Intel’s mobile business
In the previous part of this series, we saw that Intel (INTC) is seeing off-season growth in the PC (personal computer) platform space. The CCG’s (Client Computing Group) other segment is its mobile business, where it was too late to tap the mobile revolution. Qualcomm (QCOM) grabbed the opportunity and became a leader in the mobile chip market.
Intel discontinued its Atom processors for mobile phones and tablets as they could not compete with ARM-based chips. As the company now only supplies modems for smartphones and tablets, the mobile business accounts for only 8% of CCG revenue.
Mobile business earnings
Mobile revenue rose 50% YoY (year-over-year) to $600 million in fiscal 2Q17 as Apple (AAPL) started sourcing 40% of the cellular modems for its iPhone 7 from Intel. As shown in the above graph, Intel’s CCG revenue has been directly proportional to iPhone sales in all quarters but fiscal 2Q17, when weakness in modems was more than offset by strength in PC platforms.
Intel’s mobile revenue is likely to increase in fiscal 2H17, as 2017 marks the tenth anniversary of the iPhone and analysts and Apple expect record sales of iPhones.
Moreover, Apple is in a legal dispute with its key modem supplier, Qualcomm. This dispute could see Apple sourcing a larger portion of cellular modems, probably 50%–60%, from Intel. However, there are rumors of a likely delay in the launch of iPhone 8. Even Broadcom (AVGO), a key component supplier for Apple, reported that it is seeing slow iPhone production. These circumstances could delay Intel’s modem revenue from Apple to fiscal 4Q17, though there may be some increase in modem revenue in fiscal 3Q17.
Intel is catching up with Qualcomm in the modem space. It has started shipping its next generation 7480 4G LTE (long-term evolution) modems and has also developed a 5G modem. However, Qualcomm is still one step ahead of Intel, and has launched the industry’s first 1GB (gigabyte) LTE modem. It will take Intel at least a year to launch a 1GB LTE modem to compete. Next, we’ll look at Intel’s data center business.