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Intel Lost Over $4 Billion On Mobile Last Year

Although Intel had a great year overall in 2014, reaching $55.9 billion in revenue and $11.7 billion in profits, its mobile division didn't do as well. In fact, it lost $4.3 billion, after it had already lost $3.1 billion in 2013. Intel has lost more than $7 billion in mobile so far in the last two years, which is more than some chip companies are able to make in this market.

Why is Intel losing so much money in mobile? The company invests heavily in mobile from R&D to marketing, but the single biggest factor is that Intel has been essentially paying OEMs to use its chips in devices. This is why we can see Atom-based tablets such as the Nokia N1 cost only $250, despite having specs similar to a $400 iPad Mini 3.

Intel hopes that by getting enough OEMs to use its chips, even if it has to pay those companies, Atom processors will become more popular in the mobile market with consumers, who will then begin to demand Atom devices from OEMs.

As part of this strategy, Intel has also been investing in Chinese chip makers such as Rockchip and Spreadtrum, in order to get them to use the Atom CPU in their SoCs. Intel won't make too much money from this, if anything at all, as it only stands to gain a small royalty on each chip sold. That's similar to what ARM does with its chip IP, although at a much smaller scale.

Intel's strategy is to get as many devices as possible to use its x86 Atom CPU, whether the company makes money from it or not -- at least in the short term. In the long term, Intel hopes it can begin charging premium prices for its chips again. If Intel ever becomes a dominant player in mobile, that may happen, but right now the mobile landscape is much more competitive than the PC or server markets, which Intel dominates.

Starting this year, Intel will stop reporting its mobile results to shareholders, as the company will integrate the mobile division into the PC division. This will make it much harder to see how the company fares in mobile as it can hide the losses with the profits from the PC market, although of course, Intel hopes its mobile profitability will improve in 2015.

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  • TechyInAZ
    At least there is still competition for intel, the last thing I think all of us want's to see is intel domination the entire CPU market!
    Reply
  • Grognak
    Is that supposed to be surprising? Everyone knows Intel offered their Atom chips for dirt cheap in an attempt to stop AMD from entering the tablet/phone market. They've never made a profit from it and they don't care, as long as AMD loses even more.
    Reply
  • salgado18
    By paying companies to use its chips on devices, Intel is doing the same thing it did to AMD a while back: gaining market share using pure financial power. Intel was charged with monopoly, and had to pay AMD a bunch of cash because of it, but the damage was still done. Now it's doing it again. I might be wrong, but isn't that illegal?
    Reply
  • everlast66
    I am glad Intel lost such a great chunk, $4B, of their hard earned $11B profit with this false economy strategy that isn't contributing anything to the market. I am sure big shareholders are breathing in the board's directors' necks and hopefully will stop such nonsense next year.
    It's much more reasonable to spend such funds for R&D and put a better product in the market, rather than subsidizing prices to get inferior products into customers hands.
    When a company starts spending like this, something with it is going seriously wrong and alarm bells start ringing ...
    Reply
  • salgado18
    I don't think investors will find that bad. You see, in 2013 Intel shipped 10 million tablet processors, and in 2014 around 40 million. Now that they have a presence, they can take some of the subsidy away, start earning a bit more, and still ship quite a bunch of processors, because the products with Intel Inside were "successful". They bought market share, cold blooded, outmatching anyone on cost/benefit. That's why AMD couldn't compete (that makes me so mad), and that's a serious threat to slightly less powerful ARM chip makers.

    Edit: god, this comment system is terrible :/
    Reply
  • Brice McIntosh
    How does this strategy work? Doesn't enabling OEMs to sell devices at much lower costs now make it harder to sell devices with the same relative performance down the road harder to swallow for consumers? If I can get a Nokia N1 today for $250, Why would I pay $350-$400 for an N2 in a year or two? I expect that once Intel stops paying people to use their chips, the products using their chips will cost considerably more.
    Reply
  • none12345
    "I am glad Intel lost such a great chunk, $4B, of their hard earned $11B profit with this false economy strategy that isn't contributing anything to the market. I am sure big shareholders are breathing in the board's directors' necks and hopefully will stop such nonsense next year."

    No, they had 11 billion profit after that loss. So they lost 4 billion of a 15 billion profit, leaving 11 billion.

    But....they didnt lose anything. Its by design. Its the same thing they did to AMD in the the year 2000. It worked before and as long as they have the cash to do it for awhile(which they do), it will probably work again.

    From that point of view, i think the shareholders are fine with it. If the market ONLY bought bet best tech for the dollar, Intel would be a much weaker position today then it is. It can afford to get its product everywhere, and that keeps it strong.
    Reply
  • InvalidError
    15072049 said:
    Is that supposed to be surprising? Everyone knows Intel offered their Atom chips for dirt cheap in an attempt to stop AMD from entering the tablet/phone market. They've never made a profit from it and they don't care, as long as AMD loses even more.
    Does AMD have any SoCs competing against Intel's Atoms in the neighborhood of 2-3W TDP? No. Intel cannot drive AMD out of a market AMD has no products for.

    The Android market is dominated by $15-35 SoCs. If Intel is failing to grab a decent market share despite its architecture, fab process, power efficiency, marketing, engineering muscle and other advantages over AMD, AMD's chances of entering the mobile SoC arena with x86-based chips are very low. With the amount of competition in the low to mid-range ARM-based SoCs, AMD would likely have a hard time entering the mobile ARM market as well.

    Most mobile device designers/manufacturers are simply not interested in x86 beyond what Intel's R&D funds will cover. This reluctance would not get magically better for AMD even if Intel suddenly ceased to exist.
    Reply
  • MyDocuments
    As someone has already pointed out, Intel expect to be able buy a presence in the Mobile market, and then start the price hike whilst claiming premium prices for their premium performance. This of course can only happen when they hand in hand with their silicon expect to provide software and services that can only run on their devices and so put other architectures and their vendors on the wrong foot (Qualcomm, Samsung, Mediatek, Spreadtrum, etc).
    We must remember the big picture in that Intel will eventually expect to own the whole vertical platform, from the handy/tablet in your pocket/bag to the server infrastructure at the back-end doling out the special Intel-only (or even Intel-improved) services.
    As far as I remember former Intel executives were also on the boards of service companies, like Google for instance, and we should perhaps look into how far this spreads and how these boards are steering the technology – doubtless there is a matching paradigm of the stories of elected officials being lobbied by big-business here, and all of it self-serving and not in the public interest.
    Nevertheless, I would expect this would be how Intel would eventually crow-bar the Apples of this world into giving up their hard-won custom ARM cores.

    Hopefully, most people will start to see sense and stop buying over-the top pretty-baubles that are the premium priced products and realise that what they in fact need is something good-enough for their intended use. Should this “good sense” prevail then we can expect to continue to see the products that we have now at similar prices in the future without too much of the Intel inflation that the company enjoys in the mid to upper PC-chip market.
    In short, get them while they're good and cheap but try not to rely too much on any tie-in services and software.

    Of course, the one known market area where this “good enough for the purpose” mentality has been successfully shuttered is where Apple have cornered the “Bling” market, (Bling in this case representing the so called “fashionable to be seen with” item), but there are already defectors in this camp that see the price as too high for what is offered. Doubtless many of these people will argue about the Apple use-ability, services and quality, which could be a good thing in that it should help raise the bar for the competitors similar offerings, but in the meanwhile, meh... whatever. These people will continue to want what they want at the prices they pay, so buyer beware! .
    Reply
  • kawininjazx
    You couldn't pay me to use an AMD chip.
    Reply