Client Computing Group
Intel (INTC) is moving away from PCs (personal computers) to other data-centered technology. However, the CCG (Client Computing Group) still commands 55% of the company’s revenue. The CCG comprises its PC platform and mobile modem businesses, with the PC platform business accounting for over 92% of its revenue.
Intel is a leader in the PC processor market, with a ~79% market share. Despite the PC market declining for the past several years, the company has managed to improve its CCG revenue through segmentation and with the right core mix.
CCG revenue rose 12% YoY (year-over-year) to $8.2 billion in fiscal 2Q17, despite Gartner’s data showing that worldwide PC shipments fell 4.3% YoY during the quarter. The revenue was driven by a 3% YoY increase in platform volumes, especially those of notebook platforms, which rose 14% YoY. This performance is a shift from normal trends as notebook and desktop volumes generally decrease in fiscal 2Q.
Bernstein analyst Stacy Rasgon stated that notebook volumes were driven by significant overshipment in 1H17. While many analysts expected Advanced Micro Devices’ (AMD) Ryzen desktop CPUs (central processing units) to impact Intel’s CCG revenue, any weakness in Intel’s desktop CPUs was more than offset by strength in its notebook CPUs.
On the profitability front, CCG’s operating profit rose 59% YoY to $3 billion in fiscal 2Q17 as ASPs (average selling prices) rose 8% YoY. However, this growth was lower than the 13% YoY growth seen in fiscal 2Q16, as AMD’s Ryzen CPU forced Intel to cut its desktop CPU prices.
Fiscal 3Q and 4Q are seasonally strong quarters for the CCG, as worldwide PC shipments generally rise by mid-single digits on a sequential basis. Intel’s segmentation strategy could increase its PC revenue faster than the market.
Intel earns 56% of its revenue from the CCG, and the group’s revenue is expected to grow 7.2% sequentially to $8.8 billion in fiscal 3Q17. This growth estimate is lower than the double-digit seasonal growth normally seen because the segment has already witnessed strong growth in the off-season despite PC demand not increasing.
New PC products
The actual competition between AMD and Intel could begin in fiscal 2H17, when both companies launch competitive products. In August 2017, Intel launched its powerful and expensive Core X-series processors. This X-series include a new range of Core i9 Extreme Edition CPUs, due to launch on September 25, 2017. Core i9 will compete with AMD’s Ryzen Threadripper, which was launched in August 2017.
At the end of 2017, Intel will begin shipment of its 10nm (nanometer) CannonLake processors and ramp p their production in early 2018. This move to 10nm technology could wipe out any competition from AMD. Therefore, the next six months will be crucial for AMD if it wants to take some market share from Intel. Next, we’ll look at the CCG’s mobile segment.