The iFad is officially over. AAPL and NOK just confirmed it. The smartphone/tablet craze is nearing a end. Everyone that really wanted one now has one.
As now the case with PC's, there is increasingly less motivation to upgrade your phone when the unit you have works well enough. The market nearing saturation. New products will not achieve the historical growth rates of early units. The iFad is tracking the history of the PC and will rapidly turn into a slow growth commodity market. It will happen much more quickly than it did in the case of PC's though, since the reference starting point of unit performance began much higher on the performance curve.
INTC faces a slow growth PC/notebook market. It will also face a slow growth smartphone/tablet market much sooner rather than later. The only saving grace for INTC is the server market, as the installed base of users will use their units to consume increasing amounts of data over the internet. Even there, where INTC has a decent monopoly, server commoditization will reduce profit margins.
INTC faces a big conundrum... focus on servers to grow their monopoly there and keep margins up, or spread the risks by trying to grow market share in the slow-to-no growth PC and now phone/tablet spaces, where margins will only decrease.
This is why I hesitate to open a long position on this company, even at what many would call 'fire-sale' prices.
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.
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.
Still waiting for Gaudot - he just left a message - and he assured me he will show up.
blackoutbuzz - you suck
Itching to buy ASML
by blackoutbuzz . Jul 12, 2011 10:45 PM . Permalink
but I will wait very patiently for the inevitable downturn to run its course this year. Looking for an entry point at 25 (or even maybe 20??). I really like this company.
Time to revisit Cymer
#$%$. I did buy ASML near a low in 2002 and held until selling it a very decent profit in late 2010. So I missed the latest runup from 2011 to now... BFD. And I was ready to lever up in late 2011 but no leaps options were out there at the time to make the play I wanted to do.
I still like ASML, but I don't like buying at highs... do you? How much have you made on your INTC shares?
ASML is going to rule EUV market
by blackoutbuzz . Aug 3, 2002 8:47 AM . Permalink
Just you wait and see. $40M/machine is big profits when you start dropping one of these tools into every state-of-the-art fab!
by blackoutbuzz . Oct 12, 2011 11:22 AM . Permalink
#$%$. I just noticed leaps options are now listed for this company. I held off buying calls after selling my shares last year because only short-term options were available. Now leaps finally show up after the stock has had a big runu
As Intel prepares to catch up with its competitors, the company is seizing on the high expectations for the low-end smartphone market, which should offer the chipmaker a golden opportunity. Figures from IHS show that from 2012 to 2016, the market will double with shipments moving from 206 million in 2012 to 559 million in 2016. In fact, according to IHS, shipments of low-end smartphones will rise at a compound annual growth rate (CAGR) of 51 percent from 2011 to 2016. That's faster than high-end smartphone shipments, which will grow at a CAGR of only 12 percent during the same period.
The strong demand for low-end smartphones is mainly from China and other Asia-Pacific countries, as well as Eastern Europe, Africa, and the Middle East. To get its chips into low-end smartphones, Intel introduced, at the recent Consumer Electronics Show in Las Vegas, an Atom processor platform designed to target this market in emerging economies. Francis Sideco, senior principal analyst for wireless communications at IHS, called this a "shrewd strategy" that just might help Intel increase its chip business in this market segment.
In the meantime, Intel declares that it continues to make progress with its acquisition of Infineon Technologies AG Wireless Solutions business and is preparing to launch its first Long-Term Evolution (LTE) solution to support 4G wireless technology -- another important milestone for Intel as it seeks to make inroads into the US smartphone market.
The consensus is that the benefit to be derived from an LTE solution is substantial. According to IHS, three years after its original deployment, projections are that there will be 100 million subscribers to LTE this year.
"INTC faces a big conundrum... focus on servers to grow their monopoly there and keep margins up, or spread the risks by trying to grow market share in the slow-to-no growth PC and now phone/tablet spaces, where margins will only decrease."
[This is what you call analysis??? Intel is going to continue all three lines. There is no conundrum. They will continue to dominant servers, they will continue to dominant PCs and they will build profitable mobility market share. As indicated in quite a few posts and articles, the margins do not in any way prevent Intel from a profitable share of smart phones and tablets. And Intel's fabrication will provide a distinct edge in all three markets....]
Sentiment: Strong Buy
Technology wise, everything is going low-power, all three of these market segments. Intel does not have a fabrication advantage in low power. It's trying to build up one by accelerating deployment of 14nm by exploiting its first mover advantage on finfets. All the 3 major foundries are very well funded and correspondingly trying to match Intel's acceleration with their own accelerated schedules. It's not going to be a cakewalk for Intel on fabrication and even having a one node fabrication advantage at low power does not guarantee success. For example, assuming Intel is able to bring 14nm to low power one year after its 22nm low power deployment (end of 2103) in the end of 2014, by that time, foundries will have 20 nm in volume and big.LITTLE configurations will be both power and performance competitive with Intel's 14nm SOC offering. That's ARMs side of the story. Whether Intel will successfully bring 14nm to low power in end of 2014 and whether big.LITTLE will actually make a difference are both speculative at this point, but the changing funding trends for the foundries don't look good for Intel.
Well, you may not agree with the viewpoint I presented, but at least unlike most of your posts, it's not simply a regurgitation of articles I can find and read without your 'help'.
- They will continue to dominant servers -
They very likely will, but whether or not they will be able to maintain their high margins is not a given.
- They will build profitable mobility market share -
That remains to be proven.
I suspect there will be difficult challenges for INTC to grow profits. Maybe you can explain why the market appears to be pricing in weak prospects for INTC if their future is really as bright and certain as you portray. And please don't respond with the simplistic argument that the market is ignorant of INTC development and production capabilities. I don't buy that for a minute.