http://www.bloomberg.com/news/2014-11-18/intel-to-merge-loss-making-mobile-bu...http://www.anandtech.com/show/8731/intel-plans-merger-of-mobile-and-pc-divisionshttp://www.pcworld.com/article/2856192/intel-plunks-down-billions-to-expand-i... So, amid news of Microsoft's Win 10 software woes last week, the breaking news about Intel's China losses made no waves beyond the financial segment of the business world.Intel has a problem with stockholders at the moment -- Krantz broke out Mobile two years ago as a separate division at the insistence of some of his largest stock holders.
This was a required move so stockholders could see just what Intel was spending on buying market share via "contra revenue" or loss leader pricing and "technology support" or direct bribes to Chinese vendors so they would design a device to use an Intel tablet chipset.
Financial numbers rolled by some non-Intel sources indicate Intel has really spent on the order of 4-6 Billion Dollars in losses over the last two years to buy their claimed 40 million Chinese tablet chips marketshare (which are to be sold by the end of calendar 2014).
Stock holders attending the Intel Investor Day events immediately took out their calculators and gasped -- Intel had actually paid out an astonishing $100 loss per chipset for the ones that will really actually get physically moved into the Chinese manufacturing flow. This does not count all the obsoleted and scrapped chip versions, either.
Brian Krantz immediately frantically started talking about limiting the number of chipsets sold under these terms to no more than the 45 million which were already committed to and had to be shipped.
All future orders past this 45m are to be deferred at this time.
Immediately after the meeting closed, Krantz also began an emergency restructuring effort, quickly moving the Mobile division over to be "an integral part of the the PC division" saying that tablets are taking market share from PC so putting them in the same bucket made sense.
What he is really doing is trying to save his arse from getting fired, because
if he can't hide the real cost of what he did to Intel's bottom line in 2014 by hiding the rest of the costs internally to some division that makes enough money to hide it really really well, well then he is likely toast by August 2015.
The Chinese tablet makers are laughing all the way to the bank right now and Intel isn't really any better off than before the loss leader stuff was started up since when the $100 subsidy ends so do the big Intel Chinese tablet production numbers, and the Chinese tablet makers will simply shift back over to other lower cost ARM chipset suppliers like Allwinner or Mediatek again.
The whole thing smells like a wasted joint Wintel effort since Microsoft didn't have Win 10 ready to go into China along with the big Intel loss leader push.
Instead, Win 8.1 with Bing was used -- and that was a lame game to say the least. Many of the 40 million tablet chipsets were actually put into Android 4.4.4 tablets and MS got left out completely.
What Krantz has done is to clearly forewarn ARM Holdings about the sort of games that will be played by Intel and Microsoft next year.
So Apple and several others have been given the Artemis and Maya next gen ARM designs in complete secrecy so Intel (sorry Intel, the designs are not released yet) cannot see what they will be competing against in second half 2015 and 2016. Google has gone quiet about the next wave of Android and Chrome OS as well.
What is true of the next two years is the mobile and PC chipset businesses will start to be the functionally about the SAME SAME general sort of stuff across the board as even now ARM designs are showing up in desktop units (yep, Qualcomm is selling their mid to upper fully integrated phone chipsets
as fully capable laptop desktop chipsets --
and they are). Ditto for Mediatek and Allwinner and Samsung.
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Irony is that Intel stock prices are actually doing well at the moment as Wall Street has been very happy to hear that Intel has actually FINALLY moved some chipsets into China.
Rah Rah Intel !!! The Intel enthusiasm took a plunge when the Ben Franklin news hit the street though, Intel stock is ratcheting back down in price as we type.
Here is the rub that will eventually become clear -- each Intel designed and built tablet chipset had to have a Ben Franklin taped to it and all the large production numbers claimed for "mobile phone chipsets" (AKA the Sophia style stuff) planned so far are actually really 100% ARM standard designs with a Intel baseband and radio chipset loss leadered into them.
Yep, no Intel CPU or GPU cores are used at all in the Intel phone stuff so far .....
Intel is spreading some 1.6 billion dollar heavy duty bribes directly to the Chinese government to let them join Spreadtrum Consortium, etc. so the question becomes if all Intel is bringing to that party is a loss leadered baseband and a loss leadered 3G radio chipset then where/how will Intel ever make any real money by being in China?
By moving Mobile into PC division Krantz can likely hide all the loss stuff well enough to keep his job for first part of next year, but next year the losses will still eventually flush out since folks can compare the year on year dip in the PC unit's profitability.
BTW, Asia is rapidly changing their cell services from 3G to 4G LTE service, which means Intel's crop of old baseband chipsets and old 3G radios won't be needed nearly as much going forward .....
Qualcomm is sitting pretty for next year, having Intel's current loss leader efforts mostly miss them and the mid to upper market segment that Qualcomm owns pretty much completely.
Allwinner and Mediatek actually took the Intel hit, but didn't really feel it for much as the Intel/ARM 45m tablet phone stuff is "very minor volume" when split between those two volume giants. (Mediatek sold over 550 million tablet chipsets in 2013 and
Allwinner was the largest volume ARM chip maker of the lot by a goodly amount, outselling both Apple and Qualcomm added together based on just counting the number of chipsets made and shipped)
Intel is still struggling hard to keep Apple on board, so the 2015 yet to be written Intel story should be very interesting to watch unfold. Intel is a spurting bright red fiscal blood all over the place while trying to act nonchalant like it doesn't hurt them any ....
(Yep, Intel will certainly have to loss leader all the 2015 Skylake Apple stuff to come in below the A9's internal cost to Apple since Intel is nearly a year late with Skylake due to their 14nm process not working out as planned --- and the Skylake production cost is coming in way high to boot)
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