Microchip giant Intel Corporation (NASDAQ:INTC) seems to have woken up to the cellular market as a threat to its traditional market dominance. New CEO Brian Krzanich taking over the top job in May this year, has a mountain to climb before the company can dominate the cellular market in the way it has with PC’s and laptops. It is still a huge player and such plans to take on cell phone and tablet chips should not be ignored.
Over the last few years, the cellular market has exploded and Intel Corporation (NASDAQ:INTC)’s market share has fallen markedly. In its heyday in the early part of the century, it had something around 80% of the computer chip market as a whole, but with the explosion in the cellphone and tablet market, this has fallen to around 27%. From a consistent ranking of number 1 across all chip markets, Intel Corporation (NASDAQ:INTC) has fallen to number 8.
By comparison, QUALCOMM, Inc. (NASDAQ:QCOM), now dominates the cellular market with estimates of over 50% market share. Forbes reported “Last year, the baseband market grew by a strong 18% year on year to reach about $18 billion. QUALCOMM, Inc. (NASDAQ:QCOM), which dominates the market with more than 50% market share, has benefited hugely from this trend.”
$18 billion as a total doesn’t even compare to Intel’s year-on-year revenues across its portfolio. Last year it reported gross revenues of $53.3 billion, a slight fall on the year before. Compare this to cellular ‘giant’ QUALCOMM, Inc. (NASDAQ:QCOM) who’s gross revenues were reported at $6.12 billion for the quarter in April this year. Intel Corporation (NASDAQ:INTC)’s competitors have a long way to go to compete in the overall computer chip market.
The New York Times reported that “almost two-thirds of Intel Corporation (NASDAQ:INTC)’s $53 billion in revenue came from making chips for PCs.” This end is seen as stagnant so for growth, Intel Corporation (NASDAQ:INTC) is looking to break into the cellular end.
Cellphone and tablet chips are selling by the box load, with an average 18% market growth year on year. Market analysts the Linley Group believe that this upward trajectory is set to continue, even as PC and laptop sales stagnate and fall.
Intel’s profit remains strong, albeit falling due to cost pressures. CSImarket.com reported that its operating profit in the fourth quarter of 2012 was 24.41%, but fell to 20.02% in QI of 2013. This is expected to climb again with the new direction of the company and new leadership on the Board.
Speaking to the New York Times, new CEO Krzanich is reported to have said of Intel’s future, “I look at this world and see all kinds of devices connected to computers, and people connected to it all the time… We can bring things to companies that others haven’t dreamed of.”
Krzanich isn’t the only new member at the top of the company board. He is joined by new President, Renee James who was in charge of, amongst other things, smartphone strategy in her previous role as Executive Vice President. This indicates a clear drive for the company into cellular.