How Mobile Is Intel?

Just as Intel Corp (INTC) has a dominant position in the microprocessor market for computers, ARM Holdings (ARMH) has the most widely used technology in cell phones and other mobile devices. Intel’s desire to go beyond its home ground may be traced to the maturing state of the enterprise type PC market and the much stronger growth rates in cell phones and mobile internet devices.

The higher demand has been driven by a sea change in technologies driving consumer electronics products that have virtually created demand for a completely new species. Consumers now want greater functionality, connectivity, portability, lower power consumption, smaller sizes and all this at a much lower cost.

What Intel wants to achieve requires a paradigm shift. In the PC market it enjoys a special position at system integrators that have for long kept Advanced Micro Devices (AMD) at bay. Being the financially stronger party, it is able to make higher investment in R&D and also see the investment converted to sales.

However, the market is heating up and AMD’s recent alliance should help it generate much needed volumes. What that could mean for the AMD bottom line is a different story. But it should definitely begin to create a larger dent in Intel’s revenues.

The cell phone market is vastly different. Here Intel is in AMD’s shoes, despite its financial strength and ARM processors rule the day. ARM chips are already packaged and sold by the likes of Qualcomm (QCOM), Samsung and Texas Instruments (TXN) and are the processors of choice for nearly 90% of all cell phones on the market today. Even new operating systems, such as Google’s (GOOG) Android have been specially built to fit in with ARM architecture.

Intel’s problems are not limited to its x86 architecture, which is incompatible with many proprietary cell phones. The company has actually yet to come out with a satisfactory product for the market. The Atom is more of a computing chip, sort of a bridge between the two worlds.

By Intel’s own admission, the company will not be able to make an impression on the cell phone market before the advent of Moorestown. The power savings offered by Moorestown could make the Intel chip more appropriate for the cell phone market. Critics argue that the Cortex A9 from ARM could be shipping by then, which could maintain ARM’s supremacy.

However, Intel’s strategy goes deeper. The company has gone beyond handsets to the growing mobile internet devices (MID) market. According to research firm Forward Concepts, MID shipments will grow from 305,000 units in 2008 to 40 million units in 2012. The research firm expects chip companies serving the market to gain big time, growing from $29 million in 2008 to $2.6 billion in 2012.

Intel is expected to be the biggest winner with its x86 microarchitecture. The non-x86 gainers are likely to be Texas Instruments and Qualcomm.

Intel has also been developing the Moblin software platform for Atom based netbooks and nettops using open source technology from Linux. The beta version boasts the latest open source graphics technology; social networking (only Twitter and Last.fm at present); Mozilla browser (for Internet access, video embedding and the latest flash plug-in); zoomable media player, and a user interface for connection management.

Moblin will also be of great strategic importance when Intel is ready to enter the handset market through the recently announced Nokia (NOK) alliance.

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