How tablets have changed things for Intel
Intel (INTC) was the number-one player in the semiconductor market between 1991 and 2001, thanks to its lion’s share of the PC (personal computing) space. As seen in the previous part of the series, PCCG (PC Client Group) accounted for more than 60% of the firm’s total revenue in 2014.
Today, over 80% of personal computers sold worldwide have Intel processors. For example, Apple (AAPL) uses Intel’s Xeon processors in their notebooks and laptops. However, a slowdown in the PC market that began in 2012 has had a direct impact on PCCG sales. It has forced the company to diversify into other promising segments of consumer electronics.
Trend in PC sales
According to the International Data Corporation, total PC sales fell steeply between 2012 and 2013, from 350.4 million units to 315.1 million units, due to high demand for tablets. PC sales continued to fall in 2014, although at a slower rate, with 308.1 million units sold. This downward trend is likely to continue, with 289 million units expected to be sold in 2015. Given this slowdown, Intel expects its fiscal 2015 revenue to fall by ~1%.
Intel’s move to server market
To offset the decline in the PC segment, Intel is rapidly shifting its focus toward the server market. In the previous part of this series, we learned that 26% of the company’s 2014 revenue came from the DCG (Data Center Group). The company has a 99% share of the server market.
However, ARM Holdings (ARMH) is slowly gaining traction in this segment and aims to compete with Intel by selling its server chips for less. Intel will also face competition from Avago (AVGO), which recently acquired Broadcom (BRCM) in a bid to expand into the data center space.
Intel makes up 7.74% of the iShares PHLX Semiconductor ETF (SOXX).