Intel vows to slash losses in mobile biz next year, but says they have been necessary

Intel intends to cut the losses in its mobile chipset business next year, but will still likely lose billions of dollars in the mobility market in 2015. However, top company executives have said that the losses have been necessary to get the silicon giant into mobile after years of passivity.

"This is the price you pay for sitting on the sidelines," Intel Chairman Andy Bryant said at Intel's annual investor day on Thursday, according to Re/code. "We're losing a lot of money trying to regain our presence in the mobility space."

At the conference Intel CFO Stacy Smith said the company should be able to slash the losses in mobile next year by around $800 million. However, as Re/code notes, Intel has posted operating losses in mobile of around $3 billion in the first three quarters of this year, and analysts are expecting the losses to total around $4 billion for the full year.

Overall, Intel said that next year, total revenue will grow by a percentage in the "mid-single digits," slightly higher than the 3 percent sales growth analysts had expected, according to Bloomberg. That news helped push Intel's shares to their highest level in almost 14 years.

Most of Intel's losses in mobile have come because the company has effectively been paying tablet makers subsidies to put its chips in their devices. That's because the chips were designed for higher-end tablets instead of lower-end ones, so tablet makers need to take on a higher cost of materials, and so Intel has been subsidizing that cost.

"I'm not going to tell you I'm proud of losing the kind of money we're losing but I'm also going to tell you I'm not embarrassed by it like I was a year ago about where we were," Bryant said.

Intel CEO Bryan Krzanich said earlier this year that the company could ship its chips inside as many as 70 million tablet chips next year, but he told Re/code that number was probably overly optimistic. "I don't think our standalone number will be that high," Krzanich said in a brief interview on the sidelines of the investor meeting.

The Intel chief added that the company's technology might make it into that many tablets, but that would depend on getting aid from chips made through a partnership with China's Rockchip. Intel is still on track to power 40 million tablets this year though.

Intel hopes to have the 3G version of its SoFIA chipset platform for entry-level smartphones out at the end of this year, and to have the LTE version in the market in the first half of 2015. Smith has said that as SoFIA-based products ship, Intel's subsidy cost per unit will come down, which should improve Intel's mobile financials. According to Smith, Intel expects the mobile chip business to have positive profit margins by some time in the first half of 2016. "We're not yet where we need to be but we are making positive (strides)," he said, according to Re/code.

Earlier this week, Intel disclosed it will merge its chipset unit targeting smartphones and tablets with it PC chip unit early next year, arguing that the distinction is blurring between different computing models.

For more:
- see this Intel release
- see this Bloomberg article
- see this Reuters article
- see these two separate Re/code articles

Related Articles:
Intel to merge mobile chip unit into PC group
Intel records just $1M of mobile revenue in Q3, but points to brighter days ahead
Intel invests $1.5B in Chinese chipmakers to boost sales of chips to Chinese smartphone makers
Intel's James: We missed the iPhone's impact on the market
Intel's mobile biz loses $1.12B in Q2 despite uptick in tablet sales

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