Intel To Shift Mobile-Phone Chip Strategy
By Carlo Longino, Tue May 18 00:00:00 GMT 2004

The chip giant missed the window with its 2.5G products, and has told its engineers to focus on 3G.

Intel's talked a big game in the mobile market, but hasn't found much success with its line of Manitoba 2.5G chips. The company has tried to sell device makers on the line that mobiles are becoming more and more like PCs -- and who better to get their chips from than the PC processor king.

But Intel hasn't made a big dent in Texas Intruments' position at the top of the market, and TI's CEO says he's more concerned about competition from Qualcomm than Intel. Handset manufacturers have also likely been scared off the company's chips because they've seen how PC manufacturers' products have been commoditized to the benefit of Intel and Microsoft, and don't want to see their handsets follow a similar path.

Intel CFO Andy Bryant told Bloomberg last week that the company will announce within the next month a new strategy for the market, which remains strategically important for the company, and that it's already sent engineers back to the drawing board to focus on 3G handsets. Intel's already spent more than $1.6 billion on developing mobile processors, but doesn't have much to show for it.

It's doubtful the company's new products will offer great technological advantages over TI's or Qualcomm's, given those two companies' years-long head start. Intel also suffered a loss of credibility with handset makers when it tried to jack up its flash memory prices last year, a move that caused it to lose share to rivals Samsung and AMD. It's likely the company will have a hard time finding success in the mobile-phone market beyond Asian ODMs that can quickly turn Intel and Microsoft reference designs into products, and who don't have brands they're concerned about letting commoditization erode.

Anybody can build a Windows PC, and sticking an "Intel Inside" sticker on the box gives it instant credibility, regardless of if it's been built by Dell or some guy in a back alley. But in the phone market, chip makers are invisible, and a much higher premium is placed on features and design than processor type or power. This isn't a type of market that Intel has a lot of experience navigating, and the major handset makers -- and established chip companies like TI and Qualcomm -- aren't going to let them make too many inroads.