Intel and competition
Intel (INTC) is transitioning to the artificial intelligence and automotive markets as its traditional PC (personal computer) and server markets face a slowdown. The company is reducing its spending and focus on the PC processor market as part of its restructuring, which is giving rival Advanced Micro Devices (AMD) a chance to reenter the high-end PC market.
Intel discontinues production of some chips
As part of its restructuring, Intel is offloading all non-core assets and products to focus on high-growth, high-margin core products. So far in 2017, the company discontinued several wearable processors, including its Arduino 101 maker board, Curie module, Galileo, Joule, and Edison. It also discontinued Atom processors used in smartphones and tablets. Apart from processors, Intel has discontinued its first-generation Thunderbolt 3 controllers.
Intel also scrapped its annual Intel Developer Forum, which showcases its new processors, indicating a slowdown in innovation in the PC space. This gave AMD a chance to bridge the technology gap and compete with Intel with its new Ryzen CPUs (central processing units).
Intel is also seeing growing competition from Samsung (SSNLF).
Samsung overtakes Intel as largest semiconductor company
Samsung finally became the largest semiconductor company (SMH) by revenue in calendar 2Q17. Samsung’s semiconductor revenue of $15.8 billion was higher than Intel’s overall revenue of $14.8 billion in calendar 2Q17. On the operating income front, Samsung beat Intel for the second quarter in a row. Samsung’s semiconductor operating income of $7.21 billion was way above Intel’s overall operating income of $4.2 billion in calendar 2Q17.
It’s important to note that Samsung’s growth largely came from the memory market, wherein the supply shortage is driving prices, stated Bernstein Research analyst Stacy Rasgon. Intel’s memory revenue of $874 million is very small compared with Samsung’s ~$12.3 billion in memory revenues.
Memory prices are highly volatile and driven by market forces. Currently, memory prices are on fire due to a supply shortage. Samsung’s large size of memory business is acting as a catalyst, but memory prices will likely decline as more manufacturing capacity comes online and increases supply. At that time, the same catalyst would become a growth deterrent for Samsung.
On the other hand, Intel’s revenue is more stable due to its diversified revenue streams. Even though Samsung has taken the top position, it may not be able to sustain that position during a memory downturn.
Recent updates on Intel
Amid all this, Intel CEO (chief executive officer) Brian Kraznich has prevented the company from being affected by the political environment. Kraznich left President Donald Trump’s American Manufacturing Council on the grounds that the council’s mission was being governed by politics rather than by the progress of the country.
Next, we’ll see how the business transition is impacting Intel’s technology model.