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  • merlot_1 merlot_1 Jan 25, 2013 8:22 AM Flag

    Intel's conundrum

    The iFad hysteria is indeed over but your thesis rests on several faulty assumptions. First is that the maturity of the U.S. smartphone and tablet market is representative of the Rest Of World. It is not. While U.S. consumers are entering the replacement cycle for smartphones very large populations of the world have yet to buy their first one.

    Second, you assume the industry is incapable of any new innovation that would create for new products. Innovations are happening in the ultrabook and convertible space that may redefine the traditional PC. Plus smartphones can be made far more powerful and even to the point of running full 64 bit W8 giving users a completely portable desktop with apps included. Then there are wearable computers, voice control, gesture control, embedded devices, smart homes, smart vehicles and many more innovations yet to come.

    Of all the things to worry about Intel, the lack of new ways to improve lives through technology is not one of them. The better question to ask is who is going to be on the top of the heap in the long run.

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    • I agree that USA is not representative of the world. RIMM (and NOK for that matter) would most certainly be out of business if that was not the case.

      However, the underdeveloped world does not, and will not, have the means to pay for high-priced phones for many years. The replacement cycle there will continue, but only provided that the phones/tablet are cheap.

      INTC is entering the phone/tablet market precisely when growth of the high-end (high margin) phone market in the developed world is slowing down, and any remaining growth is shifting to low-cost phones in the underdeveloped world. So commoditization of the overall phone market is happening and growth will be mostly limited to low-margin products. And due to the high-performance of even low-cost phones, the replacement cycle will end much more quickly than it did in the case of PC for the reason I stated previously.

      Of course innovation is not dead. Samsung has some interesting flexible-screen display technology coming out that will open new markets. I am just not so sure the majority of people will see any urgent need to 'upgrade' their devices, at least, not nearly at the pace they did. I maintain that the phone/tablet space is going to transition to low growth much more quickly than PC's did. And that is a conundrum for INTC along with other companies in the technology space.

      • 1 Reply to blackoutbuzz
      • "INTC is entering the phone/tablet market precisely when growth of the high-end (high margin) phone market in the developed world is slowing down, and any remaining growth is shifting to low-cost phones in the underdeveloped world. So commoditization of the overall phone market is happening and growth will be mostly limited to low-margin products. And due to the high-performance of even low-cost phones, the replacement cycle will end much more quickly than it did in the case of PC for the reason I stated previously."

        ***

        [“We’re in the sweet spot of the smartphone growth curve,” said Steven Pelayo, a Hong Kong-based analyst for HSBC Holdings Plc.]

        [In other words, you don't know jack about smartphone growth rates. No surprise. Nor do you know anything about margins. You don't need huge margins and it doesn't matter if margins decline if the volume is enormous. The volume is enormous and Intel's superior fabrication will allow them to take market share from ARM. It's a huge market and Intel is just starting to tap it...]

        Sentiment: Strong Buy

 
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