7 ms·

Intel Profits Fall as PC Slump Cuts Demand for Chips

37 points by eplanit 14y ago

programminggeek 14y ago
Um, yep. If the average "PC" turns from a $500-750 laptop to a $200-500 tablet, Intel's going to lose a lot of business. It can't afford to live on Atom chip margins.
- vault_ 14y ago
  That's assuming that Intel gets a decent cut of tablet market at all. Intel making a decent low power CPU isn't going to make Arm go away, and Arm is only going to work its way up the ladder from its current dominance in the embedded and mobile space.
  - Taylorious 14y ago
    Arm exists because they went after a market Intel didn't care about. Intel was slow to react to the shift in market, but they have reacted and they are focused now. It is only a matter of time before Intel dominates the market. Their latest Atom processors are already better than Arms. They may not get the same cut from mobile processors, but they will have larger volume and there is an emerging market in the hybrid tablet space. The Surface Pro is considered a tablet but it still has an i5 in it. If Microsoft didn't screw it up so much it could have been a huge success. If any company can touch Intel fabrication process, then maybe I will start to be worried about my Intel stock.
    - criley 14y ago
      >Their latest Atom processors are already better than Arms. Source? Every review I've seen says they still struggle to beat ARM on power/performance/price. I've absolutely not heard that their mobile chips are "better" by any margin.
      - Taylorious 14y ago
        http://www.anandtech.com/show/6536/arm-vs-x86-the-real-showdown/14 http://www.anandtech.com/show/6536/arm-vs-x86-the-real-showd... On the horizon: http://www.anandtech.com/show/6790/intels-clover-trail-dualcore-cpu-and-graphics-unveiled-at-mwc-2013 http://www.anandtech.com/show/6790/intels-clover-trail-dualc...
        brigade 14y ago
        I really wish people would stop using Javascript benchmarks as a CPU benchmark, especially across architectures. The amount by which they vary between browsers on the same device should make it obvious they aren't a good general-purpose benchmark. I mean, Kraken for one says my laptop is 60% faster than itself.
filereaper 14y ago
"An improving economy should help, as well as new products like its Haswell chips, a power-saving processor that supports touch-screen computing on ultrabook computers, which are hybrids of notebooks and tablets." I was expecting this, let's see how it holds up against ARM.
adventured 14y ago
Intel is among the best at staying paranoid and investing into R&D. It makes how they've been pinched by the rapid shift to smart phones + tablets all the more amazing. A textbook example of how the best of companies can be caught with their pants down. They've always managed to respond impressively in the past to challenging circumstances. Can they do it again? Their future depends on it.
- seanmcdirmid 14y ago
  It wasn't really that though. They saw it coming, but the margins were so low in this new field that they had to decide: stay in their high-margin but slowly dying business or turn ship to compete with the inevitable but not very profitable new order that was coming online. It is quite easy to think that these big companies are not getting it, but they really do. Intel was and is basically in a no win situation: they could become like ARM and TSMC combined, but that wouldn't justify their valuation at all. Their only hope was to come out with a new breakthrough high-margin product, which might not simply exist right now (i.e. no big leaps to be had for the next 5-10 years).
  - pyre 14y ago
    So... Will desktop/laptop computers ('workstations') become super expensive (high-end) to justify Intel's valuation?
    - seanmcdirmid 14y ago
      Free market: we can buy what we want! Its only Intel that is screwed.
      - pyre 14y ago
        1. If Intel collapses, who will make the processors? I guess AMD is still out there, but their capacity, might not be high enough (which would drive up the price of the processors). 2. If Intel enters a death spiral, it seems to only make sense that it would attempt to raise the price on its processors, which could drive up the cost of desktops/laptops. Sure the market may respond by attempting to go with AMD (for example), but this may require retooling of processes and would probably incur a time delay (it may even drive some PC makers out of business, depending on their financial situation). 3. If Intel collapses who would buy up their assets (manufacture plants, design, research, etc)?
cft 14y ago
What's interesting is that as a power user I still cannot buy a good ultrabook. I have a Samsung New Series 9 13" , that besides having major quality problems (dead pixels, clicking fan noises), lacks several essential features that I think many people would like to have: -Retina display (at least like on iPad 3, 2048 x 1536 ) -Default fan-less thermal profile (i.e. no moving parts- it has fanless thermal profile, but it "forgets" it every time it's turned on) Further down the road: -Lid can be detached from the keyboard and used as a touchscreen tablet
- seanmcdirmid 14y ago
  Obviously, retina is not Intel's problem; plenty of notebooks sold by the fruit have these displays already. Its only a matter of whether the OS/app ecosystem can deal with high resolution displays.
- caw 14y ago
  >Lid can be detached from the keyboard and used as a touchscreen tablet You should check out the computers known as "convertibles". There's some listed here: http://www.intel.com/content/www/us/en/ultrabook/shop-ultrabook.html http://www.intel.com/content/www/us/en/ultrabook/shop-ultrab... Of course, Intel is in the position that it can't compete with the people that makes its products--choosing to be horizontal rather than vertical in the PC market. So those quality and options are really on the OEMs, and Intel can only provide so much of a carrot and/or stick.
- Taylorious 14y ago
  Preach it. I can't find a decent Ultrabook. It's amazing that there are so many that dont even have at minimum a 1080p screen. That really should have been part of the Ultrabook specs. What is really astounding is how completely clueless OEMs are. Intel, a chip manufacturer, not only had to go to each OEM and convince them to make some competition for Apple, but they had to help them design the laptops too. What the hell do engineers at Dell, HP, and even Lenovo do all day? They are the ones who should be coming up with laptops and telling Intel what they want.
  - 14y ago
apapli 14y ago
I'd appreciate some thoughts from more informed people than myself. As I understand it: Intel didn't go into mobile devices because of lower margins. Arm has now taken that market, and are killing it because they have the volumes to make the lower margins palatable and not much competition. Intel is now going into the mobile space now as they have decided they are better off with low margins rather than no sales. I could only imagine the total demand for mobile devices is a much bigger market than it ever was for PCs so surely with Intels production capability they can own this segment soon? And with that being said, at the price intel stock is right now, we should be buying them up by the bucket load?
- adventured 14y ago
  The companies leveraging ARM are the ones really killing it. eg Qualcomm - 100% profit growth in 24 months, to $6.1 billion ($6.6b in last four quarters). They might be the size of Intel in three or four years at this pace, and their market valuation has already passed them (the market is making a clear bet there). ARM itself is tiny by comparison. The real killing is being made by the companies leveraging ARM's designs (QCOM / AAPL / Samsung etc). I view it as akin to taking commodity energy products (which often have good margins to begin with) and leveraging into the chemicals business with extreme margins (everything from Tide to perfume to industrial chemicals).
  - corin_ 14y ago
    A few errors in your numbers, it was $6.02 billion, and this was gross revenue not profit - profit was $1.9 billion (still 91% growth in 24 months). However, Qualcomm is more than ARM chips, so really those numbers are only semi-relevant. If Apple started making their own chips, you wouldn't attribute Apple's financial success to that alone. Based on the fact that Qualcomm's profit is ~31.7% of it's revenue (in FY12Q4) you could estimate that the profit from chip sales was closer to $1b/quarter (based on annual chip sales revenue of $12.976 billion in 2012) and then the question is how much of this is from ARM sales, which I don't have an answer to. As to their valuation passing Intel - again, this is based on more than chip sales, and Intel's market share is still almost four times that of Qualcomm currently (though this is likely to keep dropping, for sure). Personally I'm still far more keen on ARM than the manufacturers. Having factories that create chips from ARM's licenses is very different to turning commodity products into goods like perfume - in the latter it is in part about creativity and marketing (and probably patents, etc. etc.) in the former it is much more about economy of scale, efficiency, etc. What would it take to beat Qualcomm when it comes to producing ARM chips, and can it be done - get the price lower, and yes it probably could be by someone like Texas Instruments, Samsung, event Intel if they wanted to, potentially AMD (who do want to but I think probably are too small to). How about beating ARM themselves - all of a sudden you're not just trying to out-price the same products, you have to come up with better architecture and get the world to switch over. Whole different ball game. All that said, Qualcomm are definitely in a great position, and are doing really well. But from a spectator point of view I think ARM are much more exciting, from an investor point of view I think that ARM's long-term future has more potential, and short-term they are paying out dividends per share greater than Qualcomm's total earning per share. edit: Oh, and remember that even after the decline in profit, Intel's quarterly net profit is still higher than Qualcomm's. For now. Number sources: Qualcomm FY12 Q4 http://www.ft.com/cms/s/0/089f7c6e-6b23-11e2-8017-00144feab49a.html#axzz2Qgbslvzk http://www.ft.com/cms/s/0/089f7c6e-6b23-11e2-8017-00144feab4... ARM FY12 Q4 http://online.wsj.com/article/SB10001424052970204740904577194273282374432.html http://online.wsj.com/article/SB1000142405297020474090457719... 2012 chip sales https://en.wikipedia.org/wiki/Worldwide_Top_20_Semiconductor_Sales_Leaders#Ranking_for_year_2012 https://en.wikipedia.org/wiki/Worldwide_Top_20_Semiconductor...

37 points by eplanit 14y ago

Um, yep. If the average "PC" turns from a $500-750 laptop to a $200-500 tablet, Intel's going to lose a lot of business. It can't afford to live on Atom chip margins.

vault_ 14y ago
That's assuming that Intel gets a decent cut of tablet market at all. Intel making a decent low power CPU isn't going to make Arm go away, and Arm is only going to work its way up the ladder from its current dominance in the embedded and mobile space.
- Taylorious 14y ago
  Arm exists because they went after a market Intel didn't care about. Intel was slow to react to the shift in market, but they have reacted and they are focused now. It is only a matter of time before Intel dominates the market. Their latest Atom processors are already better than Arms. They may not get the same cut from mobile processors, but they will have larger volume and there is an emerging market in the hybrid tablet space. The Surface Pro is considered a tablet but it still has an i5 in it. If Microsoft didn't screw it up so much it could have been a huge success. If any company can touch Intel fabrication process, then maybe I will start to be worried about my Intel stock.
  - criley 14y ago
    >Their latest Atom processors are already better than Arms. Source? Every review I've seen says they still struggle to beat ARM on power/performance/price. I've absolutely not heard that their mobile chips are "better" by any margin.
    - Taylorious 14y ago
      http://www.anandtech.com/show/6536/arm-vs-x86-the-real-showdown/14 http://www.anandtech.com/show/6536/arm-vs-x86-the-real-showd... On the horizon: http://www.anandtech.com/show/6790/intels-clover-trail-dualcore-cpu-and-graphics-unveiled-at-mwc-2013 http://www.anandtech.com/show/6790/intels-clover-trail-dualc...
      - brigade 14y ago
        I really wish people would stop using Javascript benchmarks as a CPU benchmark, especially across architectures. The amount by which they vary between browsers on the same device should make it obvious they aren't a good general-purpose benchmark. I mean, Kraken for one says my laptop is 60% faster than itself.

filereaper 14y ago

"An improving economy should help, as well as new products like its Haswell chips, a power-saving processor that supports touch-screen computing on ultrabook computers, which are hybrids of notebooks and tablets." I was expecting this, let's see how it holds up against ARM.

adventured 14y ago

Intel is among the best at staying paranoid and investing into R&D. It makes how they've been pinched by the rapid shift to smart phones + tablets all the more amazing. A textbook example of how the best of companies can be caught with their pants down. They've always managed to respond impressively in the past to challenging circumstances. Can they do it again? Their future depends on it.

seanmcdirmid 14y ago
It wasn't really that though. They saw it coming, but the margins were so low in this new field that they had to decide: stay in their high-margin but slowly dying business or turn ship to compete with the inevitable but not very profitable new order that was coming online. It is quite easy to think that these big companies are not getting it, but they really do. Intel was and is basically in a no win situation: they could become like ARM and TSMC combined, but that wouldn't justify their valuation at all. Their only hope was to come out with a new breakthrough high-margin product, which might not simply exist right now (i.e. no big leaps to be had for the next 5-10 years).
- pyre 14y ago
  So... Will desktop/laptop computers ('workstations') become super expensive (high-end) to justify Intel's valuation?
  - seanmcdirmid 14y ago
    Free market: we can buy what we want! Its only Intel that is screwed.
    - pyre 14y ago
      1. If Intel collapses, who will make the processors? I guess AMD is still out there, but their capacity, might not be high enough (which would drive up the price of the processors). 2. If Intel enters a death spiral, it seems to only make sense that it would attempt to raise the price on its processors, which could drive up the cost of desktops/laptops. Sure the market may respond by attempting to go with AMD (for example), but this may require retooling of processes and would probably incur a time delay (it may even drive some PC makers out of business, depending on their financial situation). 3. If Intel collapses who would buy up their assets (manufacture plants, design, research, etc)?

cft 14y ago

What's interesting is that as a power user I still cannot buy a good ultrabook. I have a Samsung New Series 9 13" , that besides having major quality problems (dead pixels, clicking fan noises), lacks several essential features that I think many people would like to have: -Retina display (at least like on iPad 3, 2048 x 1536 ) -Default fan-less thermal profile (i.e. no moving parts- it has fanless thermal profile, but it "forgets" it every time it's turned on) Further down the road: -Lid can be detached from the keyboard and used as a touchscreen tablet

seanmcdirmid 14y ago
Obviously, retina is not Intel's problem; plenty of notebooks sold by the fruit have these displays already. Its only a matter of whether the OS/app ecosystem can deal with high resolution displays.
caw 14y ago
>Lid can be detached from the keyboard and used as a touchscreen tablet You should check out the computers known as "convertibles". There's some listed here: http://www.intel.com/content/www/us/en/ultrabook/shop-ultrabook.html http://www.intel.com/content/www/us/en/ultrabook/shop-ultrab... Of course, Intel is in the position that it can't compete with the people that makes its products--choosing to be horizontal rather than vertical in the PC market. So those quality and options are really on the OEMs, and Intel can only provide so much of a carrot and/or stick.
Taylorious 14y ago
Preach it. I can't find a decent Ultrabook. It's amazing that there are so many that dont even have at minimum a 1080p screen. That really should have been part of the Ultrabook specs. What is really astounding is how completely clueless OEMs are. Intel, a chip manufacturer, not only had to go to each OEM and convince them to make some competition for Apple, but they had to help them design the laptops too. What the hell do engineers at Dell, HP, and even Lenovo do all day? They are the ones who should be coming up with laptops and telling Intel what they want.
- 14y ago

apapli 14y ago

I'd appreciate some thoughts from more informed people than myself. As I understand it: Intel didn't go into mobile devices because of lower margins. Arm has now taken that market, and are killing it because they have the volumes to make the lower margins palatable and not much competition. Intel is now going into the mobile space now as they have decided they are better off with low margins rather than no sales. I could only imagine the total demand for mobile devices is a much bigger market than it ever was for PCs so surely with Intels production capability they can own this segment soon? And with that being said, at the price intel stock is right now, we should be buying them up by the bucket load?

adventured 14y ago
The companies leveraging ARM are the ones really killing it. eg Qualcomm - 100% profit growth in 24 months, to $6.1 billion ($6.6b in last four quarters). They might be the size of Intel in three or four years at this pace, and their market valuation has already passed them (the market is making a clear bet there). ARM itself is tiny by comparison. The real killing is being made by the companies leveraging ARM's designs (QCOM / AAPL / Samsung etc). I view it as akin to taking commodity energy products (which often have good margins to begin with) and leveraging into the chemicals business with extreme margins (everything from Tide to perfume to industrial chemicals).
- corin_ 14y ago
  A few errors in your numbers, it was $6.02 billion, and this was gross revenue not profit - profit was $1.9 billion (still 91% growth in 24 months). However, Qualcomm is more than ARM chips, so really those numbers are only semi-relevant. If Apple started making their own chips, you wouldn't attribute Apple's financial success to that alone. Based on the fact that Qualcomm's profit is ~31.7% of it's revenue (in FY12Q4) you could estimate that the profit from chip sales was closer to $1b/quarter (based on annual chip sales revenue of $12.976 billion in 2012) and then the question is how much of this is from ARM sales, which I don't have an answer to. As to their valuation passing Intel - again, this is based on more than chip sales, and Intel's market share is still almost four times that of Qualcomm currently (though this is likely to keep dropping, for sure). Personally I'm still far more keen on ARM than the manufacturers. Having factories that create chips from ARM's licenses is very different to turning commodity products into goods like perfume - in the latter it is in part about creativity and marketing (and probably patents, etc. etc.) in the former it is much more about economy of scale, efficiency, etc. What would it take to beat Qualcomm when it comes to producing ARM chips, and can it be done - get the price lower, and yes it probably could be by someone like Texas Instruments, Samsung, event Intel if they wanted to, potentially AMD (who do want to but I think probably are too small to). How about beating ARM themselves - all of a sudden you're not just trying to out-price the same products, you have to come up with better architecture and get the world to switch over. Whole different ball game. All that said, Qualcomm are definitely in a great position, and are doing really well. But from a spectator point of view I think ARM are much more exciting, from an investor point of view I think that ARM's long-term future has more potential, and short-term they are paying out dividends per share greater than Qualcomm's total earning per share. edit: Oh, and remember that even after the decline in profit, Intel's quarterly net profit is still higher than Qualcomm's. For now. Number sources: Qualcomm FY12 Q4 http://www.ft.com/cms/s/0/089f7c6e-6b23-11e2-8017-00144feab49a.html#axzz2Qgbslvzk http://www.ft.com/cms/s/0/089f7c6e-6b23-11e2-8017-00144feab4... ARM FY12 Q4 http://online.wsj.com/article/SB10001424052970204740904577194273282374432.html http://online.wsj.com/article/SB1000142405297020474090457719... 2012 chip sales https://en.wikipedia.org/wiki/Worldwide_Top_20_Semiconductor_Sales_Leaders#Ranking_for_year_2012 https://en.wikipedia.org/wiki/Worldwide_Top_20_Semiconductor...