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.