Intel Q1 2015 earnings, still losing ~1B per Quarter from Mobile

[witeken]

Even though the actual SoC transistor count has only increased by less than double?

BDW-Y actually has less transistors and a smaller die size than Apple A8.

 

[sm625]

K1 isn't a big example, it's a failed product on the mobile market by all metrics.

The only reason it is a failed product is because intel is dumping hundreds of millions of dollars of crap onto the market. But despite that fact, Tegra is still more financially sound than intel mobile. They are at least close to breakeven and the door is wide open for X1. There is real potential there unlike for intel which is just throwing money down a black hole with zero chance of gaining anything from it.

 

[sm625]

BDW-Y actually has less transistors and a smaller die size than Apple A8.

That's what I mean! That's my point exactly. The A8 is only a $37 part on Apple's BoM. Just like every other SoC of that size. There is just no way Intel can charge literally 7-12x that amount.... the added performance is not worth that price tag.

 

[mrmt]

The only reason it is a failed product is because intel is dumping hundreds of millions of dollars of crap onto the market. But despite that fact, Tegra is still more financially sound than intel mobile. They are at least close to breakeven and the door is wide open for X1. There is real potential there unlike for intel which is just throwing money down a black hole with zero chance of gaining anything from it.

Mediatek, Samsung and Qualcomm respectifully disagree with your assessment. Despite Intel contra revenue program, these companies are thriving, and IIRC Nvidia troubles on the mobile market started well before Intel contra revenue program.

I'm not sure why you are saying that Tegra has much more potential than Atom. Nvidia basically abandoned the line as a mobile platform, and instead they want to build a business centered in custom solutions for the auto industry. The SoC itself is secondary here.

 

[mrmt]

That's what I mean! That's my point exactly. The A8 is only a $37 part on Apple's BoM. Just like every other SoC of that size. There is just no way Intel can charge literally 7-12x that amount.... the added performance is not worth that price tag.

What makes you think Intel charges 7-12x for OEMs? Intel ASP for the entire company is below $200, and that includes the big ticket Xeon chips.

 

[AtenRa]

What makes you think Intel charges 7-12x for OEMs? Intel ASP for the entire company is below $200, and that includes the big ticket Xeon chips.

That happens when you dump 7-15M of $0.0 Tablet socks per quarter.

 

[Arachnotronic]

That happens when you dump 7-15M of $0.0 Tablet socks per quarter.

Erm, no.

If you look at Intel's PC Client Group financials (well, before they merged into CCG), the implied ASP for Intel's PC platforms (that's CPU + chipset) was somewhere in the $110-$120 range IIRC.

 

[ShintaiDK]

That's what I mean! That's my point exactly. The A8 is only a $37 part on Apple's BoM. Just like every other SoC of that size. There is just no way Intel can charge literally 7-12x that amount.... the added performance is not worth that price tag.

Its a 37$ manufactoring cost.

All R&D etc on that BOM isnt payed.

 

[Exophase]

Because the world is shifting to mobile and other low power devices, so Intel has to chose between keep trying, die trying, or thoroughly change its business model.

You guys just don't get it, this isn't a retail shop, the accounting is a bit different. All these losses say is that sales of current products can't cover the R&D pipeline Intel has in development, but again, Intel wasn't investing as heavily as it is today on this segment. Now if Intel two years from now isn't making this billion dollar/quarter in R&D to make money, then you can say that they have a bad business.

All you can say today is that Intel *past* mobile strategy was wrong and didn't bring them money, but Intel isn't really hiding this fact from anyone.

Can we still say that as recently as 2012-2013 Intel was not investing very seriously in mobile R&D?

In that Intel CPU architect IAmA from December 2012 the guy predicted domination of mobile in 2015.

 

[DrMrLordX]

Their biggest problem is that they aren't going to where the market and the customers are, they are trying to force their own ideas onto the market.

The real problem is that Intel is becoming a big part of "the race to the bottom" in the mobile industry.

TSMC is having issues thanks to stagnation in the mobile market. Qualcomm's stock price is dropping enough to make influential investors push for spinning-off the chip unit to focus on earnings through royalties (read: investors don't think Qualcomm is going to be as profitable if they keep trying to produce actual hardware).

The tablet market has already gone into stagnation, and arguably did about a year ago, if not earlier. Things are not necessarily all rosy in the smartphone market, either.

Against this backdrop, Intel is charging ahead by dumping cheap/subsidized tablets. I had thought "contra-revenue" would be over in 2015, and yet we still see losses that are somewhat-indicative that contra-revenue continues in some form or another. Am I wrong to assume that? They're still losing money, and their tablet shipments are up.

If Intel keeps this up, they're going to butcher the tablet market, and weaken the mobile sector even further. Joy!

The world is shifting to mobile but mobile CPUs are increasingly a commodity.

It may be that the world's shift to mobile has gone as far as it can for now, if not for awhile (see above).

Mediatek, Samsung and Qualcomm respectifully disagree with your assessment. Despite Intel contra revenue program, these companies are thriving, and IIRC Nvidia troubles on the mobile market started well before Intel contra revenue program.

Qualcomm may not be so healthy. If consumer trends continue the way they are, there's going to be a smaller pie for everyone to share, and Intel is screwing up the margins on tablets by forcing hardware onto the market at artificially low prices.

 

[witeken]

Against this backdrop, Intel is charging ahead by dumping cheap/subsidized tablets. I had thought "contra-revenue" would be over in 2015, and yet we still see losses that are somewhat-indicative that contra-revenue continues in some form or another. Am I wrong to assume that? They're still losing money, and their tablet shipments are up.
.

Firstly, contra-revenue is not used for dumping subsidized tablets.
Secondly, only ~1/4th (at most) of the ~$1B loss/quarter is contra-revenue.

 

[DrMrLordX]

*sigh*. Fine, let's stop talking about contra-revenue. It's all just R&D after all . . .

Bottom line is, revenues are still negative for mobile, and they are shipping more tablets now than they did last year. They're practically dumping hardware. Anyone trying to sell tablet SoCs has got to be hating the overall effect that's having on the market.

 

[coercitiv]

Firstly, contra-revenue is not used for dumping subsidized tablets.

You know how low an Asus 7" tablet with Z3745 sells for? Less than 90$.

It's right there with the cheapest Cortex A7 NoName tablets.

 

[seitur]

*sigh*. Fine, let's stop talking about contra-revenue. It's all just R&D after all . . .

Bottom line is, revenues are still negative for mobile, and they are shipping more tablets now than they did last year. They're practically dumping hardware. Anyone trying to sell tablet SoCs has got to be hating the overall effect that's having on the market.

You know how low an Asus 7" tablet with Z3745 sells for? Less than 90$.

It's right there with the cheapest Cortex A7 NoName tablets.

Intel may be waging war of attrition on other players.
Which may make sense if market has stopped growing. Smaller players will weaken and there will be consolidation in the smartphone&tablet market in the future.

Besides Intel want to be lead player in ALL computing. From tiny chips for IoT to high performance chips for high performane servers & supercomputers.
Why would Intel want to settle on marginal player in smartphone&tablet business to make other mobile players life easier? What you want - does not make any sense from Intel point of view.

 

[witeken]

They're practically dumping hardware. Anyone trying to sell tablet SoCs has got to be hating the overall effect that's having on the market.

So what? It isn't like Intel loves dumping SoCs. You should blame Qualcomm, or MediaTek or so, all the companies that have been participating in the -- now consolidated -- smartphone SoC (price) war.

 

[witeken]

You know how low an Asus 7" tablet with Z3745 sells for? Less than 90$.

It's right there with the cheapest Cortex A7 NoName tablets.

That has nothing to do with the contra-revenue. That's simply aggressive silicon pricing. From Q2-Q3 onward, SoFIA will take that burden without contra-revenue.

 

[Idontcare]

Anyone trying to sell tablet SoCs has got to be hating the overall effect that's having on the market.

Assuming you aren't one of those people whose job depends on your employer's ability to sell tablet SoCs, what consumer benefiting from the opportunity to purchase lower cost tablets is going to wish upon themselves the pricing environment in which Intel wasn't trying to gain market share?

I mean you guys get this, right? If Intel wasn't doing any of the things you all so grandly like to claim it is doing, then the prices consumers pay today for the products they want to purchase today would be all that much more expensive.

When did cheering for the consumer come to be replaced with cheering for anything that props up the price-gouging competition?

 

[monstercameron]

Assuming you aren't one of those people whose job depends on your employer's ability to sell tablet SoCs, what consumer benefiting from the opportunity to purchase lower cost tablets is going to wish upon themselves the pricing environment in which Intel wasn't trying to gain market share?

I mean you guys get this, right? If Intel wasn't doing any of the things you all so grandly like to claim it is doing, then the prices consumers pay today for the products they want to purchase today would be all that much more expensive.

When did cheering for the consumer come to be replaced with cheering for anything that props up the price-gouging competition?

when all "that" kills the competition and we have a contraction liked we've seen in the pc market[especially the gpu market]. Even though they aren't quite analogous, this extreme level of competition[or lack there of] might end up doing more harm than good for cheaper products now, that might end up being less in the not so distant future.

I can't predict the future nor do I have much experience with this subject but that is how I feel things might go down. Please correct me if I have been too naive.

 

[IntelUser2000]

Also,
Q1 2015 CCG Revenue was 7420M.
Q1 2015 CCG Operating Income was 1410M

Q1 2015 Margins for the CCG is just 19%

Q1 2014 PCG Revenue was 7941M
Q1 2014 PCG Operating Income was 2802M

Q1 2014 Margin for the PCG was 35%

Actually, it might be somewhat less.

The revenue for the mobile group is essentially $0. So the $500 million decline is entirely due to PC group. If that effected Operating Income directly, it would also decrease Operating Income by $500 million, meaning the difference between the two OIs are $900 million, possible due to the mobile group.

Decline also affects OI more than revenue decrease in lot of cases, because the company likely takes steps to counter the decline.

What I can agree is for the Margins.

Intel did say though it'll cut losses on Mobile by $800 for 2015, so the entire year is only $800 million, so that makes it ~$200 million per quarter in average. I think it'll be mostly latter half effect, because that's when SoFIA and Cherry Trail parts really come into play.

That's what I mean! That's my point exactly. The A8 is only a $37 part on Apple's BoM. Just like every other SoC of that size. There is just no way Intel can charge literally 7-12x that amount.... the added performance is not worth that price tag.

A question.

How does Newegg make money when it sells for $339 for the box and ark.intel.com says $350 for box? Are they losing $11 per unit?

 

[AtenRa]

Erm, no.

If you look at Intel's PC Client Group financials (well, before they merged into CCG), the implied ASP for Intel's PC platforms (that's CPU + chipset) was somewhere in the $110-$120 range IIRC.

He was talking about the entire company, including Mobile and Servers. Without the tablets ASP would be substantial higher.

 

[Nothingness]

Can we still say that as recently as 2012-2013 Intel was not investing very seriously in mobile R&D?

Of course you can. You can even convey the word that Intel next mobile chip will overtake the market, "Conroe moment" as they like to say.

In that Intel CPU architect IAmA from December 2012 the guy predicted domination of mobile in 2015.

I bet we can find much older similar statements, but coming from Intel management/marketing (but it's their job to make such statements).

Anyway one thing is sure: Intel is gaining a lot from the global IoT/mobile market, no matter what they sell in that market, given that this makes them sell a lot of server chips.

 

[DrMrLordX]

Intel may be waging war of attrition on other players.
Which may make sense if market has stopped growing. Smaller players will weaken and there will be consolidation in the smartphone&tablet market in the future.

Besides Intel want to be lead player in ALL computing. From tiny chips for IoT to high performance chips for high performane servers & supercomputers.
Why would Intel want to settle on marginal player in smartphone&tablet business to make other mobile players life easier? What you want - does not make any sense from Intel point of view.

Yes, I agree with that completely. Intel is doing as much damage as they can to an already-saturated market.

So what? It isn't like Intel loves dumping SoCs. You should blame Qualcomm, or MediaTek or so, all the companies that have been participating in the -- now consolidated -- smartphone SoC (price) war.

Are Qualcomm or MediaTek really doing the same thing? They run tight margins, yes, but don't they still sell their products at a profit, however narrow that might be?

Assuming you aren't one of those people whose job depends on your employer's ability to sell tablet SoCs, what consumer benefiting from the opportunity to purchase lower cost tablets is going to wish upon themselves the pricing environment in which Intel wasn't trying to gain market share?

I mean you guys get this, right? If Intel wasn't doing any of the things you all so grandly like to claim it is doing, then the prices consumers pay today for the products they want to purchase today would be all that much more expensive.

When did cheering for the consumer come to be replaced with cheering for anything that props up the price-gouging competition?

There are problems for the tablet/smartphone consumer here. I think monstercameron brought up at least one: assuming Intel's market entry is successful, there will be fewer future players selling mobile SoCs leaving consumers with fewer choices.

At least one other problem I see is that few current phone/tablet consumers really seem to want x86 (or more specifically Bay Trail), which is part of the reason why Intel is having to go so low on price to get OEM's to actually feature such hardware. If Intel were "dumping" a more desirable product, it would arguably be even more devastating to the mobile SoC ecosystem, but at least people snapping up ~$90 Intel tablets would be getting a steal of a deal on something they already wanted anyway.

Are we going to see 7" Cherry Trail tablets from Asus going for such low prices? If Intel can pull that off and actually generate some positive revenue in the process, then maybe they set the bar exactly where it needs to be for their future product lines. If not, then consumers are going to see a snap-back once all the subsidized Bay Trail hardware clears out of the channels.

And no, I have no personal stake in pushing low-margin ARM SoCs. Personally, I could care less if the majority of the ARMy took a flying leap, and the whole mobile paradigm blew up overnight. Touchscreens stink, I lub mah mouse + keyboard, yeehaw. Maybe it'll be a good thing if Intel causes the tablet market to implode and takes some of the phone market with it. Sure would put Anandtech in an awkward position! Ha ha!

Regardless, I'm still capable of clearly seeing some of what Intel is doing: they are stuffing an already-saturated market with very low-price hardware, and they're losing money doing it.

Anyway one thing is sure: Intel is gaining a lot from the global IoT/mobile market, no matter what they sell in that market, given that this makes them sell a lot of server chips.

An astute observation. Mobile devices are far more likely to be reliant on cloud services and other remote computing products than desktop PCs. And who sells the hardware that runs most of the cloud? Intel, that's who.

 

[dealcorn]

Are we going to see 7" Cherry Trail tablets from Asus going for such low prices? If Intel can pull that off and actually generate some positive revenue in the process, then maybe they set the bar exactly where it needs to be for their future product lines.

I doubt we will see Asus Atom X5 or Atom x7 (formerly Cherry Trail) tablets at $70. I will be surprised if we do not see Atom X3 (formerly SoPHIA) tablets at $70. Baytrail-T generated negative gross margin dollars. Atom X3, X5 and X7 are expected to generate positive gross margin dollars without contra revenue. Intel's tablet market share goal for 2015 is to grow with the market. While the 1st quarter is not representative of all of 2015, tablet unit volume increased by ~45% year over year (per Stacy Smith during CC). Atom X3 should be an inferior margin product because Intel outsourced everything except the CPU and modem design. X3 margins should improve in 2016 when fabrication is brought in house at 14nm. If Intel can hold tablet market share and generate positive gross margin dollars in 2015 that is big progress even if volumes remain too low to fully offset leadership R&D spending.

 

[frozentundra123456]

when all "that" kills the competition and we have a contraction liked we've seen in the pc market[especially the gpu market]. Even though they aren't quite analogous, this extreme level of competition[or lack there of] might end up doing more harm than good for cheaper products now, that might end up being less in the not so distant future.

I can't predict the future nor do I have much experience with this subject but that is how I feel things might go down. Please correct me if I have been too naive.

I look at it as just the opposite. Intel's attempts to break into the tablet and phone market are clearly increasing competition against ARM. I dont think you have to ever worry about intel becoming a monopoly and raising prices sky high in this segment. Arm is firmly entrenched. Intel's efforts have clearly resulted in a lot more choices for the consumer at much lower prices. Whether it is ultimately going to be worth it for Intel, well I am not so sure about that.

 

[dahorns]

Are we going to see 7" Cherry Trail tablets from Asus going for such low prices? If Intel can pull that off and actually generate some positive revenue in the process, then maybe they set the bar exactly where it needs to be for their future product lines. If not, then consumers are going to see a snap-back once all the subsidized Bay Trail hardware clears out of the channels.

If Intel is being honest about contra-revenue, then it is reasonable to think that future Intel tablets will be available at similar prices. My understanding of Intel's pricing on Baytrail tablets is this:

"Price" = cost + target margins (60+%)
"Contra-revenue" = BoM differential in comparison to ARM products

Actual charge to Intel customers = "Price" - "Contra-revenue"

If Intel can actually eliminate the BoM differential, it will make good margins on the products. Further, pricing of end products shouldn't change as the total costs to Intel's customers remain the same.