Intel Corporation Message Board

Now INTC chips will be in smartphones .... wow!

May 17, 2011,
12:10 PM ET.

Intel Says Q2 On Track, Alludes To Foundry Appeal For Apple, Others.

By Tiernan Ray

Intel’s (INTC) annual investor day is ongoing. The company reiterated its Q2 outlook, and said its “Atom” chips for mobile devices would come to market in “the next 36 months.”

CFO Stacy Smith said the company was on track to see revenue above $50 billion this year.

Just before Smith, CEO Paul Otellini spoke.

Otellini made a push for the company’s unique ability to make money off the tablet and smartphone race even though it is regarded as having little standing in those markets.

He suggested Intel is already making most of the profit in mobile given the ramp in servers using Intel chips to power services for the devices, and he even alluded to the prospect of providing chip fabrication facilities for Apple (AAPL) and other chip designers, something that has been speculated about quite a bit of late.

Otellini talked about growth in the company’s data-center oriented “Xeon” chips, which should be a $20 billion a year businesses “within 5 years,” up from $10 billion this year, for a compounded annual growth rate in revenue from last year through 2015 of 15%. It’s not just high-performance computing, said Otellini, but also storage and other applications.

Otellini asked the audience, “Pop quiz: Which silicon vendor makes the most money on smartphones and tablets today? Intel. Anyone surprised?”

“We’re making far more margin than any silicon vendor is selling into those devices. The money is in the infrastructure.”

Otellini said there’s three places where people like Intel are going to get paid: Value for making silicon, value for chip feature sets, and value for high-performance servers, storage and networking.

While Intel gets paid on all three aspects in the current PC market, he suggested the company would also get paid eventually for all three in the tablet and smartphone market.

“Even good old Apple has to go to a foundry. They’re paying Samsung, and that value is not accruing to Apple.”

“If you look at the profitability around the smartphone chips, it’s mostly going to the foundry guys,” said Otellini, alluding to contract chip manufacturers such as Taiwan Semiconductor Manufacturing (TSM).

“The people making the SOCs are making substantially less money. As we bring our architecture and the benefits of our transistor technology into [tablets and smartphones] we believe we can be paid for all three. It’s not just about the instruction set, it’s about security as well as other things,” in the chip, said Otellini.<<<