Intel Struggles in a Very Different Environment

Carl Weinschenk

The subtext of this very good eWeek piece on Intel's reorganization is that the company is confronting a very big problem. The bottom line is that the company is atop the chip world today, but unless it takes significant steps - and it remains to be seen if the reorganization and some other moves that it is making will be enough - there is only one direction to go, and that is down:

Intel is the world's largest chip maker, holding more than 80 percent of the global market. The company has done well in its traditional PC and server markets, having several consecutive quarters of record profits and revenues. Still, the company has not yet been able to gain traction in the mobile-device space, which is expected to grow rapidly over the next few years.

That mobility will grow is something of an understatement. When, after all, was the last time anybody camped out overnight outside a retailer to get the latest PC?

Intel is placing four divisions into a mobile and communications group that cover "tablets and netbooks, mobile wireless and ultra-mobility," the story says. The piece also outlines chip plans for the coming quarters. The main point is that chips designed for PCs have access to an unlimited power, while mobile device chips must be extremely concerned with power preservation. That is a big deal.

It's a sensitive time for Intel. It is dealing, as many companies are, with the aftermath of the flooding in Thailand that has decimated the hard drive market. It also is losing, at least in the eyes of one analyst, to a company that is not known for the fabrication of chips - just what they do with them. CNET's Brooke Crothers reports that Gus Richard, a senior research analyst at the securities firm Piper Jaffray, said that Intel now trails Apple.

The key, again, is the difference between stationary and mobile computer. Richard's point is that in the mobile environment the performance of a chip itself is secondary to how they act in concert. It doesn't matter if the chip is capable of Maserati-type performance if the suspension, brakes and transmission are designed for a Highlander. The key is that mobile devices are driven by system-on-a-chip (SoC) technology that focuses on optimal integration and, Richard maintains, this is an area of strength for Apple. Part of the note is quoted by Crothers:

As an example, there is nothing leading edge about Apple's A5 processor. However, the performance of an iPad is perceived by users as better than a PC. This is because the product has a longer battery life, instant on, and a fast internet connection. The A5 processor is not faster than an Intel processor but instead has a large number of IP blocks that execute different functions with lower power and typically more quickly than a general purpose CPU (Intel).

Another sign that Intel has gotten the message is its work with HP on the Folio 13. Intel also is working with French semiconductor firm Inside Secure and will provide the company with its near field communications (NFC) technology. NFC is the technology upon which the nascent and hugely promising electronic wallet industry is based. Computer Reseller News paraphrases Inside Secure's view on the importance of the deal:

Inside Secure said that its agreement with Intel marks a significant milestone for both the company and the future of the NFC industry, as it will help nudge the emerging technology towards full-scale market adoption.

The bottom line is that the world has shifted under Intel's feet. It still produces the most chips in the world. But, unless it reacts quickly, that title will not stand for too much and eventually will fade.

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