Intel (INTC)

Today’s New York Times has a very interesting article “For Chipmakers, the Next Front in a Costly War is in Smartphones,” which makes a case why leading semiconductor manufacturers Intel and GlobalFoundries are poised to take market share in smartphone processors. GlobalFoundries is the manufacturing division that AMD spun out last year, and will do the semiconductor manufacturing for other companies at “what is arguably the most advanced chip factory ever built.” Jim Ballingall, VP for marketing, stated “[t]he first one out there with these types of products [for smartphones] is really the one that wins in the marketplace.”
Regarding Intel, the article is correct that one of that company’s keys to its success has been its manufacturing expertise. While it is very expensive to build semiconductor foundries, doing so enables INTC to manufacture at the leading edge of cost and performance. (According to EETimes, Intel manufactures semiconductors at a line width of 45 nanometers, or billionths of a meter, going to 32 nm. http://www.eetimes.com/rss/showArticle.jhtml?articleID=223100024&cid=RSSfeed_eetimes_newsRSS) But it’s worth noting that while INTC has been spectacularly successful making X86 architecture microprocessors, it hasn’t matched that record with chips for other applications. As the article notes, Intel is competing against other companies producing ARM-architecture chips for smartphones, and INTC’s Atom microprocessors “can cost two to three times as much” and “consume too much power for many smaller gadgets.” The other problem for Intel is software—since the ARM is more common, there is more smartphone software written for it. Regading GlobalFoundries, I disagree with Mr. Ballingall to some extent. While leading edge manufacturers should be able to make chips with the best price/performance, that is not a sufficient condition "to win in the marketplace," or even a necessary one. The chips that win are the ones that power the smartphones that wind up being the most successful in the market, which are chosen by the consumers, wireless carriers and smartphone makers. There are many criteria for getting “designed in,” by the smartphone vendors such as Apple and Nokia, including cost, performance, vendor (including the ARM suppliers), features and architecture. And each time there’s a new smartphone, there is at least the possibility of a new design in process, so no designer or manufacturer of smartphone chips has an ongoing lock.

Feb 22 · 9:13:00 AM · Source: The New York Times
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by Stuart Skalka