Changes in the Chip Market: How Will Chipmakers Adapt? Advanced Micro Devices, Inc. (AMD), Texas Instruments Incorporated (TXN), Intel Corporation (INTC)

Intel revealed that revenue from its PC chip division sank 6% from a year earlier, pulling down total revenue 3% at a time when the company usually releases its best results. Intel predicts a further 6% slide in the current quarter.

However, like AMD and TI, the news isn’t all bad. Intel’s net income and gross profit margin beat market analysts’ expectations, finishing higher than expected due to higher chip prices.

While companies like Texas Instruments are adapting by shifting to tablet and smartphones, Intel is banking on something entirely different: the Ultrabook, or a laptop and tablet in one. These are laptops that convert from the standard mode into a tablet-style mode. Intel’s CEO Paul Otellini has placed his confidence in making chips for these Ultrabooks, noting that the number of models of the hybrid computer-tablets has grown from 20 to 140 models. He commented that “it’s no longer necessary to choose between a PC and a tablet.

In addition to the Ultrabook investment, Intel has their chips in a few new models of smartphones and tablets, but nothing to write home about.

The other main issue with Intel is their immense spending habits. After spending $11 billion on just capital equipment and facilities in 2012, Intel pledges another $13 billion this year. Such numbers show that the company has big bets for huge revenue sums in the coming years, something that they may not be able to follow through on without success in the tablet and smartphone market.

Intel predicts revenue of $12.2 to $13.2 billion for the quarter, on track with analyst estimates of $12.9 billion.

Such high spending habits without incredible promise for revenue doesn’t seem like a formula that earns its way into my portfolio. Well, for now, at least.

In summary, the PC chip market is in a bind, and companies are struggling to find new ways to adapt. Until they each discover ways to do so, I would stay away for now.

The article Changes in the Chip Market: How Will Chipmakers Adapt? originally appeared on Fool.com and is written by Michael Nolan.

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