Intel Corp. is facing numerous challenges in its efforts to break into new markets while still holding on to opportunities in its core PC microprocessor segment .With the consumer market driving many of the applications OEMs are developing, the semiconductor giant said it is also responding with a wave of new products – up to 40 in the September quarter alone.
In a presentation to analysts after announcing its third quarter results, Brian Krzanich, Intel’s CEO spoke about some of the factors that are driving events in the semiconductor and OEM markets. A review of Krzanich’s presentation and comments by CFO Stacy Smith indicates the company is responding to four key changes, including continuing pressure on the traditional PC market, which is trending lower as other computer form factors like tablets and smartphones edge ahead. (See: Intel Sales and Profit Stall in Q3).
Intel is also expecting a flood of new products from OEMs that are looking to break into the leadership Apple Inc. and Samsung Electronics Inc. have carved out in the sector. Reports indicate companies like Dell, HP and even Nokia, which has agreed to sell its mobile devices division to Microsoft Corp., are preparing a bunch of low cost tablets for the end-of-year buying season. Intel is angling to have some of its components in these devices and making a headway in getting them designed into the OEM products, according to Krzanich.
“From a product perspective, we have an unprecedented line-up of products coming to the market this holiday season,” Krzanich said. “Haswell delivers a historical increase in battery life across the diverse line-up of ultra-mobile form factors by like 2-in-1 convertibles, tablets and other touch enabled devices. We are also starting to see our customers come to market with Bay Trail based designs that will further extend our product line across screen sizes and price points in both tablets and PCs. This extension of our product lineup across devices, price points and operating systems positions us to grow our business across a broad range of computing devices.”
Other key changes occurring in the market as identified from Intel’s financial results and the presentation to investors include the company’s shift to the embedded market space, the growing role of consumers in determining OEM focus and a slowing down in the rate of sales decline at PC vendors.
The four areas are outlined below with comments from Krzanich during his presentation:
- PC Rate of Decline Slowing but Challenges Remain: Year-over-year PC CPU volumes declined slow and were offset by solid growth in the data center and enterprise. While consumer demand in emerging markets was sluggish, we started to see early signs of improvements in North America and Western Europe. I see our performance in this environment as evidence of an increasingly broad and diverse product portfolio. What we saw in the third quarter and we believe will move into the fourth quarter as well, is stabilization in mature market in the U.S. and Western Europe. Asia and especially China still remain relatively volatile and that's where we see the growth.
- Intel's Shift to Embedded Market is Accelerating: Our embedded business grew 21 percent year-over-year, reaching an all-time record for revenue driven by communications infrastructure, transportation, the internet-of-things and retail. Embedded revenue is well on its way to a double-digit growth year.
- Consumers Driving Enormous Change in Electronics: The past few years have seen dramatic changes in the way consumers use and interact with technology and those trends aren't slowing down. While preferences for form factor, operating system and price points have evolved, the market appetite for computing has continued to grow. We are going into the fourth quarter with a broad portfolio in Intel's history and are positioned to fully participate in all of that growth.
- OEMs are Fast-tracking Form Factor Innovation: We are excited about the rate of innovation we are seeing in 2-in-1s, in convertibles, in operating systems, forms, Android, chrome books and Windows 8 and Windows 8.1. We have been meeting with most of our customers and OEMs and looking at their first quarter lineup and have been astonished by the amount of innovation and creative designs that are coming. In general, we are trying to bring innovation to the PC but we are also trying to move into these markets that are growing already like tablets and phones. So our view is that at the end of the day, the customers are going to choose their form factors.