Intel Corporation (INTC) Atom’s Chip on Its Shoulder

If Intel Corporation (NASDAQ:INTC) had its way, it would power all of the planet’s computing devices. Unfortunately, the world has moved quicker than Intel Corporation (NASDAQ:INTC) would’ve liked, and now the company is playing catch-up in the age of mobile computing. To that end, Intel’s fashionably late entry into mobile computing will be based on future Intel Corporation (NASDAQ:INTC) Atom releases covering a gamut of smartphones and tablets.

With combined worldwide tablet and smartphone shipments easily surpassing over a billion units annually, Intel’s Atom’s addressable market could be poised to grow larger than the 320 million or so PCs that ship each year. Should Intel Corporation (NASDAQ:INTC) manage to substantially grow its mobile computing market share, Intel Atom will become an increasingly important business.

Greater priority
In the past, Intel’s leading-edge capacity was allocated to its Core line of PC processors and Atom was given a lower upgrade priority. If recently appointed CEO Brian Krzanich has any say in the matter, that’s likely to change in the future. He was recently quoted saying how “we see that Atom is now at the same importance [as its Core processor line], it’s launching on the same leading-edge technology, sometimes even before the Core [family of processors].” Ultimately, Krzanich made it clear that Atom will be given a greater priority going forward.

Just how important?
Despite mobile computing having a much larger addressable market in terms of total units, the potential revenue per unit is far less than a PC. To give you an idea of what Intel Corporation (NASDAQ:INTC) might earn, mobile computing giant QUALCOMM, Inc. (NASDAQ:QCOM) shipped 173 million chips last quarter, generating about $3.9 billion in revenue, which implies an average selling price of around $22. With Intel’s ASP believed to be around $107, it’s almost a given that its ASP will decline if Intel wants to be competitive in mobile computing. At those prices, even if Intel sold every mobile computing processor expected to ship this year, it wouldn’t match the annual revenue it generates from PCs.

Hypothetically, if Intel could fetch the same $22 QUALCOMM, Inc. (NASDAQ:QCOM) commands and it could power all of the roughly 1.15 billion smartphones and tablets expected to ship this year, it would translate to $25.3 billion in revenue, $9 billion less than what Intel Corporation (NASDAQ:INTC)’s PC client group brought in last year. For mobile to surpass its PC client group revenue, Intel would need to command an ASP of $30, a 36% premium over Qualcomm’s ASP.