Intel Woes: Can it Right the Wireless Ship?

Last month’s newsletter began with the lament by the late Andy Grove, former CEO of Intel.  His biggest regret that he was never able to get Intel to be significant in communication chips. Judging from the recent wireless executive departures, Andy’s regret remains in place.

Also, in last month’s newsletter I mentioned that at Mobile World Congress, emphasis was clearly on its infrastructure product line (read: data centers & C-RAN) and IoT rather than cellphones. With Intel’s recent news release on layoffs and future emphasis on data centers and IoT, the tea leaves were clear.

However, I believe that Intel is likely to continue in the cellphone chip business, even though their success to date has been lacking. It actually has some architectural strengths that have not been adequately stressed. For example, Intel was probably the first cellphone chip house to implement MIPI’s LLI (Low Latency Interface). This is an important distinction vs. Qualcomm’s early superiority over competitors due to being able ship an all-in-one single-chip baseband-processor.

dspstudy42016Intel’s first LLI appeared in its XMM7260 modem used inside of the Samsung Galaxy Alpha smartphone, and was able to eliminate the additional memory module which reduced both component cost and power consumption.  If Intel is ever able to get into an Apple cellphone socket, this may be one reason why.

Intel desperately needs a major cellphone customer, and Apple is likely the only one that can quickly improve its poor market share of the LTE baseband chip market. As evident in the chart, Intel’s current market penetration is sorely lacking, since their LTE baseband market share last year was on a par with Chinese company Leadcore.

History: Intel’s First Foray into Cellphone Chips

It was under CEO Dr. Craig Barratt in 1999 that Intel bragged that “it had become a communications powerhouse” with two acquisitions: Level One Communications ($2.3 Billion), which was a major supplier of DSL chips and Israel-based DSP Communications, Inc. ($1.7 Billion) a major supplier of cellphone modem chips. Like many of its acquisitions, Level One was absorbed into Intel and after a few years eventually disappeared.

In 1999, DSP Communications Inc. was the #2 CDMA merchant market modem chip manufacturer (after Qualcomm).  DSPC also had a major market share of the Japanese TDMA cellphone modem market (around 35%, if memory serves), and was also selling in quantity to a cellphone company in San Diego.  Unfortunately, Qualcomm bought that small company and began selling cellphones under its own brand name.  That, of course, dried up Intel’s modem sales to the, now, Qualcomm-brand cellphone company.  As a side note, those DSPC modems were all based on Texas Instruments DSP cores, not Intel’s, and Qualcomm eventually sold its cellphone business to Kyocera.

After it failed in the CDMA modem business, Intel began development in the competing technology of TDMA based on new DSP technology co-developed with Analog Devices, Inc. (code-named Frio) and XScale (ARM-based) low-power processors acquired from DEC (Digital Equipment Corp.). Eventually, Ron Smith, a VP famous internally for his PC I/O contributions, was brought in to run the cellphone chip product line.  I spoke to Smith on two or three occasions (I was consulting variously with two of his technical minions) and it was clear that his emphasis was on the application processor side of the cellphone chip, and not the modem. Eventually, the modem and the apps processor were wedded on the same die, along with RAM that was not best suited for the same CMOS process, impacting yields.  Typical of Intel management, Smith had a PC mentality.

After Intel spent a “few” billion dollars on developing new cellphone products the company realized that it was going nowhere in the market. So, in December 2003, Intel announced that it would sell its cellphone chip properties to Marvell Semiconductor.  Marvel paid $600 million and, in an unprecedented move, the same news release announced the departure of Mr. Smith from the company.

BTW: The evolved “Frio” DSP core (named after Texas’ Rio Frio river) is the heart of Analog Devices’ Blackfin™ DSP chips and is also the basis of MediaTek’s 2G/3G modem (It employs the Coresonic DSP core for its LTE modems).

Intel’s second entry in the cellphone business began in August, 2010, when it acquired the wireless assets of Infineon Corp. for $1.4 billion. We’ll discuss that more recent Intel history and current activity in my next newsletter.

As always, I encourage your feedback.

Will Strauss
President & Principal Analyst
Forward Concepts
wis@fwdconcepts.com

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