the inventor of Moores Law, which stipulates the power of a microprocessor doubles roughly every 18 months. His successor, Andrew S. Grove, a legendary chemical engineer, ran the business with the mantra, Only the paranoid survive, which became the title of his memoir. Now, Qualcomm looks to be ascending while Intel appears descending. On Monday night, CEO Paul E. Jacobs, 50, gave the keynote address at the International Consumer Electronics Show, during which he unveiled the second generation of Qualcomms Snapdragon processor, which has been designed into hundreds of mobile products, f rom smartphones to ultralight laptops, mainly f rom Asian manuf acturers, including Lenovo Group (PINK:LNVGY), the No. PC maker that's also moving into smartphones. Since Apple (NASDAQ:AAPL) f irst started selling the iPhone in 2007, theres been a Qualcomm chip inside, too. Ditto f or the iPad and the newer iPad Mini series. Last year, Intel CEO Paul Otellini, gave a keynote in which he hailed the Ultrabook series of ultralight chips, which shipped late in 2012. So f ar, they havent made much of a dent in Intels perf ormance. Moreover, Otellini, 62, announced his sudden retirement this year, leaving Intel without a designated successor. To be sure, Qualcomms Jacobs had it easier: His f ather, Irwin, now 79, f ounded the company in 1985. Irwin Jacobs, a prof essor of electrical engineering, f ounded Linkabit, a f orerunner of whats now M/A-Com Technology Solutions Holdings (NASDAQ:MT SI), in 1968. T he younger Jacobs, who has a doctorate in electrical engineering and computer science f rom the University of Calif ornia, Berkeley, started out designing mobile chips at Qualcomm not long af ter Irwin started it. From the start, Qualcomm exploited high-growth markets in mobile communications, just as the technology got deployed in the U.S. af ter successf ul launches in Europe and Asia. Qualcomm essentially invented the CDMA standard that was the f oundation of the major U.S. networks headed by Verizon Wireless, majority owned by Verizon Communications Inc. (NYSE:VZ ). Unlike Intel, the company kept its capital costs low by not building its own semiconductor plants. T hat meant close contacts with Asian manuf acturers such as Samsung Electronics (KSX:005930) and Taiwan Semiconductor Manuf acturing Co. (NYSE:T SM) that helped with market intelligence. With hindsight, it may have been those connections that allowed Qualcomm to ride the shif t to mobile platf orms that become apparent last year and is expected in surge in 2013 and beyond. In 1999, Jacobs Sr. pushed the company out of marketing its own mobile phones, when it couldnt keep up with competition f rom Nokia Oyj (NYSE:NOK), the old Motorola Inc. and Ericsson (NYSE:ERIC).

So f or more than a decade, Qualcomm has concentrated solely on designing new products, selling the chips as well as licenses. Jacobs Jr. took over as CEO in July 2005. Since then, shares of Qualcomm have gained more than 90 percent. By contrast, in the same period, shares of Intel have lost 19.2 percent. It's probably no accident that of the 45 analysts who cover the company, 40 have either "strong buy" or "buy" recommendations on the shares. Despite its huge patent portf olio, the chip designer under Paul Jacobs has also moved shrewdly. It has strong licensing deals with ARM Holdings (NASDAQ:ARMH) of the UK, another crucial Apple mobile partner. In May 2011, Qualcomm paid $3.1 billion to acquire Atheros Communications, another f abless chip designer, which had innovative designs f or tablets and the so-called smart home. Qualcomm continues to generate a torrent of cash, too. In the f ourth quarter ended Sept. 30, cash and investments were $26.84 billion, compared with $20.9 billion a year earlier. Net earnings rose to 89 cents a share f rom 80 cents a year earlier as revenue jumped 13 percent to $4.87 billion. Pretty soon, mobile connections are going to outnumber us, Jacobs said at CES on Monday, noting there are at least 6.4 billion mobile connections worldwide, about the same as the global population. Not only will wireless connections speed communications and entertainment, he said, theyll also be the heart of a revolution in medicine, where patients have pacemakers communicating directly with the physicians, or consumers working out on the treadmill will be able to send their daily workout results to the cloud. Qualcomm looks as if it will be riding the new wave. Can Intel catch up?

m arke t wat ch.co m

http://www.marketwatch.co m/Sto ry/sto ry/print?guid=0329E556-6FB2-11E2-A22F-002128040CF6

Why Qualcomm picked Taiwan over U.S.

By Jef f ry Bartash, MarketWatch WASHINGT ON (MarketWatch) When Qualcomm looked to build a multi-billion-dollar chipmaking plant several years ago, a bunch of countries of f ered incentives to win over the San Diego-based company. T he United States? Nothing, said Greg Farmer, the companys vice president of government af f airs. Qualcomm (NASDAQ:QCOM) , whose chips are used in millions of cell phones, built the plant in Taiwan instead. T he U.S. lost out on a number of jobs. T he f ailure of the U.S. to exert its weight in the f ierce global competition f or business is all too common, executives say. T he f ederal government does very little to promote business development in the U.S. either by domestic or f oreign companies and some of its policies in areas such as corporate taxes and immigration drive entrepreneurs away. High-tech and other U.S. companies are heavily wooed by f oreign countries. T he U.S.? Not so much. In an era of stubbornly high U.S. unemployment and lackluster growth, a rising number of business leaders and some government of f icials say thats got to change. T hey believe there needs to be more cooperation between the government and private sector or more businesses will go elsewhere. Other countries, they say, are rolling out the red carpet much more than the United States. T here is very intense competition f or business and investment around the globe, said Jennif er Daniels, general counsel at Georgia-based NCR Corp. (NYSE:NCR) , one of the nations oldest multinational companies. NCR does business in 100 countries and has a f ront-row seat.

Race is on
So what can the U.S. do? Top executives arent suggesting the sort of intimate collaboration that exists, say, among business, labor and government leaders in Germany. But there are a lot of things that can help. Most of whats on the corporate wish list is nothing new. Lower business taxes. Ref ormed immigration laws that allow the best and brightest f rom around the world to stay in the U.S. Permanent tax breaks f or research and development. More f ederal grants f or lab research. Whats new is the urgency. T he U.S. has to start changing and f ast or the worlds largest economy will increasingly lose out to upstart nations that do a better job wooing international business. /conga/story/misc/dc.html 275546 T he race today is not between Mississippi and New York. Its between the United States and other countries, said Robert Atkinson, president of Inf ormation Technology & Innovation Foundation. Atkinson has long been a proselytizer in Washington on how the U.S. can become more innovative and boost job creation. Hes constantly bringing political leaders, business executives and academics together to try to f ind common ground to make the economy more competitive.

Open borders
Immigration ref orm the subject of a major push in Congress is one hot-button issue. Executives have complained f or years about the unwillingness of the government to let more f oreign-born students who study in the U.S. to stay af ter their visas run out. Read: CEOs see light at end of immigration tunnel. Foreign-born students, who tend to outshine Americans in math and science, have long been known f or their propensity to start successf ul businesses that eventually become job engines.Yet relatively f ew are allowed to remain in the U.S. Click to Play

Unions t ake a close look at immigrat ion overhaul

Organized labor is throwing its muscle behind an immigration overhaul, in a bet that unionizing more immigrant workers can minimize overall declines in union membership. WSJ's Melanie Trottman joins T he News Hub with the latest. Photo: AP. T hats growing problem. One major study says more than 40% of the Fortune 500 companies in 2010 were f ounded by immigrants or their children. T he U.S. is losing out on a major source of economic dynamism by keeping the entry gate high f or the best-educated f rom abroad. Read report on immigrant contributions to U.S. economy. A high-ranking Commerce Department of f icial, Francisco Sanchez, likes to tell a story of an Indian-born student who attended an Ivy League college T he student had a promising business plan and investors lined up, but his visa ran out and he had to go home. Back in India he started the business and now employs more than 2,000 people. T hose are jobs that could have been created in the U.S. We at the f ederal level have done very little to f ace the global competition, Sanchez said. T he Commerce Department has kick-started the very f irst f ederal ef f ort with the creation of the SelectUSA, a young program designed to make it easier f or companies to set up shop in the United States. Yet Washington remains f ar behind all 50 states, each of which has its own business-recruitment agency. And while many are very aggressive and successf ul, states arent always equipped to take the lead on huge investments like the Qualcomm chipmaking plant.

Tax man goet h

Tax ref orm, of course, is clearly item No. 1 on the agenda of business. At 35%, the U.S. has one of the highest corporate tax rates among the worlds richest countries. Its also one of the f ew nations that taxes what a domestic company earns both at home and abroad. Now its true many U.S. companies dont pay the f ull corporate rate. Loopholes and exemptions can signif icantly lower the ef f ective rate what companies actually pay in taxes. Nor is the burden equally shared between companies and industries. Some pay a lot less than others. What really galls executives, though, is the global tax system. Washington taxes what a company earns on its business in the U.S. and what it earns via operations in other countries. Foreign-based American operations are also taxed by the country in which the U.S. business is located, so its

a double whammy. By contrast, France only taxes what a French company earns at home, not what it earns in the U.S. or Canada or China. Such a territorial tax system is used by virtually every nation that competes hard with the U.S. American companies can get around double taxation by leaving prof its f rom f oreign operations parked overseas but that does nothing f or the U.S. economy. All that cash could be put to better use at home, executives say. Companies could use it to invest in new businesses or hire new workers, though past studies show they mostly use the proceeds to pay shareholders. Still, more money circulating in the U.S. economy is a good thing. Had a territorial tax system been in place a f ew years ago, Qualcomms Farmer said the company would have given greater thought to building its new chipmaking plant in the United States. Taiwan still may have won out, but the U.S. would have been a more serious contender if Qualcomm didnt have to pay a 35% tax to bring surplus cash home f rom overseas.

Deep suspicions
Getting tax ref orm though a divided Washington, however, wont be easy. And more government ef f orts to partner with business could unsettle both the lef t and right. Republicans blast President Obamas support f or the green-energy industry think of bankrupt Solyndra as a waste of money and they accuse the White House of trying to pick winners or losers. T hats a big no-no to conservatives. Liberals, f or their part, are deeply suspicious of business. Is there any possible way we can help the economy without helping business, an unnamed senator reportedly asked Atkinson not too long ago af ter he gave a presentation to Democrats at a party retreat. Atkinson tells the story with a chuckle, but he knows the U.S. has to do a lot more to promote competitiveness on an enlarged global playing f ield. Other countries are not just sitting around waiting f or companies to knock on the door, he noted.

se e kingalpha.co m

http://seekingalpha.co m/article/1159491-intel-and-qualco mm-are-bo th-winners

Intel And Qualcomm Are Both Winners

Disclosure: I am long INT C, QCOM. I wrote this article myself , and it expresses my own opinions. I am not receiving compensation f or it (other than f rom Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...) Intel Corporation (INT C) is the largest chipmaker in the world. Qualcomm Inc. (QCOM) designs, develops, manuf actures, and markets digital telecommunications products and services, including developing and licensing wireless technology and manuf acturing semiconductors f or mobile phones. T his article will provide the recent developments f or both companies and show why both are winners. Intel Corporation Intel had gone ex-dividend on February 5, 2013 with a cash payment of $0.225 per share, payable on March 1, 2013. INT C closed at $21.18 with 1.16% gain on February 5, 2013. INT C is currently of f ering 4.25% annual dividend yield. New Chips For the mobile of f ering, Intel is expected to bring out a new version of Atom (f ormerly "Lexington"), which uses less power. T he new value of f ering includes the Intel Atom processor Z 2420 with Intel Hyper-T hreading technology. For smartphones, Intel Atom Z 2580 processor platf orm (f ormerly "Clover Trial+") will include a dual core Atom processor with Intel Hyper-T hreading technology, as well as a dual-core graphics engine. T he new platf orm will deliver up to two times the perf ormance benef its over Intel's current-generation solution (Intel Atom processor Z 2460 platf orm), while also of f ering competitive power and battery lif e. For tablets, the nextgeneration 22nm Atom SoC, "Bay Trail," will be available f or the 2013 holiday. T he f irst quad-core Atom SoC will deliver two times the computing perf ormance of Intel's current of f ering. For Ultrabook, Intel is expected to deliver the 4th generation core processors, the f irst Intel chips which are built f rom the ground up with the Ultrabook in mind. Expansion into Mobile Intel is attempting to get its processors into mobile phones by joining PC maker Acer Inc. in Bangkok to unveil the Liquid C1 smartphone, running Google Inc. (GOOG)'s Android operating system. T his smartphone will be launched in T hailand and rolled out across Southeast Asia, as reported by Reuters. Af ter Paul Otellini's departure, mobile and emerging markets will become major f ocuses f or the new chief executive. Concerns Intel is still f acing weak sales of PCs, where the revenue growth f rom PC had been declining steadily since 2009. T his is an on-going concern f or Intel investors f or a while and Intel's share price should have ref lected the declining PC market. Qualcomm Inc. QCOM reported a 36% surge f or its Q1 prof it due to strong demand f rom smartphone manuf acturers. QCOM beat the estimates and raised its f ull-year guidance to $4.25-$4.45 on revenue of $23.4B-$24.4B f or 2013. QCOM continues to benef it f rom increasing population of smartphones and the demand f or next-generation

wireless technology LT E. QCOM also benef ited f rom the trend f or larger display f or smartphones. Bernstein analyst Stacy Rasgon said the outlook was "massively conservative" compared with his estimate of actual growth prospects. However, given the economic environment, it makes sense to be cautious. New Processors QCOM is delivering new Snapdragon 800 and 600 processors. T he new Qualcomm Snapdragon 800 processors will deliver up to 75 percent better perf ormance than the Qualcomm Snapdragon S4 Pro processor with exceptionally low power. T he Qualcomm Snapdragon 600 processor is delivering up to 40 percent better perf ormance than the Qualcomm Snapdragon S4 Pro processor at lower power. T he Qualcomm Snapdragon 600 processor f eatures a new Krait 300 quad-core CPU with speeds up to 1.9GHz, a new speed enhanced Adreno 320 GPU and support f or LPDDR3 memory. T he Qualcomm Snapdragon 600 processor is expected to be available in commercial devices by the second quarter 2013. Concerns Competitions are growing while Intel is catching up to the mobile segment and Broadcom (BRCM) is seeking to increase its content on popular devices, as wrote by Mark Sue, an analyst at RBC Capital Markets. QCOM might be also negatively impact as Apple Inc. (AAPL) and Samsung (SSNLF.PK) continue to work on their own appprocessor and Huawi and MediaTek also accelerate their internal developments. Nonetheless, analysts expect QCOM to hold its strong position. Citigroup raised its price target f or QCOM with a buy rating on January 31, 2013. Fundamental Comparison Intel Corporation Enterprise Value Revenue Quarterly Revenue Growth (yoy) Prof it Margin, ttm Return on Equity Total Cash Total Debt Total Debt to Equity, mrq Dividend Yield YT D Perf ormance $101.40B $53.34B -3.00% 20.63% 22.66% $18.16B $13.45B 26.26 4.25% +2.62% Qualcomm Inc. $101.41B $20.46B 28.60% 32.33% 18.12% $13.28B $31.00M 0.09 1.52% +6.11% Who leads? Almost Identical INT C QCOM QCOM INT C INT C QCOM QCOM INT C QCOM

Source: Yahoo! Finance on February 1, 2013 How to Invest INT C provides a great value with a very low P/E of 9.3, as compared to the industry average of 21.2. With its strong cash f low and solid dividend, INT C is a good candidate f or short covered call option strategy. QCOM provides strong growth with promising outlooks. QCOM is a great long-term holding with buy-and-hold strategy f or its stocks. For options investors, a credit put spread can be considered to gain credit premiums while having the potential to acquire the stock at a lower price.

Note: Investors and traders are recommended to do their own due diligence and research bef ore making any trading/investing decisions. Source: Intel And Qualcomm Are Both Winners

t gdaily.co m http://www.tgdaily.co m/mo bility-features/72046-analyst-intel-ato m-chip-o utperfo rms-nvidia-qualco mm-and-samsung

Analyst: Intel Atom chip outperforms Nvidia, Qualcomm and Samsung

Analysts at ABI Research report that Intels latest Atom processor - the Z 2580 clocked at 2.0 GHz - sets the bar f or perf ormance and current drain in smartphones. "It outperf ormed the competition in ABI Researchs benchmark testing of the Lenovo K900 smartphone, powered by Intels XMM6360 modem chipset and Z 2580 application processor," conf irmed Jim Mielke, VP of engineering at ABI research. "T he benchmarks were impressive but the real surprise was the current consumption recorded during the benchmarks; the new processor not only outperf ormed the competition in perf ormance but it did so with up to half the current drain." According to Mielke, f or the CPU part of the benchmark test, three phones scored in the 5000 range f or perf ormance, but of the three, Intel stood out with only 0.85A of average current vs. 1.38A f or the Samsung Exynos Octa, and 1.79A f or the Qualcomm APQ8064T. "Similar trends are seen f or each test. If one of the chips did have lower current, the perf ormance was signif icantly lower or if the perf ormance was better, the current was higher," Mielke continued. "T he only test where a competitor matched the perf ormance of the Intel Z 2580 was f or 1080p video record." Meanwhile, the Samsung Galaxy S4 i377 had lower current drain which ABI attributed to a separate image processor f rom Fujitsu, rather than the Qualcomm APQ8064T. T he Samsung Exynos Octa perf ormed well without a separate image processor in both the 1080p and 3D graphics tests; outscoring all but with proportionally higher current compared to the Z 2580 f rom Intel. "Intel did signif icant work to bring the current drain down on their well-recognized high-perf ormance processors but the competitors did not help themselves. T he ARM architecture used by nearly all of Intels competitors is well known f or its low power perf ormance but in bringing the processing power up closer to PC levels, the current drain has taken a signif icant hit," Mielke added. "Since high-end smartphones require this level of perf ormance, Intel is well positioned f or strong growth over the next f ew years Combining the high-end modems (the XMM6360 is used in both the Lenovo K900 and the Samsung Galaxy S4 i9500) with their application processors f or high-to mid-tier solutions, and single-chip EDGE chips f or low-cost phones makes Intel a rare f ull portf olio provider."

au.ibt im e s.co m

http://au.ibtimes.co m/articles/479461/20130617/intel-clo vertrail-co rp-haswell.htm#.Ug5eddK1GuZ

Intel Dominates Over Samsung, Qualcomm and Nvidia Processors, Haswell Processor Delivers Its Promise
Intel's Z 2580 application processor, also known as CloverTrail bef ore launching, def eated other leading processors in a benchmarking exercise. Intel outperf ormed competitors like Qualcomm, Nvidia and Samsung in a test according to Allied Business Intelligence Inc. Allied Business is af f iliated with ABI Research. ABI Research revealed that Intel Corp. processor is the best in reducing power consumption in smartphones. It is now a top player and lower compared to equivalents based on the ARM architecture licensed f rom ARM Holdings plc. T his type of perf ormance is necessary f or high-end smartphones running many applications. According to ABI, the company is "well positioned f or strong growth over the next f ew years." T he benchmark exercise involved comparing the perf ormances smartphones. T hese included Lenovo K900 smartphone running on by Intel's Z 2580 application processor and supporting XMM6360 chipset. A set of smartphones f rom Samsung were also tested. T hey run on ARM-based application processors by Nvidia. Qualcomm was also included. "T he benchmarks were impressive but the real surprise was the current consumption recorded during the benchmarks; the new processor not only outperf ormed the competition in perf ormance but it did so with up to half the current drain," Jim Mielke, vice president of engineering at ABI research, was quoted in a statement. "Intel did signif icant work to bring the current drain down on their well-recognized high-perf ormance processors but the competitors did not help themselves. T he ARM architecture used by nearly all of Intel's competitors is well known f or its low power perf ormance but in bringing the processing power up closer to PC levels, the current drain has taken a signif icant hit," he added. "Combining the high-end modems - the XMM6360 is used in both the Lenovo K900 and the Samsung Galaxy S4 i9500 - with their application processors f or highto mid-tier solutions and single-chip EDGE chips f or low-cost phones makes Intel a rare f ull portf olio provider." On the other side of the market, Intel's Haswell is receiving great reviews f or its perf ormance. To contact the editor, e-mail: editor@ibtimes.com People visit the Intel booth at the 2013 Computex exhibition at the T WT C Nangang exhibition hall in Taipei June 4, 2013. (Credit: Reuters)

it wo rld.co m

http://www.itwo rld.co m/print/362757

It's not an ARM Market, it's a Qualcomm Market

Andy Patrizio

No wonder Qualcomm is clobbering Intel in mobile. It's using the Intel playbook. ARM has 100 licensees but one, Qualcomm, is the company that's giving Intel f its. Here's why. Image credit: f lickr/jontintinjordan Intel is enjoying some good news in the mobile space f or once. Its Atom processor now powers Samsung's Galaxy Tab 10.3 tablet. Ok, that's one device. Next? Well, not so f ast. You see, the same strategy Intel has incorporated to lock up the PC and server space is being used by Qualcomm to lock up the device space, and it's working. Just as there isn't an Android market so much as it's a Samsung and others market, the chip space f or devices is pretty much a Qualcomm et al market. In smartphones, Samsung holds about half of the Android market, 18 percent of the tablet market and almost all of the Android prof its. Strategy Analytics says Samsung has 95% of the Android phone market's operating prof it. T hat's why I call it the Samsung market and not Android market. In chips, it's pretty much the same with Qualcomm. Although none of the major chip analysts have actual numbers, due to the dif f iculty of tracking so many phones on the market, all you have to do is look at the list of phones in the Wikipedia entry f or Snapdragon, Qualcomm's brand of ARM-based processors, to see how ubiquitous Qualcomm is. Just as Intel locked up all of the key OEM relationships, Qualcomm has a similar position in smartphones and is expanding that into tablets. What little Windows RT ef f ort still coming f rom Microsof t has been centered around Qualcomm processors. So what does Qualcomm have going f or it that other ARM vendors don't? For starters, it has f ocused extensively on integration and system-on-a-chip design. Qualcomm has been aggressively trying to integrate the cellular modem, Wi-Fi, bluetooth, GPS, and FM onto a single chip, and it has had this IP f or several years. Intel is only just getting into that space with the acquisitions of Inf ineon and ST-Ericsson's GPS business. It has some catching up to do. Intel has spent much of its career on more and f aster, while the SoC/embedded market is about more with less. So Intel has had to get power ef f iciency religion f or its Atom chips, which it did. Now it needs to get that same ef f iciency on its other chips. Its Wi-Fi needs more power ef f iciency because right now it uses Texas Instrument Wi-Fi f or its mobile devices. T hen there's rounding up the OEMs, and boy does Qualcomm have a lock. Just look at the Snapdragon 4 MSM8960 licensee list: It's in Samsung Galaxy S III, Asus Transf ormer Pad Inf inity, BlackBerry Z 10, HT C Droid Incredible 4G LT E, HT C One X, Motorola Droid Razr M, Nokia Lumia 820/920 and a whole lot more. T he potential f or Intel to separate f rom the pack comes with the move to 14nm. Once it gets Atom SoCs down to 14nm, that means a whole lot more power ef f iciency. Qualcomm is f abless and dependent on T SMC f or its chips, and T SMC dropped the ball on its move to 28nm last year. So it could come down to Intel once again vanquishes a competitor on its sheer ability to out-engineer and out-manuf acture them.

qualcomm-150x113.jpg Intel, ARM, Qualcomm, mobile, tablet 1994-2013 ITworld. All rights reserved.

se e kingalpha.co m

http://seekingalpha.co m/article/1540492-why-im-staying-with-intel-and-qualco mm

Why I'm Staying With Intel And Qualcomm

Disclosure: I am long INT C, QCOM. I wrote this article myself , and it expresses my own opinions. I am not receiving compensation f or it (other than f rom Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...) Anyone who has been around Wall Street long enough knows very well that investors should be skeptical of analyst recommendations, especially when it comes to technology companies that undergo their own cycles in addition to regular economic cycles. Back in 2000, technology companies like EMC (EMC), Cisco Systems (CSCO), and Sun Microsystems topped the "f ocus list" of almost every major investment f irm on Wall Street. Now, thirteen years later, EMC and Cisco trade at a f raction of their 2000 highs, while Sun Microsystems was acquired by Oracle (ORCL) f or a f ew dollars a share several years ago. T he problem with these kind of recommendations is that they are usually momentum driven, and even if they are right on f undamentals, they come too late -- markets may have already discounted the cause f or such recommendations. Evercore's downgrade of Intel, and Citigroup's removal of Qualcomm (QCOM) f rom the company's f ocus list are two cases in point. Evercore cited weakening PC sales, while Citigroup cited saturation in the smartphone market. But aren't these trends expected? Haven't the two stocks discounted this expectation? When it comes to technology leaders, the question f or long-term investors isn't how traditional metrics like sales growth and prof it margins have been f ared in recent quarters, but whether these leaders continue to enjoy sustainable competitive advantage, the subject of the remainder of the article. Intel Intel enjoys f our advantages: 1. An upgrade cycle. According to the Semiconductor Industry Association, global semiconductor sales totaled $25.73 billion in December, up 9.7% f rom April and 2% f rom the previous month. 2. Barriers to entry. Binding barriers to entry make the industry an oligopoly that allows Intel -- as a larger player -- to enjoy economies of scale while maintaining pricing power. 3. Successful transition from PCs to mobile devices. T his happened with the introduction of new products like the Atom chip, which powers Windows 8 smartphones. 4. A change in leadership. T his is usually f ollowed by new strategic initiatives to improve both the top and bottom lines of the company. 5. Intel is to benef it f rom Microsof t's release of Windows 8. 6. Intel is to benef it with the introduction of its Silvermont Atom chips f rom the smartphone industry. Analysts expect Intel to earn 39 cents f or the last quarter on $12.89 billion revenues. Qualcomm In a CNBC interview on November 9th, 2012, Qualcomm's CEO Paul Jacobs pointed to the primary source of

the company's advantage: "One thing I learned early in my career is that I don't make products f or myself . I make them f or my customers. We invest heavily in R&D, we get our capabilities ready, and we match the demand when it arises." Simply put, Qualcomm wins by keeping a close eye on customers and coming up with products to accommodate their needs. T hat's how the company rides the one emerging trend af ter another, most notably the smartphone and the tablet industry where Qualcomm has been the main supplier of chips f or both Apple (AAPL) and Samsung (SSNLF.PK). Analysts expect the company to earn $1.03 per share in the last quarter on $6.05 billions of revenues. What should investors do? It depends on the investment philosophy of each individual investor. Value investors should stay with Intel. Growth investors are better of f with Qualcomm as it of f ers better growth prospects than Intel. Intel versus Qualcomm Financial Performance Statistics in 2012 Intel Dividend Operating Margins Qtrly Earnings Growth (yoy): Qtrly Revenue Growth (yoy): Source: Yahoo Finance 1. Size. With $20.46 billion in sales, Qualcomm is less than half of Intel's size. T his means that the law of large numbers works better f or Qualcomm, as do the laws of economies. While Qualcomm is at the threshold where returns to scale takes f ull ef f ect, Intel is approaching the threshold where constant or even decreasing returns to scale begin to kick in. 2. Better company f undamentals. As a pioneer of CDMA technology, Qualcomm enjoys the "f irst mover" advantage in wireless communications; and with the recent acquisition of Atheros Communications, Qualcomm strengthened its leadership in the industry. 3. Better industry f undamentals. While Intel remains the leader in the mature PC industry, (though Intel has made several moves into wireless communications in recent years) Qualcomm maintains leadership in wireless communications - still an emerging industry. Wireless Intelligence estimates that the number of 3G users will reach 2.8 billion by 2014. 4. Riding the industry upgrade cycle. Qualcomm is expected to be the main benef iciary of the wireless communication upgrade cycle. T he GSM Association expects telecom providers to spend $100 billion by 2015 in High-Speed Packet Access (HSPA), 3G, and 4G. T he Bottom Line: Intel is f or value investors while Qualcomm is f or growth investors. But growth and value should be part of every portf olio. T hat's why I own both stocks. Source: Why I'm Staying With Intel And Qualcomm 3.70% 25.18 -25.30% -2.5% Qualcomm 2.30% 30.78 -16.30% 23.90

se e kingalpha.co m

http://seekingalpha.co m/article/1536792-qualco mm-understanding-the-threats

Qualcomm: Understanding The Threats

Disclosure: I am long QCOM, INT C, NVDA, AMD. I wrote this article myself , and it expresses my own opinions. I am not receiving compensation f or it (other than f rom Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...) As f ar as semiconductor companies go, Qualcomm (QCOM) is currently on top of the world. However, f ollowing a brief stint as the "world's most valuable semiconductor company", shares have actually perf ormed rather poorly year-to-date, of f ering a negative return of 1.47%. In contrast, Intel (INT C) is up 16.67%, Nvidia (NVDA) up 16.15%, and AMD (AMD) a whopping 70%. While I am bullish on the name, it is important to understand the very real threats that Qualcomm is dealing with now and will have to deal with in the f uture. MediaTek, AllWinner, and Other Cheap Asian SoC Vendors Qualcomm is well known f or its high end line of Snapdragon processors and its LT E modems, but did you know that a big driver of volume f or Qualcomm has been participation in the Chinese mobile market with its lowerend Snapdragon 200 parts? In this market, it is much more dif f icult to dif f erentiate f rom the hordes of other companies doing precisely the same thing. Even Qualcomm doesn't bother to use its own higher end, larger "Krait" processor cores f or this market and instead opts to use ARM's (ARMH) of f -the-shelf low end Cortex A5 and A7 CPU cores (since it would probably cost more to develop a specialized core f or this market than it would to simply use ARM's IP). (click to enlarge)

T he key dif f erentiators in this space are the f ollowing: Integration - the more f unctionality that can be integrated on a single chip, the more desirable the product is. Connectivity/cellular integration in particular is key Cost - while in the high end of the smartphone space, perf ormance matters, in this ultra-low-cost market, the "best at a low price" is what matters. Of course, despite the f act that at the low end these chips typically sell f or sub $10, there is massive volume in the low end smartphone market, particularly as these devices are simply replacements f or f eature-phones. While some investors in this space tend to conf late the high-end market with this lower-end market when they

scream "$10 ARM chips", it is important to note the distinction: Qualcomm's Snapdragon 800 chips ain't sellin' f or no $10. Anyway, so the issue that Qualcomm has is that, quite simply, the likes of AllWinner, MediaTek, and Spreadtrum (SPRD) can of f er essentially the same product and happily accept lower gross margins. Spreadtrum, f or instance, typically sees gross margins of ~38%. In addition, Qualcomm has the additional headwind of trying to f ight local, Chinese chip vendors that have established relationships with the local device vendors and wireless carriers. Despite this, Qualcomm has managed to maintain ~33% market segment share in this space. But the threat on this f ront is clear as day: there's not a lot of room to dif f erentiate on technology, and margins will continue to come under pressure. T he good news is that the secular growth in this space is likely to more than compensate f or ASP erosion. T he High End: T he Free Ride Is Likely To End At the high end, Qualcomm lucked out big-time over the last couple of years. T he company was the f irst to of f er a multimode LT E modem f or phones, and even took it a step f urther by integrating that modem onto its mainstream applications processors. T he nearest competitors - Intel , Nvidia , and Broadcom (BRCM) - won't be shipping solutions that compete with Qualcomm in this space until the end of the year (likely to show up in phones during 1Q 2014). But what happens when these solutions do ship? Well, here is an interesting snippet f rom Broadcom's recent presentation at the William Blair Growth Stock conf erence,

I mean, to give you a sense, how we are understanding is the price points on an LTE chipset, highend LTE chipset is probably $40, $45 when in fact it probably should be close to $20 or $25, probably $25.

So now you've basically got two major negative f orces: the threat of ASP erosion, and the threat of market share loss. T his wouldn't be so much of a problem if the market were growing like gang-busters, but the high end market is actually showing signs of exhaustion, as Apple's (AAPL) and Samsung's (SSNLF.PK) recent quarterly reports have indicated. What you have, then, is a f lat to slightly up market in which Qualcomm has ~100% market share and is about to come under f ire f rom many strong players. Samsung Dependence A Double Edged Sword Right now, Qualcomm actually gets more than 10% of its consolidated revenues f rom sales to Samsung. On one hand, Samsung's success currently translates into success f or Qualcomm, but on the other, if Samsung were to actually develop an apps processor + modem platf orm that it could use in place of Qualcomm's, then this would represent a pretty dramatic f all-of f in chip revenues. T he 3G/4G royalties, on the other hand, would still remain. Qualcomm needs to stay a step ahead of what Samsung's own chip design team can do, otherwise things could get ugly. Cellular Patent Licensing Still Sweet, But May Suffer From Mix Shift To 4G Only While Qualcomm's semiconductor business gets a lot of attention, the real money maker is the wireless patent licensing business that it runs. In the most recent quarter, the licensing business (QT L) generated $1.5B of earnings bef ore tax while the modems, apps processors, and everything else generated $1B of earnings bef ore tax. T he idea is that f or each 3G/4G device sold, Qualcomm gets a percentage of the selling price. T his

means that as long as 3G/4G device shipments continue to grow, Qualcomm continue to grow this business. Unf ortunately, while Qualcomm now gets paid f or both its 3G and 4G/LT E patents in multimode devices, carriers such as Verizon (VZ ) have expressed interest in moving to LT E-only devices, which would lower the royalty rate that Qualcomm would receive on these devices. Why Bother Owning T he Stock? In light of these threats, it may seem that owning the stock wouldn't really be a good idea. In some sense, this is correct: if you're looking f or "explosive" growth as we saw when LT E became popular, then I think you will be disappointed. T his is a $105B company that already owns the majority of the smartphone apps processor and baseband markets, so there's probably more share price upside in betting on one of the players aiming to gain share in this space (Nvidia, Broadcom, Intel). However, there's a good dividend growth story going on here and I think that f ollowing the recent correction the company may f inally start buying back shares instead of simply having a buyback declared. T his could help prop up the shares in the near-term, and I think that investors may ease up on their bearishness on the name when the excitement surrounding Qualcomm's tablet penetration (where Qualcomm currently has negligible share) makes up f or the gloomy outlook on high end smartphone growth. Also, if it turns out that the af orementioned competitive threats turn out to be more bark than bite, then this could also ease the pressure on the shares. Source: Qualcomm: Understanding T he T hreats

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

Comments (35)
bgessner Comments (13)
Do you really think you're smarter than all the engineers and visionaries at Qualcomm? Do you really have inside information on their strategy for high-end and low-end chipsets? How about the costs, performance, margins, etc.? Do you really know the deals they're making in China, India, and other high growth markets? Do you know the deals they're making with Apple, Samsung, HTC, and hundreds of other wireless phone manufacturers? The answer is NO. My advice to all you readers, is BUY QUALCOMM rather than listening to rant like this guy.
7 Jul, 02:46 PM
! Report Abuse

Like

Reply

fidgewinkle Comments (384)

bgessner, One need not know all of the detailed inner workings of Qualcomm to understand the competitive landscape. Qualcomm can't make the flat-lining high end smartphone market grow and they can only get so much revenue from lower end phones. Your argument is 100% faith-based with no foundation in reality. Will Qualcomm be in the next wireless opportunity before everyone else and make a lot of revenue in the process? Yes, but that is literally years away. In the meantime, they are going to be exposed to margin erosion from the competition catching up as the wireless infrastructure prevents Qualcomm from moving on to the next big thing.
7 Jul, 03:36 PM
! Report Abuse

Like

Reply

SKS1586 Comments (381)

bgessner - Please read Ashraf's Disclosure (He is Long $QCOM). Disclosure: I am long QCOM, INTC, NVDA, AMD. (More...) No one is forced to read any of the SA articles & therefore no one is forced to waste their energy by making un-deserving comments.
7 Jul, 06:21 PM
! Report Abuse

Like

Reply

Michael Blair Comments (1223)

seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 1/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

@Ashraf Eassa - good article. There are threats to Qualcomm and opportunities. In my view, buying back stock is a fool's game in a capital intensive business. It differentiates shareholders - those who sell and those who stay - rather than dividends that treat all equally. It props up earnings per share in a company where growth is slowing masking poor operating performance. The only case for buybacks is really when the company is trading well below fair value, not the case with Qualcomm. Management should invest to meet Intel and the lower priced threats and continue to innovate,and, as earnings grow, increase dividends. The next few years will be interesting as Intel flexes its muscle in the space. Qualcomm can meet Intel on an equal footing if it spends its money advancing and innovating. If it becomes a balance sheet play with major stock buybacks, I will be a short.
7 Jul, 03:19 PM
! Report Abuse

Like

Reply

gloss Comments (3)

Actually the stock is trading below its' intrinsic value currently. As such buying back stock makes a lot of sense.
8 Jul, 07:03 AM
! Report Abuse

Like

Reply

karoussos Comments (9)

Good write up pointing to the competitive market in which QCOM operates in. The fact is that the smartphone market has reached a saturation level where every consumer is looking for the next generation of "smart " devices be it phones,tablets,laptops or TVs To this point,I don't believe the QCOM engineers have been seating on their hands.
7 Jul, 04:28 PM
! Report Abuse

Like

Reply

Sundowner Comments (103)

I've actually never been forced to read an SA article. I do however read most of Ashraf's articles simply because he is much more knowledgeable in the Tech sector than I am...
7 Jul, 05:05 PM
! Report Abuse

Like

Reply

Tim McAleenan Jr. Comments (1860)

Most articles on Seeking Alpha are easy to filter out because the author's name is labeled next to the piece in most cases. And even if I click on something I do not want to read, I have learned this--in under two, count 'em two!--seconds I can get away from an article and find something else I'd enjoy.
seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 2/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

Surprisingly, surfing the web is no great hardship, and something that can be done with remarkable ease--all you have to do is click! Ashraf, FDR once said something to the effect, "If I'm not pissing anyone off, I'm not doing anything worthwhile." You see plenty of writers on SA who receive no comments at all, because their ideas are not strong enough to be worth it. You make compelling arguments, and you have a reader base that reflects that. Some commenters post 10-20 negative things for every neutral/positive comment they have to say. With a ratio like that, who do you think is the problem: The author or the commenter? Keep it up, Ashraf. You're a tribute to this site, and Seeking Alpha is lucky to have you, my friend.
7 Jul, 05:22 PM
! Report Abuse

Like

15

Reply

Ashraf Eassa Comments (6297)

Tim, Thank you, sir. You know I feel equally positively about your work.
7 Jul, 06:09 PM
! Report Abuse

Like

Reply

varan Comments (2148)

Really! You want to write articles for people to read, and then worry about negative comments? I have stopped clicking on your (Tim's) articles because they are oh so inspiring and therefore uninformative and boring (repetition of the same Mantra, start young, buy good dividend growth stocks, here is Munger saying something, here is Buffet saying something , start young, buy good dividend growths stocks, looped over and over ad nauseum) and the comment threads are all bordering on extreme flattery. If that is what you want, good luck to you. I hope that Mr. Issa, given the actual information that he so painstakingly assembles and presents, does not seek flattery from his readers.
8 Jul, 12:46 AM
! Report Abuse

Like

Reply

varan Comments (2148)

@Tim It's kind of ironic that you think that if a few of your commentators are teed off that is sign of saying something right, but if your commentators feel the same
seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 3/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

way the other way round, you get all bothered and flustered. Self Awareness is something that you perhaps need to have more of.
8 Jul, 01:39 PM
! Report Abuse

Like

Reply

Tim McAleenan Jr. Comments (1860)

"you get all bothered and flustered." Varan, I have no problem with people who disagree with my ideas. The only time I have a problem is when people say things about me personally rather than the ideas I present because that doesn't seem right. I wish everyone, including you, the best with their investing and hope they reach their goals. It does not bother me whether you get there with dividend stocks, Berkshire, index funds, or whatever strategy you employ. Lots of ways to get rich in a $13 trillion economy! When I write an article, it's because I'm trying to use common stocks to put together a nice life for myself and use them to meet my goals. I've been lucky that some readers appreciate what I have to say. Personally, I don't understand why someone would heckle others as they try to make their dreams come true. Perhaps, on some level, you know that some of your comments aren't exactly aiding and encouraging folks on the path to making their lives better, and that could partially explain why you choose to use a pseudonym instead of your real name.
8 Jul, 02:03 PM
! Report Abuse

Like

Reply

varan Comments (2148)

@Tim Wow! You were doing good till the the last two sentences. I hope that when you write your articles you do not make the same types of leaps of logic that are wholly unjustified by the available data, although the ones that I have read suggest that such may indeed be the case.
8 Jul, 02:29 PM
! Report Abuse

Like

Reply

Tim McAleenan Jr. Comments (1860)

Okay, I could be wrong. In my experience with your comments on my articles, it just seems that people have been getting along fine, doing their thing, and then you've interjected with some kind of negativity. At least, I think you've done that to me five or six times. But if you don't think you instigate stuff with the deliberate intention of getting under people's skin instead of helping them reach their goals, that's fine. I see it differently I guess. It just seems to me that, in some of your comments, you're trying to get a rise out of people instead of help them out.
seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 4/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

8 Jul, 03:04 PM

! Report Abuse

Like

Reply

arthur_bishop1972 Comments (1266)

<<I hope that Mr. Issa, given the actual information that he so painstakingly assembles and presents...>> It's 'Eassa'-not Issa. Please pay attention if you're going to complain. Sheesh. There is an Issa in the state gov't of CA and if you'd like to complain about him, this is not the place for it.
8 Jul, 10:59 PM
! Report Abuse

Like

Reply

SKS1586 Comments (381)

LarryMelman - Please read my words. No one is forced to read any of the SA articles. Therefore no one is forced to waste their energy by making un-deserving (BAD) comments. Please save your energy for yourself (for your bad moments) & your loved ones.
7 Jul, 06:26 PM
! Report Abuse

Like

Reply

LarryMelman Comments (425)

I'm free to comment however I choose, as long as the attacks are not personal. As is anyone. You're right, I choose not to read his articles. But when they keep showing up attached to the tickers in my portfolio here, what should I do?
7 Jul, 07:38 PM
! Report Abuse

Like

Reply

Ashraf Eassa Comments (6297)

"You're right, I choose not to read his articles. But when they keep showing up attached to the tickers in my portfolio here, what should I do?" If you can see the author beforehand, don't click it. If you click it and you see my handsome face, close your browser immediately. It's that simple. I'm surprised that despite your apparently keen wit that you could not figure out this simple algorithm. I don't think you are incapable of figuring this out, so that leads me to believe that you are simply attempting to troll my article.
7 Jul, 07:45 PM
! Report Abuse

Like

11

Reply

seekingalpha.com/article/1536792-qualcomm-understanding-the-threats

5/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

mpcascio Comments (127)

I know little about the tech sector but what I know is the Mr. Eassa doesn't seem to be pumping stocks. He offers his analysis and puts it out there. It's up to you to do the rest. I for one enjoy the articles and am pleased to add to your coffers. Keep up the good work.
7 Jul, 06:37 PM
! Report Abuse

Like

Reply

Ashraf Eassa Comments (6297)

Thank you, sir. Glad you enjoy my work! :)
7 Jul, 06:38 PM
! Report Abuse

Like

Reply

Mobile Software Developer Comments (20)

Ashraf, I am following you for some time and most of your articles are against Qualcomm or ARM. you hardly said good things about Qualcomm. In my opinion your articles are emotional, rather than reality
7 Jul, 08:08 PM
! Report Abuse

Like

Reply

Ashraf Eassa Comments (6451)

Mobile, Then you're not actually reading the articles, then... http://seekingalpha.co... http://seekingalpha.co... http://seekingalpha.co... Maybe your responses are emotional, rather than based in reality. Or maybe you simply do not follow my articles as you claim you do.
7 Jul, 08:14 PM
! Report Abuse

Like

Reply

dnorm1234 Comments (204)

>I am following you for some time and most of your articles are against Qualcomm or ARM He's long both...
seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 6/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

8 Jul, 02:15 PM

! Report Abuse

Like

Reply

Ashraf Eassa Comments (6451)

dnorm1234, Funny how that works, eh? :)
8 Jul, 02:17 PM
! Report Abuse

Like

Reply

gsridhar29 Comments (4)

Samsung Dependence A Double Edged Sword 10% revenues from single client is a not a dependence at all. I agree that the competition is intense (especially at the low end segment). I dont believe that QCOM is standing still waiting for the competition to catch up.
7 Jul, 08:19 PM
! Report Abuse

Like

Reply

Wireless Knoledge Comments (7)

Ok let me understand, your point of view. From 10000 ft, everything has to go against qualcomm . I agree market would be tough, but there are few things qualcomm is doing which is in public space But first your point that QCOM doesn't integrate ARM processor core in low end chips being sold in china. It is clear qualcomm is dooing product differentiation. When consumer think of Krait core they want them to think of "High End" Core. and than at low end what you do where people just care about "number of core" and price, just pick up off the shelf component and feed it. Spend low end energy on integration and price point rather than eroding your brand. If you remember, your dear intel created "Pentium" and "Celeron" where celeron was low end brand of intel compare to pentium. If i understand correct, QCOM believes more in integrating with ARM core rather than coming up with new core. Though they may come up with Low end Chipset Architecture (Remember i am talking about SOC architecture rather than CPU cores). About your other points about competition, i want to make few points. 1. Samsung semiconductor always had modem and they tried to use ARM CPU to compete with qualcomm and earn Samsung Phone business from QCOM. But they struggle coming up with "Universal Solution". Broadcom LTE solution is 3 generation behind when it would see "Day of Light" ( BRCM said it would go commerical next year in 2014) by the time QCOM 3rd Generation LTE with carrier aggregration and 40+ LTE band support would be in. Also, From all public information, seems like qualcomm is planning MASS LTE chipset, which would penetrate LTE in mass smartphone ( may be $250 Pricepoint), so eventhough they may not have 100% market share in next 2 years, because LTE integrated market would grow and they would have still majority share ( above 60%)
seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 7/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

. One more point, by the time competition comes up with some comeptitive LTE integrated solution, qcom would start pitching "LTE-advanced" and competition would be playing catch up. you mentioned all big names you can think of i.e samsung/BRCM /Intel in baseband market. I think real threat qualcomm would be worried would be HiSense ( Huawei) which has very efficient LTE design in market compare to any other competitor you mentioned. 2. By early next year, QCOM RF 360 solution would be in fully available, that means so much fragmented RF bands in 3G/4G worldwide, anyone willing to launch world phone, would be looking at QCOM for solution. So it plays in QCOM's hand. I haven't heard any of your above mention company coming up with something similar. "Advantage " QCOM. 3. You claim QCOM is overdependent on Samsung ,and if i assume that's truth, let's for a minute assume samsung /apple looses market share , who gains. LG -- Major customer of QCOM and feeding on QCOM product line, They revived themselves based on QCOM solutions. HTC - again Major customer and feeds on QCOM solutions. RIM -- Exclusive BB10 supplier of chipset is QCOM. Windows phone OEMs -- QCOM is exclusive chipset supplier. So, i think QCOM would be more than ok for some reason Apple/Samsung looses grip on their market share. QCOM would turn out to be fine and may be "happy" too!!! 4. LTE single mode. ---Really??? Flag barrier for Single Mode LTE devices with VOLTE is Verizon . They want to deploy it fast. But if my information is correct, internally Verizon don't forsee major LTE only devices till 2017 or later. Till the time, they expect flagship devices to carry both 3G/4G. So, all in all, it is competitive market, but in my eyes, QCOM is playing on its strength and they are not sitting idle. They are making it difficult and difficult for competition.
7 Jul, 10:27 PM
! Report Abuse

Like

Reply

stephenpoirier Comments (14)

Investing in technology is tough. How long do qualcomm's patents last? What I do know is that smartphones will become like the air we breath. I watch mothers entertain their 3 year old kids with these devices. All commerce will eventually migrate to wireless payments along with augmented reality. I am holding this stock and am betting that every share bought today will be worth $500 in ten years and I think that is being conservative. Wish I could see into the future. Qualcomm is entrenched in the wireless world.
seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 8/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha
! Report Abuse

7 Jul, 10:34 PM

Like

Reply

stephenpoirier Comments (14)

I am not promoting this website but if you want to follow what the pros are buying goto dataromacom. Aig,nov,dtv,dva are some value plays.
7 Jul, 10:37 PM
! Report Abuse

Like

Reply

chongkim74 Comments (185)

AMD long...and its becoming long as we all can see...but wait for the earnings soon.
8 Jul, 01:33 PM
! Report Abuse

Like

Reply

vector_us Comments (191)

Ashraf, Qualcomm has many more products and market you might want to add in your analysis. Here is nice place in their website where you can learn more about them. http://bit.ly/158FPRh Now lets stick to Semiconductors and Internet of Everything. Cisco Predicts that the Internet of Everything market of the size of 14.4 Trillion dollars. In powering the internet of everything, data connectivity will be a big problem and hence there will be big need for small cells once the teleco's start moving to LTE Advanced or the real 4g as opposed to current 3.9g we have in US. I believe small cells will be a big market for Qualcomm who make processors for the same. http://bit.ly/158FQ7v http://bit.ly/158FQ7x http://bit.ly/12hraEU Now lets get back to royalties. Lets take developing market for this example. The 3g penetration in India is at mere 7% which mean about 1.2 billion potential customers for 3g. http://bit.ly/158FSMO Now lets assume a very modest ASP of $200 on average. Note that India still have a lot of rich people and they do end up getting pretty darn expensive phones. Assume roughly (as rumored) 5% royalty for 3g phones. That equates to $10 per device or a total market of 12 billion dollars. Even if the 3g penetration manages to be at mere 50% in next couple of year that still equates to potential $6 billion in revenue from 3g
seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 9/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

phones only. But I believe the penetration will be at a higher number and a faster rate. A similar argument can be put forth for China and other developing counties in South America. Now the real growth story is all about developing countries. Even if Qcom manages to keep hold of 33% market share it has in China, that still equates a very good overall growth. But china is moving fast to 4g and that is where Qcom strengths will start showing up. All in all if your dream of Intel eating up Qcom's smartphone lunch comes true than also I see Qcom posting double digit growth for next couple of years just because of the sheer size of the market. And at the same time I find it funny the conversation about smartphone market saturation from Citi bank.
8 Jul, 07:55 PM
! Report Abuse

Like

Reply

Software Engineer. Comment (1)

Hi Ashraf, Nice Article!!! What is your opinion for intel and AMD joining Tablets market with X86 processor ? What do expect for these new joinees in Market.
9 Jul, 03:51 AM
! Report Abuse

Like

Reply

experienced Comments (329)

In the PC market, Intel has always been top dog. Intel and its loyal investors must know, then, that it's difficult for smaller players to compete with the established big boys. Witness AMD, barely surviving against Intel, again for PCs. Now the tables are turned for wireless devices. Qualcomm is the obvious leader, and Intel is experiencing similar problems to those that plagued AMD in the PC market. It's all well and good to rave about Intel's process technology, its 14 nm chips, its high speed processors, and low power consumption. But the fact is that: 1. So far, even the latest Haswell chips, combined with radio and related chips for smartphones/tablets, consume more power than chips based on ARM designs, whether made for Apple, Qualcomm, Samsung, or other major producers. 2. Intel, in order to establish a foothold in the smartphone/tablet market, will have to price its chips competitively, which will, without a doubt, result in much lower gross margins than Intel is accustomed to report. When coupled with the flat or declining demand for PC chips, Intel's future earnings growth (as opposed to growth in unit sales) is clouded indeed. A growing number of investment firms now realize that Intel may not be as good a growth prospect as they had believed earlier in the year. Despite an attractive
seekingalpha.com/article/1536792-qualcomm-understanding-the-threats 10/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

dividend, the shares will probably remain depressed until investors see better profit margins, and these may not occur for another year. Meanwhile, many other investment firms have downgraded Qualcomm on the premise that sales growth for smartphones and tablets is waning. I'd like to see the data to back up those views. What is known, however, is that, especially in developing nations, wireless phone users are switching from old second generation phones to third or fourth generation smartphones, making the growth in demand for the types of equipment that generate royalties for Qualcomm healthy indeed. There is simply no basis to claim or infer that Intel is about to eat Qualcomm's lunch. Maybe the reverse is closer to reality.
9 Jul, 06:02 PM
! Report Abuse

Like

Reply

onlythetruthhere Comments (41)

Wireless life as a journalist wannabe is hard! It's harder when your stupid!
10 Jul, 07:51 PM
! Report Abuse

Like

Reply

Saterley Comments (11)

There are LTE chips and there are LTE chips. Qcom is on its third generation. Using technology developed by Qcom the chip is world mode, transfers data at twice the conventional LTE data rates, drastically shrinks the amount of area in a handset now dedicated to addressing the multiple RF frequencies, and it is part of the Snapdragon 800 processor chip, a true SOC. It does much more with technology, making it attractive to carriers and handset makers worldwide. So when you say a company is going to pose a threat to Qcom in LTE as soon as they can get their first chip working in six months, it can be a little frustrating to some Qcomers as evidenced above. This chip can do much more than there is room here. If interested view the following presentation on Snapdrason 800 that includes a section on the LTE third generation. http://bit.ly/1avBE5w
18 Jul, 05:50 PM
! Report Abuse

Like

Reply

Sam Liu Comments (3550)

What's up Ashraf? QCOM is launching.
2 Aug, 01:21 PM
! Report Abuse

Like

Reply

seekingalpha.com/article/1536792-qualcomm-understanding-the-threats

11/12

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

seekingalpha.com/article/1536792-qualcomm-understanding-the-threats

12/12

se e kingalpha.co m

http://seekingalpha.co m/article/1342641-intel-o r-qualco mm

Intel Or Qualcomm?
Disclosure: I am long QCOM, MSFT . I wrote this article myself , and it expresses my own opinions. I am not receiving compensation f or it (other than f rom Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...) High-tech leaders Intel (INT C) and Qualcomm (QCOM) are about to report Q1 earnings-Intel is reporting on April 16, while Qualcomm is reporting on April 24. Earnings Estimates f or Intel and Qualcomm Company Intel Qualcomm High $0.46 $1.21 Mean 0.41 $1.16 Low 0.35 1.12

Qualcomm is the winner of the semiconductor industry. Its stock trades near the upper end of its trading range - at a new high; and it has the highest PE among its peers. Intel is the loser of the semiconductor industry. It stock trades near to the low end of its trading range- below its 2000 high. Which one is a better investment bet? Obviously, the def inite answer to the question will be known only af ter the two companies report their earnings. Nevertheless, Intel is a better bet f or value investors, given its low valuation, high dividend payout, and the prospect of riding Microsof t's (MSFT ) Windows 8 roll-out, while Qualcomm is a better bet f or growth investors, f or f our reasons: Company Intel Advanced Micro Devices (AMD) Nvidia (NVDA) Texas Instruments (T XN) Qualcomm Broadcom (BRCM) Source; Yahoo.f inance.com Intel versus Qualcomm Price Performance (2000-12) Intel Year Price* Qualcomm Price* Recent Price $21.66 2.43 12.95 35.46 66.18 33.67 Forward P/E 10.51 -15.94 17.4 13.48 10.93

2000 2004 2008 2013

25.20 19.93 23.95 21.59

$37.12 38.78 34.36 63.36

Source: yahoo.f inance.com Intel versus Qualcomm Financial Performance Statistics in 2011 Intel Dividend Operating Margins Qtrly Earnings Growth (yoy): Qtrly Revenue Growth (yoy): Source: yahoo.f inance.com 1. Size. With $20.46 billion in sales Qualcomm is less than half of Intel's size. T his means that the law of large numbers works better f or Qualcomm, as do the laws of economies. While Qualcomm is at the threshold where returns scale takes f ull ef f ect, Intel is approaching the threshold where constant or even decreasing returns to scale begin to kick in. 2. Better company f undamentals. As a pioneer of CDMA technology, Qualcomm enjoys the "f irst mover" advantage in wireless communications; and with the recent acquisition of Atheros Communications, Qualcomm strengthened its leadership in the industry. 3. Better industry f undamentals. While Intel remains the leader in the mature PC industry - though Intel has made several moves into wireless communications in recent years. Qualcomm maintains leadership in wireless communications, still an emerging industry. Wireless Intelligence estimates that the number of 3G users will reach 2.8 billion by 2014. 4. Riding the industry upgrade cycle. Qualcomm is expected to be the main benef iciary of the wireless communication upgrade cycle. T he GSM Association expects telecom providers to spend $100 billion by 2015 in High-Speed Packet Access (HSPA), 3G, and 4G. T he Bottom Line: Intel is f or value investors while Qualcomm is f or growth investors. Source: Intel Or Qualcomm? Which Seeking Alpha App is best f or you? Seeking Alpha Portf olio Tech Investor ET F investor Energy Investor 4.20 27.44.30 -26.50% -3% Qualcomm 2.10 30.78 36.00% 28.60

Email me a link to open f rom my phone:

Continue
Sha re t his a rt icle

Short URL: More articles by BubbleBustInvesting

se e kingalpha.co m

http://seekingalpha.co m/article/1554482-intel-do nt-panic

Intel: Don't Panic

Disclosure: I am long INT C, QCOM, NVDA, AMD. I wrote this article myself , and it expresses my own opinions. I am not receiving compensation f or it (other than f rom Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...) It looks as though I was wrong -- Intel (INT C) had to bite the bullet and guide down f or the year. Instead of low-single digit growth, it seems that 2013 is going to be a f lat year f or the company (in line with consensus, f ortunately enough). However, I believe that the devil is in the details here, and that f ollowing what will surely be capitulation over the next couple of sessions, there will be a gradual realization that the sky isn't f alling f or the company and that under this new CEO, shares -- and indeed, the underlying business -- can f inally return to very healthy, prof itable growth. Keep in mind as you read this article that I am speaking f rom a multi-year perspective and not necessarily trying to give short-term trading advice. With that, let's dig in. T he Datacenter Story May Make Some Uneasy... But It's Okay One thing that I f ound uninspiring during this release is that the data-center was essentially f lat Y/Y during Q2. T his, coupled with modest ~6% growth in Q1, optically does not bode well f or a "low-double digit" growth story f or the f ull year. T his suggests a rather dramatic ramp during the second half . As I have detailed in previous articles, I believe that this is quite plausible given that the entire product lineup is long overdue f or a ref resh that will be coming in Q3 and Q4. We have the "Haswell" based Xeon E3 parts f or entry level servers, and micro-servers. On top of that, the Romley platf orm sees a new processor known as "Ivy Bridge EP" that should bring ~50% more cores within the same power envelope (this decreases T CO as perf ormance/watt improves dramatically). Finally, the very high end, "expandable" market that scales f rom 2-8+ sockets sees a very long overdue ref resh f rom Westmere EX to Ivy Bridge EX. In the same power envelope, Intel will release 15 core parts, and each core should clock higher and of f er ~25% more perf ormance per core, per clock. It is important to note that Intel will also be rolling out its new part known as "Avoton" based on the "Silvermont" micro-architecture during 2H 2013 (I am expecting a late July/early August launch) f or microservers, and another part known as "Rangeley" f or networking. T he company mentioned on the call that networking, cloud, and storage have been growing at 20-40%+, and I believe that the release of "Avoton" should catalyze f urther growth. T he PC Client Group Hiccup T he main driver behind the guide down was the weakness in the traditional PC market. Notebook units f or the quarter were down 7% Y/Y and ASPs saw a hit of ~4%. While AMD (AMD) isn't likely to be too thrilled that the company more aggressively competed at the low end on price, this was necessary f or the company to try to hit guidance. Desktops seem to have almost bottomed, with units down only 3% Y/Y but ASPs up 6%. I expect that Intel will try to drive a richer mix as it continues to integrate more onto its PC chips (including multiple higher tiers of graphics), but this is a longer-term story. Now, as I have suspected f or quite a while, it isn't the high end of the PC market that is getting hit by tablets. In f act, CFO Stacy Smith had this to say on the call:

And if you look at the last three years even in a time where the market's been relatively weak, the

Core i5, i7 volumes have been very healthy and if anything we've seen a larger mix overall to Core over that time period.

So you don't have tablets replacing high end PCs, you have tablets replacing the relatively high volume, low end PCs into which Intel shipped a large number of Pentium and Celeron chips. Now, luckily the Pentium/Celeron chips move to the upcoming "Bay Trail" design going f orward, which means that they all become f anless, thinner, and much more amenable to convertible designs at low price points (this could drive volume). Also keep in mind that a move f rom a 2-chip solution to a single chip solution based on cores designed to be much smaller will yield signif icant gross margin benef its at f lat ASPs. But the truth is that Intel needs to get Bay Trail out as quickly as it can , and quite f rankly I don't think even Intel realized how urgently it needed to get this part out until the beginning of the year (as all of the leaks f rom 2012 suggested that Bay Trail was a 2014 part). I am glad that this lineup was accelerated to late 2013. T he Tablet And Smartphone Push: It's Do Or Die Quite f rankly, in terms of the consumer computing space, it is imperative that Intel get into these markets and in f orce as quickly as possible. Now, unlike what some have suggested, the tablet and smartphone vendors appear to want Intel in this space, as Mr. Krzanich noted when asked about customer response to Intel's attempts to enter this space:

I'd say the key message that they've been giving us is, we really want you there, we see the products coming, we want even more and we want a faster line up following those.

But the main problem that we have seen so f ar is that Intel needs to have the right products to play in this space. I think that when Intel can put the old Atom behind it and get the f irst Silvermont based parts to market, then we will see some real volume growth. Intel is lucky that ARM (ARMH)-based competitors such as Qualcomm (QCOM) and Nvidia (NVDA) are essentially locked out of the Windows space (and as a result, Intel captured 90% of Windows tablet share translating into ~6% of the total tablet market), but in the Android space, X86 compatibility is not a barrier f or competitors, so Clover Trail+ isn't going to cut it against an Nvidia Tegra 4 or a Qualcomm Snapdragon 800. Bay Trail had better be good (i.e., best in class), otherwise it will f ail to gain traction on Android. T he long and the short of it is: tablets and low cost convertibles will become the mainstream computing devices of the future for the vast majority of people . While the high margin, high ASP Core i5/i7 will continue to do well, the mainstream parts need to transition to the Bay Trail design as quickly as possible f or Intel to be able to participate in this broad f orm f actor transition. Fortunately, the Atom SoCs that go into this space are likely much cheaper to make than the cut-down Core processors that become Pentiums/Celerons that sell f or ~$40-$50, so gross margins on these parts are likely to remain stable to perhaps slightly up as these chips ramp in f ull-f orce. Blended gross margins come under slight pressure, as it is the low end/low power part of the compute market that will see growth while the high end is likely to be slightly up to f lat. For growth, Intel also really needs to play in the smartphone space on both baseband and apps processor. If Intel can deliver on the perf ormance/power claims in the f ollowing slide, then I believe that this could drive signif icant adoption of the company's parts in mid to high end smartphones. (click to enlarge)

However, I expect that Intel is at risk of having a signif icant marketing problem trying to sell a dual core product into a world of quad core phones, even if the dual core part delivers better perf ormance/watt. I f urther expect that f rom what is currently known about Bay Trail's GPU (4 EU Gen7 GPU), it is unlikely that -- unless Intel is either using Imagination's (IGNMF.PK) next generation PowerVR 6 or a beef ed up Gen7 design f or the "Merrif ield" SoC -- it will be as competitive with the Snapdragon 800 on the GPU side of things, which could pose as an additional headwind to adoption. I also believe that the Q1 2014 launch curtails any hope that there will be a 14nm smartphone product launched in 2014 (although Mr. Krzanich's comments about "acceleration" could be a source of optimism here), which means that the company's process lead could ultimately prove to be ephemeral in this particular end market. Fortunately, product cycles in this space are short, so it may be okay to have Merrif ield be reasonably short lived. Finally, it will be an uphill battle f or Intel to compete with Qualcomm on the modem side of things, although recent hiring and R&D increases suggest that Intel is making a serious ef f ort. It is not clear if the "Merrif ield" platf orm will ship with an LT E-Advanced modem (which both Broadcom (BRCM) and Qualcomm will be shipping in this timef rame). I am expecting a highly integrated part known as "6331" during 2014, which will put the modem on the same die as the apps processor, although it is clear that Intel's modem ef f orts have signif icantly lagged its apps processor ef f orts signif icantly thus f ar. I also expect that Intel will need to f ill out its portf olio with low power WiFi connectivity as consuming the majority of the bill of materials in this space will be key to driving high margin revenue growth. T his can likely be developed in-house by leveraging existing WiFi IP, although I would not be surprised to see f urther acquisitions. A Note On Sentiment I am not oblivious to the f act that Intel has been a f rustrating and disappointing stock. Long-term holders are likely f urious that the company is guiding to f lat Y/Y revenues in this bull market, af ter years of seeing their investment go nowhere at the speed of light. T he opportunity cost to holding Intel shares likely f eels high, particularly as growth names tend to be outperf orming in this market, and Intel is not invulnerable to broad market weakness, which in the near term could create a pretty negatively skewed risk/reward prof ile f or the name. But the bottom line is that Intel still exhibits a f avorable risk/reward f or investors with the patience to stick through at least until the core thesis has played out long enough to drive signif icant upside. What is the thesis, exactly? Intel will gain enough share in tablets (which have a much larger TAM than the low-end PC market today and will continue to grow) to of f set low-end PC sales declines.

Intel's datacenter growth story will remain on track with a double digit revenue growth CAGR through 2016. T he low-end PC will merge with the high-end tablet, and Intel will have signif icant share here. T here is plenty of volume in cheap 7" tablets to drive growth, and Intel will have a leadership product here. Intel has the scale and the ability to invest in order to take signif icant share in the Android smartphone space. Intel will be signif icantly expanding its processor TAM into new end markets such as low-end networking, communications inf rastructure, in-vehicle inf otainment, and wearable devices. While the current year's f inancial results more than likely to be disappointing (f ull-year guide being cut was a major disappointment to bulls), Wall Street reacts f avorably to stories that are showing signs of improvement. For Q3 and Q4, gross margins are back into the 60% range. T he CapEx guide has been cut yet again, and total spending has been cut f or the year. T he launches of Bay Trail and the next gen micro-server SoC known as "Avoton" are imminent (which could drive sentiment), the upcoming investor meeting should be a positive catalyst, and I believe that Q1 2014 should be the start of a real growth story f or the company as the f ull-year impact of the new product lineup is realized. More importantly, I believe that the new CEO will be well received by the Street. If you notice on the call, he was very eager to emphasize the "Atom" parts and did not act as though Intel was a PC-f irst company and regarded Atom as a second-class citizen. T his new CEO understands that low power SoCs designed quickly in a f astpace environment is the f uture f or the majority of compute, and I expect that going f orward, he will not be shy about pursuing new and emerging opportunities even if it means "cannibalizing" pre-existing markets (as Intel was apparently af raid of given its historically low f ocus on Atom and attempts to reinvigorate the traditional PC market). Finally, I believe that the f ull-year guide down was done to make sure that Intel is not at risk of missing in Q3 or Q4. I expect that the Q3 guide -- which was at the low end of the traditional seasonal increase -- was very conservative, and if Haswell Ultrabooks do, indeed, pick up, there is a chance f or a beat. Optically, Intel has been "missing" its guidance f or the last several quarters, and I believe that the new CEO and the current CFO are tired of getting egg on their f aces. Paul Otellini did not leave as a CEO who was known f or delivering shareholder value (despite the massive revenue growth and PC/server leadership under his reign), and I get the sense that the company is looking to change this. Intel will -- if I'm right -- become a company that blasts through expectations, not one whose quarterly results causes investors to cringe. While I was initially irritated by the guide-down, I realize that in this uncertain demand environment, I would do the exact thing in Mr. Krzanich's and Mr. Smith's places. T his is the one grace period bef ore Mr. Krzanich's tenure begins properly, and it's best to get that sort of thing out of the way. Conclusion Look, we all already knew the PC market was not doing so great, and the f act that Intel is going to be f lat f or the year isn't wonderf ul, but it's not the worst thing possible. If you are a long-term investor, recognize that this is a marathon and not a sprint, and all of the signs that Intel is doing the right thing to position itself f or long-term growth are there, even if the short-term results take a hit. It takes time (4 years) to design new chips f or new power/perf ormance targets, and what you are seeing now is a company that completely miscalculated when it would need a new Atom. In 2009/2010, when Intel bought Inf ineon's wireless and started taking Atom more seriously, it had no idea that the PC market would go into such steep decline; even 2011 was a banner year in terms of the top and bottom lines. T his was supposed to be an incremental opportunity to spur f urther growth on top of what seemed to be a pretty healthy business.

But the past is the past, and we will see Bay Trail in 2013, Merrif ield and Cherry Trail (Airmont based) in 2014, and I think that the company can f inally return to growth. Long-term investors need to wait a little bit longer f or the growth story to play out, and I don't blame you at all if you just want out to go participate in a much "easier" growth story. But as f ar as I'm concerned, Intel is a top notch, all-star company that made a really dumb decision that it is now in the process of correcting. If I am right and the company can push hard in this new world of ubiquitous compute, then all will be well, the massive R&D investments that have ravaged the net income line will pay of f , and shareholders can f inally move beyond the "lost decade" in Intel's shares. I'm betting on Intel. Source: Intel: Don't Panic

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

Did Intel Miss The Mobile Boat?

Aug 4 2013, 15:36 | 87 comments | about: INTC (Intel Corporation), includes: QCOM

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in INTC , QC OM over the next 72 hours. (More...)

Intel (INTC) has been recently trying to catch up in the mobile space. They have revamped their mobile CPU lineup to place added emphasis on performance/watt, and are using their process advantage over the competition to try and finally enter significantly into the mobile market. But there are a few things that have made me hesitant as to whether they can catch up, including how these factors will affect revenues and margins, and how many units they will need to move to show substantial growth. Why Pricing is Tricky I have pointed out in a previous article that Qualcomm's (QCOM) Snapdragon 600 costs $20 and Samsung's Exynos 5 costs $30, according to data from iSuppli. Image taken from IBTimes.com

So the price of apps processors above range from $30 for an 8 core Samsung (SSNLF.PK) processor to $17.50 for a quad core. Companies like MediaTek probably charge less, but make up for it in volumes; Intel will be competing in a market sector where $50 is higher than the high end. This presents several "red flags" to me. Intel Inside Smartphones Two articles on SemiWiki.com (I, II) were written describing smart phone sells in China, and how companies are able to produce these phones that retail at prices of $50-$75 for the entire phone (and I believe these are not subsidized prices). The following tables taken from IDC.com

First I would like to point out that between 2009 and 2010, Apple (AAPL) and Samsung demonstrated 89% and 318% respectively, compared to 47% and 129% between 2011 and 2012. Also, Samsung's growth seems to primarily come from stealing market share from the other major players

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

1/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

excluding Apple. The "others" category, the place where the cheaper smartphones dwell, has seen sustained growth, and these "others" combined ship more smart phones than either Apple or Samsung. Given that these smart phones are considerably cheaper than what most of us will find in our Verizon store, I assume that Intel will not be participating in this category, leaving them mainly in play for the higher end smart phones. Intel Inside Tablets Source: IDC.com

You can see above that Apple owns the lion's share of the tablet market, followed by Samsung, Amazon (AMZN), and Asus. Note that the developing countries are seeing an explosion of cheaper tablets as well, but again this should not matter to Intel, since they are not in play in these cheaper markets in my mind. Amazon also aims to price their tablets very cheap, and Apple designs their own chips. I will assume that Asus, Samsung, and "others" such as Acer and Sony (SNE) are the only sockets up for grabs from Intel. What Happens if Intel Steals Considerable Market Share? Given that it appears $30-35 is the high end of smart phone and tablet processor range, excluding the expensive Surface Pro tablets, let's assume that Intel's processors are so much better they convince OEMs they're worth an ASP of $50, which represents a 67% premium over the competition at a high end of $30. Now let's also assume that Intel is able to grab all the sockets from Samsung smart phones and tablets. That's 215M smart phones, and roughly 25M tablets, for a total of ~240M devices. This represents an increase in revenues of ~$12B each year.

Given their $53B in revenue from last year, this represents a ~22% increase, if Intel is able to ship 230M devices next year, and charge by my estimates a premium over the competition. Most likely this will not be an overnight transition, and it will take a few years for this to unfold during a time when the PC market is stagnating; Intel derives a majority of their revenue from the PC market. Given that roughly 850M tablets and smart phones combined shipped last year according to IDC data, Intel would have to gain about 30% of the mobile market for this scenario to happen. With no high volume design wins announced yet, I find this highly unlikely. If Intel competes on price to gain market share, I feel they have to worry about lower GM. Gross Margins in Mobile SA contributor Ashraf Eassa published an article predicting margins on Intel's mobile chips. In the article he estimated Intel's Core CPU line selling for an ASP of ~$120. As for a second data point, Intel's mobile Core i3 ULV CPU is $287 per the ARK website. A discount of 50% over the ARK website places OEM bulk pricing at ~$145, so I will use $130 as an estimate for calculations based on the ASP of Core CPUs. For the time being, Intel is using 300mm wafers with plans to transition to 450mm. A 300 mm wafer has roughly 70,000 mm^2 of usable surface area. I will present a range of values that I believe should encompass where Bay Trail's revenue per wafer will fall within by performing a few sets of calculations. Intel's ULV mobile CPUs are 2 core, and come in an array of different GPU sizes. Here, I will assume an average die size of 170mm^2, which is slightly smaller than the 2 core chips with the larger GPU die area. As for Bay Trail, Nvidia's (NVDA) Tegra 4 is ~80mm^2, while Apple's A6X is ~120mm^2. Therefore, for Bay Trail die size estimates I will assume a die size between 80 mm^2 and 100 mm^2.

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

2/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

Regarding pricing, I will assume Bay Trail has an ASP of $30-$50 for OEM pricing. As die size goes down, yields tend to improve, so for ease of calculation, I will assume that Bay Trail yields at 100%, while Haswell yields at 80%. So for Haswell, using the assumptions above, the revenue per wafer should be ~$43,000 (70k mm^2/170 mm^2 * 80% * $130). Bay Trail should fall between ~$24,500 (70k mm^2/100 mm^2 * 100% * $35) and $43,500 (70k mm^2/80 mm^2 * 100% * $50). I know this is a pretty broad range, but these calculations are meant only as demonstration purposes since most of the information needed to make them accurate would be information that only Intel engineers and management would have access to. So in my best case scenario assuming a die size of 80 mm^2 and a $50 ASP, Intel will generate revenues per wafer ~equal to their Core CPUs. In my worst case, Intel is looking at ~60% of the revenue per wafer of Bay Trail compared to Haswell. And this is also assuming Bay Trail yields 20% better than Haswell. GM is calculated using revenue and cost of sales. I am neglecting the increase in cost of sales from packaging, binning and testing a larger number of chips per wafer for Bay Trail. In my best case scenario, it seems to me that Intel will be stretching it to generate an equal revenue per wafer when comparing Bay Trail to Haswell, so I am having a hard time coming to the conclusion that Intel will be able to maintain ~60% GM for their mobile products. This in and of itself is not necessarily a problem provided Intel can sell Bay Trail in sufficient quantities. Assumptions that will affect the accuracy of my estimations are inaccuracies in the ASPs used, yield percentages, and die size estimates. Power Consumption I have made the case before that the power consumption of the competition when compared against Intel needs to be taken relative to battery life and performance, since the end goal of focusing on performance/watt is to deliver the combination of maximum performance and time unplugged. Intel's 22nm process has an inherent power savings advantage. But there are other ways chip makers can make architectural changes to their chips to save power. ARM Holdings (ARMH) uses a "big.LITTLE" arrangement to turn off larger cores and gives control to weaker cores, but this is the less interesting solution to me personally. Qualcomm uses an asynchronous architecture. Rather than me trying to explain it, Qualcomm has provided a video that explains it better than any attempt I could make. These kinds of technology improvements have allowed Qualcomm to increase performance without dramatically increasing power consumption. Motorola (MSI) recently released a new phone with an interesting setup as well. The solution, the X8, features a cheaper custom Qualcomm SoC combined with 2 separate DSP (digital signal processors): a "contextual computing processor" and a language processor. The crux of this is that the contextual processor can serve as the main processor in standby to lower power consumption of the Qualcomm's already frugal S4. To assume that Intel will completely obliterate the competition in regards to power consumption would require looking at the mobile sector in a vacuum with your eyes closed, especially since we have not seen real world benchmarks that compare performance per watt, and we have no idea on pricing. Benchmarks Although recently mobile benchmarks are coming under heavy scrutiny (I,II), the available GeekBench scores for the S800, S600, and Tegra 4 compared to the z3770 (the Tegra 4 is an unfair comparison though because it's taken from Nvidia's Shield which is actively cooled). I have also included a benchmark with the outgoing generation Atom to give a point of comparison for Intel competing in the K900.

Bear in mind, this is a single data point (GeekBench), and the most important performance/watt metrics are missing. There are potential issues with GeekBench in benchmarking x86 floating point performance as well, but for the time being with all available data, I am not seeing a definitive

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

3/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

performance advantage for Intel. And regardless of what benchmarks say, I am waiting for real world tests to make a definitive conclusion. Conclusion I think to assume that Intel stock is going to take off and leave investors playing catch-up is analogous to saying that a turtle is getting ready to start sprinting. I have no opinion on Intel as a long term investment; I have been contemplating to adding Intel to my IRA and forgetting it's in there until I'm ready to go find a mountain lake somewhere to live out my days on. But for at least the remainder of 2013, I am not expecting much growth from Intel. And aside from some unforseen catalyst happening, I am waiting to see how well Bay Trail is received before I revisit my opinion. As far as smart phones, Intel would have to capture significant market share while charging more than the competition (given iSuppli's price of $20 for a Snapdragon 600). I have shown why I feel that Intel competing on price will drive margins down which will limit upside in the stock. The three largest vendors for smart phones are "Others", Samsung, and Apple (in order). Intel is probably not competing in the "Others" category given this is where the cheaper smart phones reside. Apple I feel is out of the question until it's announced they're switching to Intel. Apple has spent a significant amount of resources in developing their own processor, and rumors report that at least for the time being, Apple is going to continue using their own in house chips. Samsung uses a mixture of chips across all their devices, so I do not see Intel capturing every Samsung socket. That was for demonstration only. Major catalysts, like an announcement of Intel-powered iPads or iPhones from Apple, are the reason I keep cash on hand, so I can invest early and ride the momentum. Regarding tablets, Apple also uses in-house designed chips, and iPad variants represent the majority of the tablet market. Amazon tablets compete on price, leaving Intel out of the question here in my mind as well. This leaves primarily Samsung, Asus, and possibly other OEMs such as Sony. However, given the total tablet shipments last year were roughly 130M, and that Apple and Amazon represent roughly 75% of this market, that leaves about 32.5M sockets for Intel to compete for. And the competition is fierce. Qualcomm I feel is Intel's strongest competitor. They use a unique architecture that allows their processors to operate at lower power levels while providing good performance. Here, I will note that there are no independent reviews comparing Tegra 4, Snapdragon 800, and Bay Trail so nothing is definitive yet. I will revisit this conclusion if I see proof that Bay Trail is significantly ahead of the competition in performance/watt and competitive on price; I do not consider PR slides as proof. Considering that Qualcomm is the same size as Intel by market cap, has a very wide and deep moat of IP regarding mobile processors and communications, and Qualcomm is accustom to competing in mobile where $35 is the ASP of a high end processor, Intel will face hurricane-force headwinds from a competitor that is equally sized and heavily entrenched in mobile. If Intel is competing on price, I cannot see them maintaining GM, which I feel will limit the upside potential to the stock. Potential ways I could be wrong are if the die size of Bay Trail is considerably smaller than I have assumed, or if the performance is much greater than the competition so Intel is able to command a higher premium. R&D spending is accounted for between GM and operating margin, so Intel needs to maintain healthy gross margins to maintain a healthy R&D budget, or it starts eating into their bottom line. The biggest advantage I see going forward for Intel is their x86 ISA and a cheap, competitive x86 solution in Bay Trail. OEMs need to put together competitive Windows based solutions not subsidized by "bloatware" that can compete on price and functionality with tablets, and not give off the vibe of a disposable computer.

This article was sent to 46,282 people who get email alerts on INTC.
Get email alerts on INTC

Now Research Small-Cap Alternatives to INTC

by Darspal S Mann 1 Comment Aug 1, 2013

Intersil Delivers A Comeback Quarter, Is It Time To Buy? Atmel Needs To Show That Touch Can Be A Growth Business Again
by Stephen Simpson, CFA 64 Comments Aug 1, 2013

About this article

Emailed to: 46,289 people who get INTC real-time alerts, 131,058 people who get SA Tech Stock Report daily and 325,577 people who get Investing Ideas daily. Author payment: $0.01 per page view, with minimum guarantee of $500 for Alpha-Rich ideas plus free access to Seeking Alpha Pro. Become a contributor Tagged: Investing Ideas, Long Ideas, Technology, Semiconductor - Broad Line Problem with this article? Please tell us. Disagree with this article? Submit your own. Articles that link to this one

Revisiting The Potential For Bay Trailby Justin Jaynes 1.

More articles by Justin Jaynes

Nvidia: Significant Headwinds BuildingFri, Aug 9 New Never Settle Bundle And Potential GPU Refresh May Boost AMDThu, Aug 8 Advanced Micro Devices Responds To Kaveri Delays, New Never Se Tue, Aug 6 Revisiting The Potential For Bay TrailMon, Aug 5
INTC's management discussing earnings Intel Corporation (INTC) CEO Discusses Q2 2013 Results - Earnings Call Transcript
Wed, Jul 17 5 Comments

Comments (87)
All (87)Author's Picks (7) Justin JaynesComments (1360)
Wanted to add this before someone else top posts - no Intel did not miss the mobile boat, but now they are stuck playing catch up. They did miss the explosive growth phase that occurred. Tablets, taking away Amazon's Kindle and the Ipad, account for roughly 50M sockets or so (very rough quick estimate). AFAIK, mobile phones are a Q4, CY2014 Q1 event, so those will probably get baked into the stock later, but we *should* get a performance preview in tablets to see the kind of potential where Bay Trail architecture lies a quarter or so before the phone SoCs start showing up. Phones are where, in my mind, the real chance for growth is. But that's a couple quarters away. 4 Aug, 03:41 PM ! Report Abuse Like 5 Reply

investingInvestor Comments (384)

Justin, think about Intel if the x86 ISA had never become a legal monopoly. Unit sales and gross margins would be much smaller. This is the case for mobile and IoT industries. SoCs start at $1.00. Mixed signal chips are being used. DIY chips are appearing more frequently. Intel will be stuck in the past making monolithic chips in a DIY custom chip world. Intel is in the WRONG BOAT...a big expensive yacht aground in the small shallows, nowhere to go. With customers abandoning ship and x86 ISA. 4 Aug, 07:11 PM ! Report Abuse Like 6 Reply

Justin JaynesComments (1360)

@Investing - you are honestly one of my favorite posts, and I always love your input.

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

4/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

I agree, and that's why I sold my INTC position and moved everything to AMD. AMD is embracing ARM architecture, and custom silicon. There are a few things that I think could help, and one of those being that Intel made their chips compatible with Android. I included the Lenovo k900 to show users that if you look at benchmarks running clovertrail/clovertrail+ in windows vs android, it seems to run just as well. The one thing that makes me hesitant is I do not (for reasons stated in my article) think GM will maintain at 60%. If Intel cannot maintain good GM, they cannot fund their R&D as well to maintain their process lead. That's why I'm waiting until later to see if this ship can come ungrounded, so to speak. 4 Aug, 07:33 PM ! Report Abuse Like 1 Reply

Rudester Comments (1195)

The Microsoft tablet sales have been worse than anybody thought. This time around Microsoft gave some visibility into the composition of tablet revenues. It seems that the majority of that revenue was not from tablet sales but from patent royalties (primarily Samsung) on some tablet related patents that Microsoft has. This of course, unfortunately, reduces the tablet CPU sales that had been attributed to Intel. Dividing MS Tablet Revenues by their ASP overstates the number of tablet CPUs sold by Intel. 4 Aug, 10:38 PM ! Report Abuse Like 2 Reply

Justin JaynesComments (1360)

OEMs aren't helping the situation either. http://ars.to/1843tQL Review: First 8-inch Windows tablet is a device that shouldnt exist thanks for the comment rudester!
4 Aug, 10:49 PM
! Report Abuse

Like

Reply

pfifla1Comments (349)
just took back the windows 8 tablet i bought last week. absolutely worthless piece of hardware! Hoping the new chips Intel will release at xmas will bring the processing power up to where it needs to be to make the unit run smooth. 5 Aug, 07:27 AM ! Report Abuse Like 0 Reply

flux8Comments (122)
Excellent article Justin. Very objective and level-headed view of Intel's realistic prospects. I agree with pretty much all of it, except that I think your scenarios are a bit too generous with regards to potential market share and revenues. If Intel prices Bay Trail at a 67% premium over the competition, Bay Trail will be DOA. No OEM is going to go for that. Even if they have more processing power, as an OEM, how do you market that to the consumer public that isn't currently complaining about tablet processing power? "Intel Inside" doesn't mean anything in the mobile market. Okay, so the next argument will be that it can run Windows 8. So what? Is there a huge demand by buyers of tablets to run Windows 8? To my knowledge there isn't, so why would OEM's pay a premium to do so (a premium for both the chip AND the OS)? Then either the OEM or the consumer has to pay for a "feature" he/she never asked for or needed. It's like telling a buyer of an automobile that $200 of the vehicle's cost is due to the satellite radio, and that while it's an "option", you can't choose to NOT buy it. Except by going to a different car company. I feel like a big part of the problem in the recent debates over Intel is that most of the pro-Intel articles are being written and supported by tech geeks who can't understand why anyone might not care about paying more for more processing power. In my experience, many tech geeks just can't fathom that >90% of the buying public don't view tech gadgets in the same way they do. From my experience, most people I know who are buying tablets don't know and don't care what's under the hood. They just want it to be able to run apps, last the entire day on a single charge, and cost a reasonable amount. If the cost difference isn't something they can easily see or feel, they won't pay for it. 5 Aug, 01:09 PM ! Report Abuse Like 1 Reply

Justin JaynesComments (1360)

Flux - Thanks for the compliment!

5 Aug, 01:38 PM

! Report Abuse

Like

Reply

Justin JaynesComments (1360)

@All Just submitted an updated piece to this article http://seekingalpha.co... New GeekBench benchmark populated today showing improved performance for BT-T 5 Aug, 10:06 PM ! Report Abuse Like 0 Reply

mikeurlComments (389)
Intel missed the boat, of course they did. But maybe it is a boat they don't even really want to be on. All of these devices are becoming more and more data hungry

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

5/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

and they use more and more cloud services. In order to feed that demand there have to be servers. And powering those servers are Intel chips. Intel is still the 800lb gorilla in the datacenter. Not only that but once the market is clearly shrinking in PCs regulators may finally allow Intel to acquire AMD. That would actually tend to boost cash flow from the x86 line. Intel is in a rough spot right now because they had become addicted to the marginal growth in PC sales which sent their total revenue to the moon. That is now gone and they're adjusting. 4 Aug, 04:09 PM ! Report Abuse Like 3 Reply

Justin JaynesComments (1360)

server revenue is their second largest contributor. 2014 they will be competing against ARM in earnest in both mobile and data centers. 4 Aug, 04:20 PM ! Report Abuse Like 1 Reply

SA Editor Samir PatelComments (134)

"2014 they will be competing against ARM in earnest in both mobile and data centers." There's an interesting dichotomy in market perception here: despite little to no evidence of ARM-based microservers gaining any traction in the data center, everyone seems absolutely certain that ARM chips will achieve astronomical success in this arena. Despite pretty good evidence of Intel gaining traction in smartphone and tablet processors, everyone's absolutely certain that Intel chips will fail miserably in these applications. Kind of inconsistent, isn't it? The truth is that most market participants are focused on the ARM-thrashes-Intel narrative, and actively dismiss data points that don't fit their existing conception of how things are. 4 Aug, 04:30 PM ! Report Abuse Like 13 Reply

Justin JaynesComments (1360)

@Samir - that is not what I am getting at in the slightest. Read Anand's reviews on 32 bit based ARM servers from Calxeda: http://bit.ly/Z0nqV0 "Right now, the limited performance of the individual server nodes makes the Boston Viridis attractive for web applications with lower CPU demands in a power constrained data center. But the extremely low energy consumption and the rapidly increasing performance of the ARM cores show great potential for Calxeda's technology. Short term, this is a niche market, but in another year or two this style of approach could easily encroach on Intel's higher end markets." I disagree with the opinion that the general consensus is that Intel cannot compete with ARM in mobile - so many tech sites write that Intel will thrash ARM in mobile. Maybe it's just the articles I have read, but I was under the impression everyone assumes Intel will dominate the competition next year. http://bit.ly/16erX73 http://seekingalpha.co... http://bit.ly/14vXDH4 All of these links are regarding the AnTuTu benchmark where it was found out that the compiler optimizations found part of the code to be erroneous and optimized out part of the benchmark giving Intel an artificially high score. Things are rarely mutually exclusive. I expect Intel to compete in mobile, and ARM to compete in the data center. I am focused on the fact that Intel *will* gain market share in ultra mobile (smart phones/tablets) while their PC sales have declined about 10% and are not forecasted to return to their 2011/2012 peak (see my IDC link below). Couple this with the fact that ARM *will* be competing with 64 bit server solutions next year, which will put pressure on Intel's Data Center operating group. Who knows how successful ARM will be, but if nothing else it could at least cause pricing pressure in this segment. You have several factors going on here 1) PC sales have peaked and are stagnating and are seeing pressure from cheaper tablets which could affect ASPs of both AMD and Intel's highest grossing operating segments 2) Intel will see more pressure next year in server markets than they're accustom to 3) Intel has a viable solution for ultra mobile devices in Bay Trail and Merrifield that will undoubtedly gain some design wins. And for this Bay Trail part we have very little data on performance, and ~0 on power consumption and pricing. 4) Somewhere out in left field there are the things such as Intel toying around with TV broadcasting. I whole heartedly believe Intel will make inroads into mobile. But there are many other factors at play here, so I more question how much growth specifically near term we can expect. "But for at least the remainder of 2013, I am not expecting much growth from Intel." -- that is also why I made sure to include the comment that we will see real world results in tablets prior to smart phone SoCs. Given my assumptions of Bay Trail not being in iPads, cheap tablets, or Kindles, that leaves about 30% of the total tablet sockets to compete for in 2013. I believe Intel owns 85% of the PC market. Given this, and the fact that roughly 350M PCs shipped last year compared to an estimated 320M this year, if Intel maintains 85% market share, Intel can expect to ship roughly ((351-322) * .85) 25M less CPUs this year (based on IDC numbers). So I more question how much traction Intel will have to gain in their smart phones and tablets. I

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

6/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

expect them to be more competitive in tablets than in smart phones given the fact that tablets are better suited for running Windows, and tablets represent a smaller market. 4 Aug, 05:22 PM ! Report Abuse Like 1 Reply

Justin JaynesComments (1360)

@Samir "server revenue is their second largest contributor. 2014 they will be competing against ARM in earnest in both mobile and data centers." - Long story short, I specifically used the word competing because I bet Intel will have a competitive solution for mobile, but I also believe there will be competitive ARM solutions in data center, so I'm not trying to come across as inconsistent at all. What are your thoughts regarding Intel in mobile and ARM in data centers? 4 Aug, 05:29 PM ! Report Abuse Like 0 Reply

ash187Comments (102)
Justin, in that anandtech article, anand mentions software side to it and the lead intel has there; small startups may be willing to recode and try the software solution that calxeda comes up with, I don't think enterprise will take that risk. It'll be just like that old adage, "nobody got fired for buying intel" And for all that talk of Facebook moving to arm servers, that served to hype up arm server talk, but just recently intel came out and said Facebook and ebay are big customers for custom designed chips for micro server use. With krzanich at the helm, intelmis going to prioritize these customized CPU deals and big customer relationships, and that ultimately may keep the odds titled in their favour. gigaom.com/2013/07/22/...
4 Aug, 07:17 PM
! Report Abuse

Like

Reply

Justin JaynesComments (1360)

@Ash - thanks for the comment, but the link is not coming through. Would you send it to me via PM? 4 Aug, 07:34 PM ! Report Abuse Like 0 Reply

Justin JaynesComments (1360)

@ash regarding servers, i will also point out that Intel is in the same position where Sun and others were - dominating server market share - and Intel came in and completely turned their world upside down. My only point in saying this is I am waiting until next year before I pass judgement and say definitively ARM has no chance. I understand Intel's advantages, but I almost always refuse to exclude things believing in absolutes. I think that may be why I take flak quite a bit. Right now I agree with Anand that these will be a niche market, but I am curious to see where they go. 4 Aug, 07:54 PM ! Report Abuse Like 1 Reply

SA Editor Samir PatelComments (134)

Briefly: 1) All data I've seen points to Silvermont-based chips being very competitive with (and likely superior to) same-class ARM-based designs. Given Krzanich's focus on mobile and intention to bring Atom onto the same schedule as Core, Intel's chips and rate of improvement will likely continue to outpace competitors', given Intel's significant process node advantage. 2) I have not yet seen a credible ARM chip for the data center. I've seen a lot of promises by certain companies, and a lot of not-delivering on those promises. You have to remember that with a lot of these 2014 launch dates, these chips aren't competing against anything in the current market - they're competing against the next generation of Xeons and Atoms. While I think Intel's a great company, I'm not wedded to my investment and am always on the lookout for data points that contradict my thesis. Haven't seen any yet (though I will grant that declining PC sales would undoubtedly be a negative for INTC). If you have any links that suggest a credible threat to Intel's DCG from ARM microservers, I'd certainly be interested in reading them. Ultimately, I view INTC as having three key attributes: 1) exceptional technology, 2) strong market opportunities for those technologies, and 3) a valuation that doesn't account for 1 and 2. 4 Aug, 08:02 PM ! Report Abuse Like 5 Reply

SA Editor Samir PatelComments (134)

By the way, I definitely agree with you that real-world performance is superior to benchmarks. As far as Geekbench, though, you can get it to spit out some weird results... a while back, someone showed me one comparison where an NVIDIA Shield was apparently outperforming an i7-4770k. Clearly something's a bit off there. 4 Aug, 08:12 PM ! Report Abuse Like 0 Reply

dRINTELComments (87)
Arm will not and cannot compete with Intel in the server market this is just a pipe dream... 4 Aug, 09:10 PM ! Report Abuse Like 0 Reply

Justin JaynesComments (1360)

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

7/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha
thanks for clarification Samir -

I wasn't sure what you were getting at by the dismiss data points comment. If you look through my article disclosures you will see that I was long Intel, and have since sold my position. Ultimately it comes down to how Intel will be able to compete in smart phones in my mind, since it seems tablet sales are cannibalizing PCs. Just based on my complete guesstimation of $50 as an ASP of Bay Trail-T, and Ashraf's $120 ASP of desktop CPUs, tablet sales would have to outpace lost PC sockets at a >2:1 ratio. I am not long qualcomm because I have most of my money tied up in AMD, but research into Qualcomm was another huge reason. Intel is competing in a market where $30 is high end, but I look at every smart phone SoC sold as incremental revenue. Based on their smart phone SoCs not appearing until next year, I plan on looking at tablet performance as a preview to see what to expect in smart phones. I plan on revisiting Intel after I see what news comes out of Hot Chips and AFDS 2013 regarding HSA, and see real world benchmarks of Bay Trail. I like Intel's prospects post 2013, and I could be wildly off, but I am looking at 2014 and beyond as when I feel they have potential for real growth, and plan on revisiting Intel after I see how Bay Trail does. Now I hope that if Intel wins iPad/iPhone sockets it's not before I re-instate a long position :) 4 Aug, 09:11 PM ! Report Abuse Like 0 Reply

techy46Comments (4060)
Intel did not miss the mobile boat they purposely decided not to get on the boat and cannabilize their PC chips prices with $30-50 Atoms prior to combined PC, smart phone and tablet unit sales making the move accretative as the author points out. Now taht the PC and mobile boats are one and the same they have no alternative but to turn direction and paddle really fast. 4 Aug, 09:15 PM ! Report Abuse Like 2 Reply

ash187Comments (102)
@Justin My ipad was acting strange, wasn't URL shortening. Here's the link: http://bit.ly/13evMbP You do raise a valid point about Sun and disruption in the server market; there may be some space for ARM servers to take hold, but enterprise lock in is the big beached whale that they have to move. I would say back then Sun's RISC/SPARC servers couldn't compete against Intel, because intel were offering a) MUCH better pricing b) better software ecosystem. Calxeda's custom solution can't compete on price at the moment or even software, and unless they start to build volume, they never will. I believe AMD will capture a lot more than these small bespoke makers. Which makes going long AMD/INTC a lot more palatable to me over the next year. Appreciate your articles, always a good read!
5 Aug, 03:45 AM
! Report Abuse

Like

Reply

amagusComments (18)
Studies have the microserver market at between 10%-15% of the overall server market by 2015-2016, and they will never take over the market as they are only suitable for certain types of workloads. With Avoton, Intel is going to have a significant time to market advantage over 64-bit multi-core ARM solutions, with probable technical advantages too. So ARM is going to be later with 64-bit solution, with probably no technical advantages vs Intel, with minimal software ecosystem (vs Intel's which is fully built out), minimal OEM/ODM network, entering a market that is still only going to be a fraction of the server market in a couple of years. Yeah they might be cheaper but how much cheaper can it be when companies still need to recoup the R&D from developing ARM based enterprise solutions, which will not be particularly high volume. Also, remember in the enterprise space, the cost of CPUs is a drop in the bucket when compared against the cost of software, services, storage, memory, etc. I'm not particularly the most bullish person when it comes to Intel's chances of breaking into the mobile space, but I think ARM has even less of chance of breaking into the datacenter space. 5 Aug, 01:56 PM ! Report Abuse Like 0 Reply

Justin JaynesComments (1360)

@amagus - thanks for a well put-together rebuttal Like

5 Aug, 02:11 PM

! Report Abuse

Reply

mikeurlComments (389)
With respect to servers it helps to remember that Intel both designs the chips AND build's the fabs. That is an enormous advantage when you have clients that MUST have chips that work. It is also an advantage when it comes time for the next "leap" in design/fab technology. That isn't to say "don't worry"; every good investor worries. But I don't think I'd be worried about Intel losing the datacenter anytime soon. But ARM is a credible competitor with a ridiculous amount of cash...they will certainly keep the pressure on. What I'd be looking out for is whether ARM starts to deploy

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

8/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

some of that cash to start building its own fabs...then I'd be more worried. 10 Aug, 12:05 PM ! Report Abuse Like 0 Reply

Rob Tanner Comments (460)

Mediatek quad A7 - $8
4 Aug, 04:14 PM
! Report Abuse

Like

Reply

Ashraf EassaComments (6359)

Rob, Gee whiz, I guess Qualcomm is wasting all of that time developing high end Snapdragon chips with custom Adreno graphics, a high performance Krait core, and the works. It's not $8 though (Snapdragon 800 is ~$43). But hey, performance doesn't matter, and quad A7's for all, right? lol what nonsense. 5 Aug, 07:56 AM ! Report Abuse Like 2 Reply

manfredthree Comments (530)

@Ashraf... thanks for the sanity. Lots of folks are focused on wrestling away unit sales, but in our view only QCOM is lasered on wrestling away gross margin through superior offerings for superior performance. They will be happy leaving the low end commodity side to be price-warred by the nondistinguishable 5 Aug, 06:11 PM ! Report Abuse Like 0 Reply

DigiHound Comments (88)

This is well written, solid exposition. Yes, it's speculative, but it's informed speculation from a series of logical starting points. The point of Medfield was to show that Intel could build a competitive midrange part. It did so. The point of Bay Trail is to demonstrate a competitive higher-end part. A competitive higher-end part doesn't automatically mean mass uptake or interest from OEMs, but Intel has plenty of carrots it can toss in on the software and optimization side. Still, anyone predicting either nothing but upside or the quick collapse of entrenched ARM players is overly optimistic. 4 Aug, 04:23 PM ! Report Abuse Like 3 Reply

Justin JaynesComments (1360)

Thanks Digi! I definitely think Intel will be competitive, but I don't think they're going to roll into mobile and steal 50% market share their first year. The biggest thing that could boost Intel is Apple switching to Bay Trail in their iPads and Merrifield (whatever their 22nm phone SoC) for iPhones. I whole heartedly plan on revisiting Intel for a long position after I see real world results from Bay Trail, probably sometime in Q1 or Q2 before 14nm silicon releases, once I see how 20nm planar from the competition compares. 4 Aug, 04:43 PM ! Report Abuse Like 2 Reply

dRINTELComments (87)
They don't need 50% percent of the market at 15% there stock will start growing like it should... 15% next year 30% a year later then who knows from there...... 4 Aug, 09:10 PM ! Report Abuse Like 1 Reply

Justin JaynesComments (1360)

@dR Intel let's hope. If Intel makes significant inroads into mobile I'll be a huge buyer. I'm okay with missing a 15-20% run in the beginning if I get in at $26/27 on the way to $35 or so. 4 Aug, 09:19 PM ! Report Abuse Like 1 Reply

GeorgemikaComments (65)
I have paid very close attention to Intel's comments in company events including earnings calls. Here's my understanding. Intel can sell their smartphone chips and tablet chips at a small premium (not double) of what competitors sell them for with much better performance and comparable battery life. As for interest by customers, they are currently being told by customers that they can't wait for Intel to release their latest products such as the baytrail and the merifield. For growth purpose, the smartphone market can slow down to no growth at all and the same can be said for tablets, yet Intel's market share growth will give them the growth they need to attract new investors. And if we want to quote IDC, even they have claimed that PC numbers, such as laptop sales will grow to around 350 million units in the next 3 years. At the worst case, even a flat revenue for this group in the foreseeable future, will give Intel a very strong base while stealing huge market share in mobile area. All in all, Intels revenues may exceed the $60 Billion mark for 2014. And even if it is delayed and it happens in 2015, that's much better than what is expected. So it's $53 Billion expectation for 2013, $55 Billion for 2014 which is a 4% growth year over year. At $60 Billion for 2015 (which is very much possible), that's a revenue growth of over 9% year over year. After that will be the continuation of gaining mobile market share by Intel which could push revenue anywhere from $70 Billion to over $80 Billion. The key for me is that if Intel is willing to go after the market that involves processors, they will dominate it. I have full confidence in that outcome. Gross margins? They made it very clear that gross margins will remain in the 55% to 65% range. Or 60% midpoint. 4 Aug, 04:26 PM ! Report Abuse Like 2 Reply

Justin JaynesComments (1360)

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

9/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

@George - these are a few rebuttals: "Intel can sell their smartphone chips and tablet chips at a small premium (not double) of what competitors sell them for with much better performance and comparable battery life." - After re-running AnTuTu Intel's scores dropped. Geekbench does not show Intel having better performance. Intel can claim better performance and battery life - but there's no proof yet, and the benchmarks we do have point to a competitive scenario, not a unanimous victory. I plan on revisiting this sometime later when there are real world usage scenarios. Regarding GM, again, they have not sold a single product yet. GM will depend on how aggressively they want to price their parts when going after marketshare. Again, nothing is set in stone until it happens. Regarding PC sales coming back and IDC forecasts - IDC forecasts PC sales barely growing between now and 2017 from 322M to 333M in 2017. This is down from an average of ~355M for 2011/2012. Intel owns roughly 85% of the PC market (I believe), and revenues in 2012 of $53B, and about 65% of their revenue comes specifically from PCs. Given a PC revenue of $34B last year, I roughly expect (322/355 * $34B) $31B in revenue this year if IDC numbers turn out to be true. This would be made up for by Bay Trail sales back half and expansion in the data center in back half, which is why I feel Intel's management given flat revenue guidance is believable. IDC Link http://bit.ly/12grru7
4 Aug, 04:40 PM

! Report Abuse

Like

Reply

GeorgemikaComments (65)
I don't know if you are looking at current chips for sale. I'm talking about the baytrail, which is not even out yet and the Merifield for smartphones which should be formally introduced in new smartphone products in the consumer space during the 2014 MWC. This is what Intel is claiming that performance will be much better than the best out there. Both are on 22nm process and Silvermont architecture. Like I said, I'm confident that Intel knows much more about what they are talking about. Even IDC has been way off in estimates on PC sales. I trust Intel. They know they will win in the end and I believe they will. They just will not enter a market which they think they will not dominate over time. Given Intel's possibilities in the future, this is the best time to bet on the stock. 4 Aug, 05:51 PM ! Report Abuse Like 2 Reply

GeorgemikaComments (65)
Justin, You say you may initiate a position in Intel in the next 72 hours. Did you read Ashraf's article a day ago titled Intel: This may be your last chance to buy. Meaning that you don't want to wait while everybody else believes in Intel as well. The stock will have appreciated accordingly by then. For now, I would just take the many clues that are available the show Intel is on track to gain some significant market share in a very short time. If you are truly interested in the stock and are trying to time it, just read that article. The guy knows what he is talking about. Intel many times has surprised even its most bullish investors when it comes to earnings. 4 Aug, 05:58 PM ! Report Abuse Like 0 Reply

Justin JaynesComments (1360)

@George- the leaked benchmarks in my article are supposedly of the Bay Trail-T z3770 taken from GeekBench. (browser.primatelabs.com if you'd like to verify for yourself) - Digi has also reminded me that production silicon will likely perform better than the ES Bay Trails out right now, so those benchmarks above have two built in biases - it may not give x86 based CPUs a high enough floating point performance score, and there is a chance that actual silicon shipping later will perform better. But the Snapdragon 600 and 800 samples I pulled I believe were pulled specifically from phones and not reference devices (Sony Experia Z and Samsung Galaxy for S800 and S600), and I mentioned the Tegra 4 benchmark is skewed. See my post to Mr. Blair below - I don't necessarily disagree with anyone that eventually Intel will takeover the semiconductor world, I just don't think it will be 2013, and I'll revisit this Q3/Q4 when I see how Bay Trail production silicon does, and later next year when there is 20nm enemy silicon to compare to 22nm tri gates, and finally 14nm next year. 4 Aug, 06:02 PM ! Report Abuse Like 0 Reply

Justin JaynesComments (1360)

I said that I may initiate a position in the next 72 hours to play around in my IRA. There isn't much money in there, but I may look at moving a very *small* amount of money into Intel. I am personally expecting 2014 to be the growth story, but may initiate a small position this year on any healthy dips and then at the beginning of next year with my full contribution to my IRA. 4 Aug, 06:08 PM ! Report Abuse Like 0 Reply

dRINTELComments (87)
The real take over in phone market will not be until 2015 everything until then is just gravy...... 4 Aug, 09:10 PM ! Report Abuse Like 0 Reply

Michael Blair Comments (1230)

@Justin-Jaynes - you are pretty convincing all in, but I am betting that Intel makes meaningful inroads. Someone will make money in mobile in the future and my belief is that Intel has the lowest cost. Price is another story. Can Intel meet Qualcomm

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

10/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

on price and performance is the real issue. From what I see they can. Will that make the stock more valuable? Time will tell. I also see an upsurge in mobile devices like hybrids and ultrabooks now that battery life is less an issue, and believe tablets will decline in relative terms. 4 Aug, 05:16 PM ! Report Abuse Like 3 Reply

Justin JaynesComments (1360)

@Michael - to be clear I think Intel will make meaningful inroads, but I personally think that's more of a 2014 event. I think the "end game" that most INTC hyper-bulls are hoping for is Intel shipping 14nm silicon and the competition shipping a terrible 20nm product or getting stuck on 28nm. 4 Aug, 05:24 PM ! Report Abuse Like 0 Reply

leechyComments (11)
@michael blair where do you see an upsurge in Intel and how do you know about their battery life makes less issues than the powerful competition coming from the high end QCom chips and the lower end allwinner,mediatek chinese that are creeping up the markets? your wishfull thinking ?! tablets will decline in relative terms ? when that happens why would Intel benefit with their strategy of entering this market with baytrail-t? if a decline is going to happen my guess would be not before 2015. not much time for intel to steal the honey... 4 Aug, 06:36 PM ! Report Abuse Like 0 Reply

Luka PreradoviComments (71)

Z3370 is nothing special, it is a chip with 2w SDP while in reality it is a 4watt chip and it seems it is not faster than AMD's A6 1450 in CPU and it gets destroyed in GPU. 4 Aug, 06:21 PM ! Report Abuse Like 2 Reply

experienced Comments (322)

Justin Jaynes' comments are well founded and thorough perhaps more so than any other comments I've read regarding Intel's entry into a market heavily dominated by the likes of ARM, APPLE, Samsung, and Qualcomm. Real world testing of these components in production model smartphones and tablets will be far more meaningful than benchmark test results revealed so far. In particular, the performance of a processor chip cannot be evaluated in isolation, especially because of the increasing number of system-on-chip devices containing both the modem and processor, along with power management and amplification. In the tablet market, there appear to be two main categories of devices those with baseband modems and processors, capable of wireless data communications through assorted service providers, and those with Wi-fi access only. In both these markets, Qualcomm, for example, has developed chips that contain all the functions, not just the processor alone. These combined chips reduce space, use less power, and cost less than separate chips with similar functions. These new chips are likely to make it even more difficult for Intel to compete and still receive the kind of revenues per chip that lead to gross margins anywhere near 60%. In short, Intel, though having cutting edge process technology, is at an extreme disadvantage entering markets dominated by companies that easily compete with Intel in size, available capital, and technically savvy personnel. 4 Aug, 07:36 PM ! Report Abuse Like 3 Reply

Justin JaynesComments (1360)

@Experienced - thank you much for the kind words =] I whole heartedly believe Intel's process advantage will help tremendously in tablets, where tablets can be substituted for PCs and baseband does not matter as much. And as I have pointed out, throwing out iPads (unless we hear otherwise), Kindles and cheap tablets, Intel has about 40M sockets they can compete for based on 2012 data, so probably higher during 2014. But if tablets are truly replacing PCs, how is this affecting Intel's core business? In smart phones, I think Qualcomm will be much more of a challenge, and this is strictly because of baseband considerations, and the fact that not a ton of processing power is truly needed in smart phones *yet*, and Qualcomm powered smart phones already offer good battery life. 4 Aug, 07:43 PM ! Report Abuse Like 1 Reply

Just Some GuyComments (72)

Excellent analysis, thanks. Technically, I've wondered how far down Intel can push their architecture, in power, performance, and price. I think the lowest model they've announced is 5 watts, single core, 1.1ghz, presumably with modest GPU. I wonder if they could push that to 2 watts, 0.8ghz, and even modest-er GPU, targeting low-end phones and unit prices in quantity under $20. Based on nothing very particular, I think you may have overestimated the die size for BayTrail, so there may be a little more room for dollars per wafer, too. It's likely a question of just how hard Intel culture let them work the problem, even the mundane issues like die size. Wish I had more/better info on a lot of these aspects. 4 Aug, 08:10 PM ! Report Abuse Like 0 Reply

Justin JaynesComments (1360)

@Just - thanks!

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

11/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

I gave a range of values that I thought should encompass it. I expect it will be closer to the 80 mm^2 than 100 mm^2, which would put it at the same size as Tegra 4. But with no concrete data it is a *very* rough assumption, so that's why I said it could throw my calculations off. I have asked Ashraf to steal one if he attends IDF so he can benchmark it and give us actual die size :) 4 Aug, 08:20 PM ! Report Abuse Like 0 Reply

Ashraf EassaComments (6359)

Justin & Just Some Guy Bay Trail-T will come in 2W and 2.2 - 2.4W flavors. The 5-10W parts are for low cost notebooks/desktops and include additional I/O functionality built onto the die (SATA, PCIe, etc.) that isn't there on the -T version. The chip launches at IDF, so I'm sure a lot will go public then. That is why I am halting all coverage until IDF. I do plan to attend the conference in person and plan to have plenty of exclusive coverage for SA. @ Justin...would really not use those Geekbench results as any sort of datapoint given how horribly broken the test is on Intel processors. 4 Aug, 08:26 PM ! Report Abuse Like 1 Reply

Justin JaynesComments (1360)

@Ashraf - measure the die while you're there :D Like

4 Aug, 08:28 PM

! Report Abuse

Reply

Ashraf EassaComments (6359)

@ Justin Intel will be giving a full session on the Bay Trail-T SoC (as well as sessions for each BYT-M/D, and BYT-I)...perhaps I won't have to measure it myself and the kindly engineers will just tell us how big it is :D (If not, I'll have to be real stealthy about sneaking away with a sample :P) 5 Aug, 08:00 AM ! Report Abuse Like 0 Reply

Justin JaynesComments (1360)

Ashraf - Are Bay Trail devices showing up in Q3 or Q4? Tabs are end of Q3 beginning of Q4, phones are probably mid december or beginning of next year, correct? 5 Aug, 10:03 AM ! Report Abuse Like 0 Reply

Micro FocusComments (2)

A fairly good article. A couple of points that are often missed, understated: - ARM-based chips are typically very cheap (the $20-$30... range mentioned). I don't believe Intel has it in itself to live in a world where thin margins are made on parts that sell about 1/10th of what they're used to. - The radically different software required for an X86 processor compared to the ARM architecture coupled with the vast success of the incumbent ARM in cell phones and tablets as well will continue to dog any transition to more power-thrifty X86's. There's just too much s/w out there that's long-dependent on the ARM architecture. - ARM has a similar problem breaking into the micro server space, but there are far fewer OEMs in servers to work with and that s/w is often very customized & not shared a lot. Therefore if ARM can convince one or two OEMs to cut across some DB & search engine s/w, they can make some progress in server space. But this is not a slam dunk either. - Would those who think Intel has a good shot at cell/smartphones think that ARM has a good shot at the PC market? Why not? Oh, the PC s/w keeps the ARM arch out. So apply the same logic to phones and you see why it's unlikely that Intel will make it in phones. One big difference is Intel has the huge $$ to continue to throw at the problem and may eventually get there. But over many years now I've seen Intel still just have about 4 token phone wins to throw out on the table. You can look at bloaty Windows and see that it never made it out of the PC space either despite numerous attempts over the years in traditional embedded systems. - Generic performance benchmarks (let alone flawed, inappropriate, or tricked up ones) and power claims (which are extremely difficult to model in mobile phones) even if they all showed a "win" for the X86 column still may not overcome the stickiness of the mountain of s/w. I return to the ARM-in-a-PC question. - X86 *might* have a chance in the tablet space, if consumers can be convinced to look for "the familiar Windows" mannerisms in their tablets, relating them to laptops. But so far that doesn't seem to be happening - a tablet is a consume where a laptop is a create platform - and Windows 8 has had a very rough start trying to have a go at it from the opposite direction (let's make your PC look like your phone). But at least I'd say tabs are a more likely, if smaller, space where Intel has a chance of gaining some ground. But are they trying there or only Ultrabook'ing down into the space? It's all a difficult potential transition. Intel's best shot at mobile was with the old Xscale ARM architecture that they abandoned 5 or so years ago (Marvell has it now). On the other hand, PCs (not just laptops), servers, and other X86-based endproducts should benefit from all the power-conservation and efficiency gains that Intel is making by focusing so hard on the mobile space. 4 Aug, 09:04 PM ! Report Abuse Like 1 Reply

Justin JaynesComments (1360)

@Micro - regarding ARM taking aim at PC spaces, have you seen the android dongles? http://amzn.to/13yTy5X

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

12/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

It's already happening. You can buy dongles that will turn your TV into an android based PC via the HDMI input, and they're *CHEAP* 4 Aug, 09:33 PM ! Report Abuse Like 0 Reply

Micro FocusComments (2)

Some early Netbooks were ARM based. But now they are nowhere. I'm not saying there aren't small slivers of PC-like devices based on ARM, but they're very specific, don't run off-the-shelf MS Office, usually Linux-based, or like this are there to run streaming media... Not a "runs everything" standard PC. *I* might buy one but I'm a techy - Mr. Tech Support for numerous "normal people" I know who don't understand why they get odd banners from McAfee appearing on their laptop or what all those little images are at the edge of their screen. Raspberry Pi isn't for your average guy / gal. These are not 100MU markets. 5 Aug, 02:17 AM ! Report Abuse Like 0 Reply

Armchair EconomistComments (2)

Micro Focus, The software issues for x86 smartphones vs ARM PCs are not analogous. Android already runs on both architectures. I understand there are a few little pieces of ARM code here and there that help performance of certain apps, but Intel is probably porting those already. So any android phone vendor can switch from ARM to x86 and consumers may not even know or care. They just know their battery life doubled. On PCs, on the other hand, most users still want MS Windows, not Linux. Windows 8 supports ARM PCs in theory, but I don't think a lot of success is predicted for that product. I think all the analysis of INTC underestimates how many users are going to upgrade their high-end laptop in the next 12-18 months. These message boards are busy debating the nitty gritty of benchmark accuracy and MIPS/Watt and gross margins. None of that means anything to Joe consumer until he sees a guy next to him with a laptop that is lighter, and snappier, and has 12 hour battery life. 5 Aug, 09:29 AM ! Report Abuse Like 1 Reply

Justin JaynesComments (1360)

@Arm - undoubtedly a lot of people will upgrade - I upgraded to a haswell powered MBA first chance I had. But look @ IDC data - IDC stated in a fairly recent release that in many developing countries tablets are causing consumers to forego PCs. With Haswell launching in Q2, we should have an idea of how many users plan on upgrading by Q3 financials, but based on flat revenue guidance for the year I don't think INTC management is expecting too many either. 5 Aug, 09:44 AM ! Report Abuse Like 0 Reply

Retired Securities AttorneyComments (181)

@Armchair Economist >>None of that means anything to Joe consumer until he sees a guy next to him with a laptop that is lighter, and snappier, and has 12 hour battery life. Yup. That's the key.
5 Aug, 10:25 AM
! Report Abuse

Like

Reply

grrrrrr Comments (4)

Hmm, let's see if Ashraf also gives some comment about your detailed calculations... 4 Aug, 09:07 PM ! Report Abuse Like

Reply

axarmComments (6)
First with you using i3core for pricing. Baytrail will replace the lower end Celerons and Pentiums, which sell from $40 to $80. This processors are based on the core platform and have margins less than the 55 to 65 percent(it takes a lot of these to bring the ASP down for the $4000+ high performance processors). The margins for the much smaller Baytrail platforms will be higher for Intel. As for the phone market, Merrifield will have an integrated "stand bye hub". Because they are only dual cores, their energy consumption will be much less than any high end ARM processor in the market(Meditek use low end A7 and even the 8 core will not be competing in the high end market). Intel will also have a single core phone platform, which should be highly integrated and will compete in the lower mid range phone market. As for your benchmarks, these are old numbers and newer leaked information show the Baytrails running at a higher GHz. Your benchmarks show that Baytrail is really no better than the Clovertrail and everybody(who has look at the design) knows that this platform will easily double that performance.
4 Aug, 09:12 PM
! Report Abuse

Like

Reply

Justin JaynesComments (1360)

@axarm - can you provide links to all these newer benchmarks? These are the most recent I have found. http://bit.ly/1b5G3ML The z3770 pulled from GeekBench was uploaded on July 23rd, I posted the link so you can verify. And in regards to the dual core standby hub, lookup motorola contextual processing DSP. This is a feature that can be implemented in ARM

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

13/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

architecture, and is implemented in conjunction with a QCOM S4 in the Moto X or whatever the new motorola phone is. 4 Aug, 09:15 PM ! Report Abuse Like 0 Reply

jstrattComments (1511)
I enjoyed this well thought article! In a much less scientific manner I do believe in Intel's ability to produce high quality chips. On the other hand a lot of steps between creating such chips and maintaining huge margins exists. Thus I have a small position and I am watching closely. While I root for Intel privately my money is agnostic and invested elsewhere waiting for the right entry point should one occur. 4 Aug, 09:56 PM ! Report Abuse Like 1 Reply

Justin JaynesComments (1360)

Thanks Jstratt That's kind of why I said I was thinking about initiating a *small* INTC position in my IRA, and a much bigger one when I see the design wins that come from Bay Trail, the performance, and how much traction it gains. 5 Aug, 09:55 AM ! Report Abuse Like 0 Reply

Rudester Comments (1195)

When the PC market was growing by leaps and bound and Intel owned that market, and when Sun had their SPARC go bust and Digital Equipment's speed demon Alpha computer failed in the server space to Intel based solutions, what was the Intel share price? It should have been a stratospheric price, no? Well, what was the Intel share price then? Now we are in a world where PC sales continue to decline, server sales are not growing very fast, and Intel is perhaps going to make some significant design wins in the tablet and smart phone space, with devices 1/5 of the ASP of a PC CPU. So, what do "investors" think will happen to the Intel share price? Seems to me the share price during the PC and server hey days is the limiting case for the Intel stock price this time around. So, what was the share price then and why would anyone think it would be higher than that if Intel wins in the tablet and phone space? 4 Aug, 10:55 PM ! Report Abuse Like 3 Reply

edboot01Comments (152)
Justin, I always enjoy all you INTC writer guys, and the articles you write, and learn a lot from your words. Really appreciate all the research and time you all spend developing these articles. Plus, I enjoy the on-going debate between the fanboys and the haters club. To be up front - I am ex INTC manager - spent 9 years with them back long ago and still have a ton of their stock from the late eighties, with a current cost basis under $2.00 - so I've made my decision on them years ago and am not going anywhere (love those INTC options - with dividends and CC writing make an annual 100%+ return on my investment - so don't cry for me Argentina). Now, here's what I don't understand. IF INTC has access to more data and more intelligence from many more sources in this industry than all of us together X 1,000 about Mobile, and INTC has also been around for 40+ years and has a very large number of partners, clients, contacts, and probably more business friends than we all know which equates to intelligence in this area; plus, if they have some of the best and brightest people - paying among the highest salaries in the Tech world - why then 3+ years ago did INTC start building Fab capacity up the ying yang spending an insane amount of money (around the time they said no to APPL mobile for a nickel by the way) which probably now totals well over $12-15 Billion. Also, why does INTC currently have over 2,800 people working full-time on their Mobile products at what I would guess is an annual cost of well over $300 million? And why, if you all know that mobile is a low margin product, why doesn't INTC have this data, and know exactly what their margins will be? Do you think they do not understand, are on an ego trip, or that they have not accepted this? So, my question is - do you all really think INTC is really that stupid and has made a continuing mistake for the last 2-3 years, or is there an INTC grandiose plan that you guys can't figure out??? Are they going hell-bent for leather done a dead end highway? Or is there something else afoot? Maybe the question is - does INTC have a plan and can they achieve it? By the way, Micron just closed on the purchase of Elpida, and that deal has INTC fingerprints and money all over it! So, how does that tie into their plan, if they even have one? By the way, watch MU for $18-20 price by end of 2013 (long 20,000 shares). I still have a lot of friends there and for the first time since 2010 they are all buying the stock - are they all dumb too? (don't be mis-led by Insider Program selling as they all have very large amounts of shares on scheduled sell dates). I know that INTC is always (underlined) working on new products 2-3 years ahead of release with their new product development teams and is usually working with 50-100 customers in developing new products for their needs. Could they really be missing the boat that badly? Well everyone, this is all very confusing, and either they are really under-estimating a bunch of things, or they have a plan. Like all things dealing with investments it will eventually become clear, and time will tell. Eddie B
4 Aug, 11:27 PM
! Report Abuse

Like

Reply

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

14/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha
Justin JaynesComments (1360)
Eddie -

As an individual investor I don't have access to that kind of information. As such, I never try to kid myself and forecast too far out. The reason I specifically stated I don't expect much excitement before the end of 2013 is because it's hard to predict, at least in technology, anything more than a few months out. And as such, my investment timeframes are very narrow and I revisit them often. "I think to assume that Intel stock is going to take off and leave investors playing catch-up is analogous to saying that a turtle is getting ready to start sprinting. I have no opinion on Intel as a long term investment; I have been contemplating to adding Intel to my IRA and forgetting it's in there until I'm ready to go find a mountain lake somewhere to live out my days on. But for at least the remainder of 2013, I am not expecting much growth from Intel." I whole heartedly plan on revisiting these types of analysis once we see real Bay Trail silicon in the wild. Don't know if that clears things up for you or not, but the extent of where I feel about Intel is that given flat revenue guidance, the limited upside potential given tablets and no real smart phone solutions until *I believe* the beginning of next year. Don't know if that clears up anything or not. But I will start digging further down the roads you suggest, and I appreciate the comment! 5 Aug, 12:08 AM ! Report Abuse Like 0 Reply

Rudester Comments (1195)

"So, my question is - do you all really think INTC is really that stupid and has made a continuing mistake for the last 2-3 years, or is there an INTC grandiose plan that you guys can't figure out???" So the bind that Intel is in right now is not real because of the grandiose plan they have been following? 4 Aug, 11:44 PM ! Report Abuse Like 2 Reply

edboot01Comments (152)
Hi Rudester, No, the bind they are in right now is because they passed on mobile, which was a terrible decision, and had no grandiose plan. In their market place, your results today come from decisions made 2-3 years ago and missing mobile has put them way behind in that growth area. Currently they are applying massive resources toward both mobile and TV, and we'll see what happens when their new products start hitting the market. I do not see INTC at more than 5-8% of mobile market be end of 2014, but that is a good start and a significant increase from where they are now. By the way, I'm not sure that any company netting $2 Billion per quarter is doing all that poorly, but agree that they are way behind in mobile, yet have lots of potential opportunities. So, we'll see what happens - in the meantime I'll continue writing Calls, selling Puts and collecting dividends on INTC. To each his own. Eddie B
6 Aug, 02:28 AM
! Report Abuse

Like

Reply

Jeach!Comments (789)
Excellant article! I have yet to see such a detailed analisis from the Intel camp in trying to prove that Intel can gain market dominance AND the margins above the 60% area. Keep these great articles coming...
5 Aug, 12:02 AM
! Report Abuse

Like

Reply

hksche2000Comments (377)
@edboot01: Just look at INTC stock over the last 10yrs to see "how smart" the company has been, turning its 900 pound gorilla power position into shareholder value. It's absolutely pathetic isn't it! And a huge part of it has been INTC's "missing the mobile boat". Of course, if you (as a past INTC employee receiving discounted stock options for 9yrs) are "sitting on a ton of INTC stock at $2 cost basis since the 80's", this whole conversation is as muet for you as it would be for Bill Gates listening to people discussing MSFT's future. You obviously made your fortunes in the dawn of (computer) times and with great privileges. Good for you, though you could (should?) have made a lot more money by selling your "tons" of stock when INTC was worth above $70/share! However, if it's true that "(you) still have a lot of friends (at INTC)", ask them for the real reasons why INTC missed the mobile boat and what it is going to do about that. Until then, most of us should be forgiven for "really think(ing) INTC is really (sic) that stupid". And who wants to invest in a "stupid" company?!. 5 Aug, 12:23 AM ! Report Abuse Like 2 Reply

edboot01Comments (152)
hksche20000, You are quite correct about missing the mobile boat - blame to the Ottellini regime, that's probably why he's no longer there. That is their big mistake, and they continue to play catch up (which is very difficult in the tech world). What

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

15/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

they are doing, is throwing tons of money and resources at it, but in my mind still a difficult catch-up. I think they will have a good mobile product, but doubt they will get to 25% of this market in the next 3 years, but watch the TV product, it will revolutionize the old technology of cable, dish, and directv (this has not been a tech world to date) and make them a lot of money. I agree that they made a stupid mistake and were stupid in mobile, but that is the past, and at the $22-23 stock price, the question is can they go from 1% to X%, and will the stock go up? Yes, they were 'the good old days' and I did sell the vast majority of my shares in late '99 (too early) when the whole tech world got a little crazy. Made for a nice Christmas present and an early retirement. Part of INTC problem is below (although not at the time) as they split the stock 4 times in the 9 years I was there and 5 times after I left - mostly 2-1 (see below). A lot of wealth was created for a lot of folks. 07/30/00 07/02/00 2/1 04/11/99 03/23/99 2/1 07/13/97 06/10/97 2/1 06/16/95 05/16/95 2/1 06/06/93 05/06/93 2/1 10/28/87 09/28/87 3/2 06/30/83 06/16/83 2/1 10/08/80 09/08/80 2/1 05/31/79 04/30/79 3/2 09/01/78 08/04/78 5/4 05/26/76 04/26/76 3/2 05/15/74 04/15/74 3/2 05/17/73 04/16/73 3/2 Thanks for your response. EddieB
5 Aug, 10:30 AM
! Report Abuse

Like

Reply

User 7757181Comments (13)

@ Justin I think that's a very good and non biased article. One thing your article is missing in my opinion is the construction of gross margin. It consists of sales versus costs. In the costs part, you have variable and fix costs. The fix costs are the part you are missing in your calculation in my point of view. Fabs are very expensive as we all know and their costs are shared by all chips that are sold. The more chips you sell, the lower the fix costs per chip. That is basically the reason why TSMC can have such high gross margin by not even making any designs. It's because their fabs are running at high load. Intels are not. That's why Intel desperately needs to enter the mobile business because it adds significant production volume and therefore reduces the fix cost part per piece in the Mobile as well as the PC (!) and Server (!!) business. In addition, Intel keeps almost all the royalties for the IPs (processors, modem, graphics starting with baytrail and GPS in the future). In addition, Intel will soon switch to 14nm production with 450mm wafer. The die size will shrink accordingly and therefore Intel will have significantly higher production volume than the competition. If they achieve to fill this capacity with PC, server and mobile chips in addition to their foundy plans, they will be highly profitable. Nothing any competitor is close to. Besides: Geekbench is officially flawed on Intel processors, Even the developers admit that and they are about to fix this. As the Antutu benchmarks with Intel were flawed in a positive sense on Intel, Geekbench in a negative sense. Only use them when updated (Antutu is already, Geekbench will from what I know). 5 Aug, 03:30 AM ! Report Abuse Like 2 Reply

darturtle Comments (187)

SSNFL.PK uses its own CPU in all its flagship product while uses others' CPU in mid and low range product. For instance, it uses its own CPU in its flagship Note family tablet (Note 10.1, etc.) while use CPU from MRVL and INTC in Tab 3 (Tab 3 is not even able to use its stylus pen and has lower grade of display). INTC is between a rock and hard place. Its huge overhead is a big problem to it. I am not interesting to buy this stock at this price. 5 Aug, 07:36 AM ! Report Abuse Like 1 Reply

redarrow5150Comments (577)
Of course INTC missed the boat. Long INTC but phones have been around for decades and now they are just starting to hit the market? Could you imagine GM waiting 20 years later to the hit the truck market? INTC will easily take a minimum of five years before making an impact in this category and by then gross margins will be razor thin. 5 Aug, 07:44 AM ! Report Abuse Like 1 Reply

edboot01Comments (152)
HI redarrow5150, Actually, GM did miss the last technological move in auto's (as did Ford and Chrysler) as the Japanese and Koreans attacked with energy efficient cars, and American car sales died as they fell behind Toyota, Nissan, Honda, Hyundai, and Kia. The Pruis, Sonata and others ate their lunch for a few years, but both GM and Ford (Chrysler went away) have fought back and fully recovered, although GM did have some help from the U. S. Government. If it takes INTC five years to make an impact in Mobile, they will have failed their new products either work and they start gaining market share in 2014, or

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

16/17

8/16/13

Intel Corporation (INTC): Did Intel Miss The Mobile Boat? [QUALCOMM, Inc.] - Seeking Alpha

they miss this cycle - which will be extremely bad news for them (and their shareholders). While I don't believe this will happen, it is a possibility. Eddie B 6 Aug, 02:48 AM ! Report Abuse Like 0 Reply

User 7757181Comments (13)

@redarrow Intel did sell xScale (their ARM based processor business) 7 years ago. That was the moment when Intel clearly intended to build their own processors for the ultra moble space. Still, it takes many years to enter such a market which is dominated by a different architecture and completely different processor requirements. Do they have a chance at all? They do, because they are lucky since Android dominates the market and it is based on Java (a point that is rarely mentioned in those analysis but in my opinion a key factor). Java uses just in time compilation which means that the original program is not bound an any specific platform (simply speaking). Therefore, Android is much more platform agnostic than the PC world (especially Windows, but also Linux). Also IOS uses static compilation and therefore, in my opinion, may never use different processors than ARM. The reason simply is that this would require emulation, similar to what Apple did when switching their MAC line from PowerPC to Intel. Such a move is very painful and only makes sense when the processors that run the emulation are much faster than the ones that are emulated (today all Mac programs are compiled for x86, so this disadvantage was only temporary). If Android wouldn't be based on Java (strictly speaking: based on a virtual machine) I wouldn't pay a dime for Intel. To enter the Android space is much easier for Intel than it is for ARM to enter the PC space (not even considering the fact that Intel high end CPUs are many times faster than the fastest ARM CPUs). For the server space, it may be easier for ARM to enter since those are mostly based on Linux which provides all sources so that they can be recompiled for ARM. Nevertheless, even on the compiler front, ARM cannot compete with the x86 world. 5 Aug, 08:42 AM ! Report Abuse Like 1 Reply

redarrow5150Comments (577)
How long has Android been around? Isn't Android one of the top platforms in phones? This is my point as we are how many years into phones and INTC doesn't really have a market yet? If and when INTC does get into this market the margins are going to be razor thin. 5 Aug, 09:12 AM ! Report Abuse Like 1 Reply

User 7757181Comments (13)

@redarrow Android overtook IOS sales only three years ago. That was actually Intel's luck. When it was clear that Android would dominate the market three years ago, Intel could actually first employ a strategy about how to enter the mobile market. They needed to build SOCs that compete with the ARM based ones and they needed to build the software ecosystem. The first result was Medfield in 2012, two years after the beginning market dominance of Android. That's not really slow I think. Sure, it wasn't competitive enough, especially since LTE was missing, but Intel is on the right track since. Today they offer Clovertrail+ with decent performance, also for graphics, good integration into Android and LTE modem option. According to analysts at the ARM conference, at very agressive pricing. Baytrail and Merrifield are announced and Intel claims double the performance of Clovertrail+, which is on par with todays middle class. Things only start to become interesting from now on. Since Android is established and the clear winner of the smartphone era, Intel has a clear strategy about what to technically do to compete. I think they can hardly be beaten when things come down to a clear technological task: Fastest and lowest power processors, integrated with as much as possible and good integration into one dominating OS. They can now concentrate with all their engineering power on this task and make life very hard for its competitors. They are the only one who has everything in one hand, from production to processor, graphics, GPS and so on. 5 Aug, 09:50 AM ! Report Abuse Like 0 Reply

Justin JaynesComments (1360)

@user - I've talked to Mr. Poole at geekbench regarding the issues with x86 CPUs. It's known to affect Intel, not sure if it affects AMD, but they're releasing a new rev of GB in August. I appreciate your comments too btw. I think that anyone looking at Bay Trail as a complete failure or total success before it has even launched is already in the wrong frame of mind. 5 Aug, 09:54 AM ! Report Abuse Like 0 Reply

redarrow5150Comments (577)
Things can quickly change so I wouldn't declare Android the winner now or in the future. I think you have to look at the fact that many companies in this space are doing quite well without INTC chips. The idea that INTC is going to have an impact because they aren't a player in this sector is where I have issues. It is assumed that any sales or shares can be only a good thing when I say none of these companies need INTC. As I've stated I'm giving INTC 18 months to see where they are heading. 5 Aug, 10:09 AM ! Report Abuse Like 1 Reply

seekingalpha.com/article/1603012-did-intel-miss-the-mobile-boat

17/17

ne t wo rkwo rld.co m

http://www.netwo rkwo rld.co m/co mmunity/print/81635

Is Qualcomm the New AMD? Or the Next Intel?

With the news that Qualcomm will take over the CES keynote spot previously held by Microsof t, it really became clear what a dominant player the company has become. Quietly, while no one was paying attention, it's become the second-most important semiconductor maker in the U.S. I didn't attend the Intel Developer Forum, but some reports out of the show presented an interesting take on things f rom people who worked the f loor and talked to Intel engineers. Namely, that Intel no longer views AMD as its main rival. T hat honor now goes to Qualcomm. RELAT ED: What's happening with Clover Trail and Windows 8? Intel boss Otellini's f ace-palm-evoking comments violate trust with Microsof t It's a darned shame, but the writing is on the wall f or AMD. T he AT I graphics business is the only thing keeping it af loat right now as sales shrivel up and the company f aces yet another round of staf f ing cuts. You can only cut so many times bef ore there's no one lef t to innovate you out of the mess you're in. Qualcomm started lif e in 1985 as a maker of cellular communications semiconductors, and it hasn't strayed f ar f rom that f ormula. It's pretty much the go-to company f or CDMA chips and is now taking a lead in 4G LT E as well. So why would a company that's so vertical become Intel's biggest competitor? Because of where the two are headed. Intel has the desktop/laptop and server markets sewn up tight now and wants to get into mobile. It desperately wants to make inroads to the smartphone and tablet markets, and despite a number of generations of Atom processors, it's not getting very f ar. Qualcomm, on the other hand, dominates this space, and it has the chips to back it up. T he Snapdragon line of ARM-based processors alone is f ound in a ridiculous number of prominent devices, including Samsung Galaxy S II and S III, Nokia Lumia 900 and 920, Asus Transf ormer Pad Inf inity and the Samsung Galaxy Note. Mind you, Samsung is also in the ARM processor business, yet it is licensing Qualcomm's parts. T hats quite a statement. Qualcomm also showed success where AMD f ailed. It bought a mobile graphics unit f rom AMD, which came as part of the AT I acquisition, f or $65 million in 2009. T hat unit became Qualcomm's Adreno line of mobile GPUs. Word around the blogs is that Texas Instruments, an ARM OEM with its own line of processors called OMAP, is looking to back out of the heated mobile chip market and f ocus on areas where it is strongest. With a giant like T I backing down, that just clears more room f or Qualcomm and Intel to f ight it out. Qualcomm has its challenges, not the least of which is that the company is f abless. T hat means it's at the mercy of T SMC to get its product to meet demand, and T SMC has proven abysmal when it comes to that. JenHsun Huang of Nvidia has been complaining about T SMC's inability to provide adequate supply f or so long I'm amazed he hasn't built his own f abs. And Intel? It has no problem here. It has all the f ab capacity it needs and does it at a much smaller manuf acturing process. T his will play a role in competition. T he question then f alls to where Microsof t f its into all of this. Microsof t and Intel were BFFs until recent years, and no doubt the relationship was not helped by the comment f rom Intel chief Paul Otellini that Windows 8 was not ready.

Microsof t is sitting on a potentially winning strategy of supporting ARM and x86 equally. Clearly, Intel would benef it more f rom this, but if Qualcomm sees an opening to get closer to Microsof t, it could and should take it. Links: [1] http://www.networkworld.com/community/blog/whats-happening-clover-trail-and-windows-8 [2] http://www.networkworld.com/community/blog/intel-boss-otellinis-f ace-palm-evoking-comments-violatetrust-microsof t [3] http://en.wikipedia.org/wiki/Snapdragon_(system_on_chip) [4] http://www.networkworld.com/community/node/81621 [5] http://www.bloomberg.com/news/2012-08-29/apple-qualcomm-spurned-in-bids-f or-exclusive-tsmc-chipsupply.html

se e kingalpha.co m

http://seekingalpha.co m/article/1516122-intels-pro blem-isnt-arm-its-qualco mm

Intel's Problem Isn't ARM, It's Qualcomm

Disclosure: I am long INT C, QCOM, MSFT . I wrote this article myself , and it expresses my own opinions. I am not receiving compensation f or it (other than f rom Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...) Take a look at which chips power the latest smartphones. If you ask the average investor, he or she would probably say, "ARM (ARMH)", but they would be dead wrong. Sure, the processors that power the majority of smartphones are indeed ARM-compatible, meaning that the processors all understand the same language, but the majority of them aren't actually designed by ARM; rather, they are designed by Qualcomm (QCOM). So, when people talk about Intel's (INT C) competitive position in the smartphone market and they say "Intel vs. ARM", what they actually mean to say is "Intel vs. Qualcomm". Of all of the ARM licensees lef t playing in the high end game (and on the merchant vendor side, there's only a f ew), Qualcomm is the f iercest. Intel's problem isn't ARM; it's Qualcomm, and in the mobile space, it is going to be quite a challenge f or Intel to threaten Qualcomm's dominance. Qualcomm Has T he Upper Hand What you need to understand is that very similarly to Intel's dominant position in PCs and servers, where Intel has all of the key OEM relationships, the scale, and on top of all of that the best parts f rom a perf ormance/watt perspective, Qualcomm holds a similar position in smartphones, and if what I'm seeing of the Snapdragon 800 in the media represents perf ormance in production perf ormance, then Qualcomm is well on its way to establishing itself as a major f orce in Android tablets. Even Microsoft (MSFT ) seems to be in bed with Qualcomm as well, as evidenced by the recent f low of PR f rom Qualcomm regarding Windows RT. So, Intel has a f ew problems that it needs to overcome in phones (tablets are an area where Intel is rapidly gaining traction, so I'm not too concerned about those; particularly as Intel still has a home-f ield advantage on Windows 8 and is throwing all of its resources at Android): Having a highly integrated solution Having the best solution f rom a perf ormance/watt perspective in common smartphone tasks Establishing leadership in cellular modems Developing/acquiring the rest of the connectivity suite Further, even if Intel were to pull ahead on the technology side of things, it would still have to work hard to displace the perception among the phone vendors that Qualcomm is the superior solution. Take, f or example, this recent slide that Acer showed to its partners (image courtesy of DailyTech): (click to enlarge)

Notice that Qualcomm is viewed as providing the "best in class technology and experience", while Intel is listed as a "strategic play only". Now, f or 2013, this makes perf ect sense; Snapdragon 800 is simply a better platf orm than Intel's current Atom Z 2580 as it has f our cores (and can be marketed as such), LT E-Advanced, and substantially f aster graphics. Now, while it remains to be seen how production devices perf orm under battery lif e/power constraints, the point is that Qualcomm's solution is the crme de la crme today, and Intel's next chance to really break in will be in 1Q 2014 with "Merrif ield". According to slides presented at the launch of the "Silvermont" micro-architecture, it should f inally have a signif icant perf ormance per watt advantage - at least on the CPU side of things - over the Qualcomm and any other competition: (click to enlarge)

But that's not going to be enough. Intel Needs Leadership In Modems And Integration Tablets aren't so dependent on cellular connectivity, which is why you are seeing Intel push hard there f irst, where the computer perf ormance and power consumption of the system on chip is king. However, in smartphones, the trend is towards integration of everything possible onto a single chip. T his does a couple of major things:

Mo' Integration, Mo' Money - the more that a system on chip vendor can integrate onto the chip, the more that the vendor can charge f or the chip, as it will have f undamentally more value/content. T his is why Qualcomm has been aggressively trying to integrate the cellular modem, WiFi, bluetooth, GPS, and FM onto a single chip. Once Intel has all of the right IP in place (which means getting its cellular modems caught up to speed with the latest Qualcomm parts and developing its own in-house low power WiFi), then it will be in a much better position than it is in today and would be poised f or leadership. More Power Efficient/Smaller Footprint - the more you have on a single chip, the smaller the board f ootprint will be, and the lower power your system will be as any power overhead involved in connecting more chips disappears. For very low power devices in which battery lif e is key, it is generally much more ef f icient to have a single chip than multiple chips. Intel has most of the puzzle pieces; the f irm's acquisition of Inf ineon, coupled with organic expansion ef f orts (Intel has a modem development team in San Diego...right across the way f rom Qualcomm) shows that it is going to seriously f ight on the modem/RF side of things (not to say that this will be an easy f ight). Further, I believe that Intel is developing its own low power WiFi (its WiFi chips are f or higher power settings, so it currently uses chips f rom Texas Instruments (T XN) as a stopgap), and the recent acquisition of STEricsson's GPS business put it in a good position f or f uture chips. But the point here is simple: Intel can't just show up with the f astest, most power ef f icient CPU and call it a day, and the company knows that. Qualcomm and Broadcom (BRCM) both have extensive experience in such integration without too much concern about tweaking f or maximum f requency/perf ormance, while Intel's heritage is very high speed, laid out by hand processors that are incredibly f ast, so there's a bit of a learning curve f or the company (although I think af ter the Medf ield/Clover Trail experiments, the worst of it is over) to get into that "SoC methodology" mindset. Can Intel Do It? I believe so. Anybody f ollowing the company knows that the f irm has been on a hiring and acquisition spree f or the last several years. Intel has been quietly assembling the pieces that it needs to really take the f ight to Qualcomm. T hat's not to say that I think that gaining any sizable market segment share is going to be easy; it's not, and it's going to take a combination of world-class products, the development of key partnerships (Qualcomm's in bed with HT C and seems to be penetrating f urther into the Samsung lineup), and a clear technological lead in order to gain real design win momentum. "Clover Trail+" and "Medf ield" were nice and all, but it's going to take "Bay Trail" and "Merrif ield" - two parts designed with leadership in mind and not simply as a proof -of -concept - to really get a sense of what Intel can do here. My guess is that leadership in tablets comes this year with "Bay Trail", but smartphone leadership probably won't be up f or discussion in terms of the f ull system (I expect CPU leadership) until the 14 nanometer generation, and even then it depends on how aggressively Intel's modem f olks can stay on the cutting edge of mobile standards and integration. Long term, I expect the high end smartphone chip market to be a f ight between Intel and Qualcomm, although it's too early to tell what kind of market share balance to expect over the next decade. In any case, Intel's problem ain't ARM, it's Qualcomm. Source: Intel's Problem Isn't ARM, It's Qualcomm Additional disclosure: I will go short ARMH when the opportunity arises.