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.
Even so, it is widely felt that the waking giant will struggle to seize control of this end of the chip spectrum. Having had only small successes in breaking into it of its own accord it acquired German cellular chip company Infineon Technologies in 2010 while investing heavily in its own Atom chip technology. Indeed, the latest iteration of the ultra low power Atom processor is thought to be so competitive that at its launch earlier this year, INTC stock rose by 25%.
Some argue that there is still room for Intel to regain its dominance because of the diversity of the cellular chip market. Due to its size the company believes it can alter the market by sheer weight, as it has in PC and laptops over the last two decades. In reference to the way it used to work in PC’s, Intel spokesman Bill Calder is reported as saying, “we standardize the ecosystem.”
Some argue Intel has done just this with the development of PC’s and laptops over the years. Oregonlive.com suggests that in its traditional market “it told PC-makers how to make the computers and sold them the chips to do so.”
Will Intel dominate in cellular as it has for so long the rest of the industry? Only time will tell. Size matters and if the right resources can be brought to bear, the company has the ability to be the giant in this relatively new field that it has been in its traditional markets.
The article The Sleeping Giant Wakes originally appeared on Fool.com and is written by Mandy Seay.
Mandy Seay has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Mandy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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