Yesterday Intel released their latest quarterly numbers, and they were pretty spectacular. Some serious milestones were reached last quarter, much to the dismay of Intel’s competitors. Not everything is good with the results, but the overall quarter was a record one for Intel. The company reported revenues of $14.55 billion dollars with a net income of $3.31 billion. This is the highest revenue for a quarter in the history of Intel. This also is the first quarter in which Intel has shipped 100 million processors.
The death of the PC has obviously been overstated as the PC group had revenue of around $9 billion. The Data Center group also had a very strong quarter with revenues in the $3.7 billion range. These two groups lean heavily on Intel’s 22 nm TriGate process, which is still industry leading. The latest Haswell based processors are around 10% of shipping units so far. The ramp up for these products has been pretty impressive. Intel’s newest group, the Internet of Things, has revenues that shrank by around 2% quarter over quarter, but it has grown by around 14% year over year.
Not all news is good news though. Intel is trying desperately to get into the tablet and handheld markets, and so far has had little traction. The group reported revenues in the $1 million range. Unfortunately, that $1 million is offset by about $1 billion in losses. This year has seen an overall loss for mobile in the $3 billion range. While Intel arguably has the best and most efficient process for mobile processors, it is having a hard time breaking into this ARM dominated area. There are many factors involved here. First off there are more than a handful of strong competitors working directly against Intel to keep them out of the market. Secondly x86 processors do not have the software library or support that ARM has in this very dynamic and fast growing section. We also must consider that while Intel has the best overall process, x86 processors are really only now achieving parity in power/performance ratios. Intel still is considered a newcomer in this market with their 3D graphics support.
Intel is quite happy to take this loss as long as they can achieve some kind of foothold in this market. Mobile is the future, and while there will always be the need for a PC (who does heavy duty photo editing, video editing, and immersive gaming on a mobile platform?) the mobile market will be driving revenues from here on out. Intel absolutely needs to have a presence here if they wish to be a leader at driving technologies in this very important market. Intel is essentially giving away their chips to get into phones and tablets, and eventually this will pave the way towards a greater adoption. There are still hurdles involved, especially on the software side, but Intel is working hard with developers and Google to make sure support is there. Intel is likely bracing themselves for a new generation of 20 nm and 16 nm FinFET ARM based products that will start showing up in the next nine months. The past several years has seen Intel push mobile up to high priority in terms of process technology. Previously these low power, low cost parts were relegated to an N+1 process technology from Intel, but with the strong competition from ARM licensees and pure-play foundries Intel can no longer afford that. We will likely see 14 nm mobile parts from Intel sooner as opposed to later.
Intel has certainly shored up a lot of their weaknesses over the past few years. Their integrated 3D/GPU support has improved in leaps and bounds over the years, their IPC and power consumption with CPUs is certainly industry leading, and they continue to pound out impressive quarterly reports. Intel is certainly firing on all cylinders at this time and the rest of the industry is struggling to keep up. It will be interesting to see if Intel will keep up with this pace, and it will be imperative for the company to continue to push into mobile markets. I have never counted Intel out as they have a strong workforce, a solid engineering culture, and some really amazingly smart people (except Francois… he is just slightly above average- he is a GT-R aficionado after all).
Next quarter appears to be more of the same. Intel is expecting revenue in the $14.7 billion, plus or minus $500 million. This continues along with the strong sales of PC and server parts for Intel that helps buoy them to these impressive results. Net income and margins again look to appear similar to what this past quarter brought to the table. We will see the introduction of the latest 14 nm Broadwell processors, which is an important step for Intel. 14 nm development and production has taken longer than people expected, and Intel has had to lean on their very mature 22 nm process longer than they wanted to. This has allowed a few extra quarters for the pure-play foundries to try to catch up. Samsung, TSMC, and GLOBALFOUNDRIES are all producing 20 nm products with a fast transition to 16/14 nm FinFET by early next year. This is not to say that these 16/14nm FinFET products will be on par with Intel’s 14 nm process, but it at least gets them closer. In the near term though, these changes will have very little effect on Intel and their product offerings over the next nine months.