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Intel's post-PC plan to take a short-term hit

Posted: 21 Apr 2016 ?? ?Print Version ?Bookmark and Share

Keywords:job cuts? PC industry? chipmaker?

Each of Intel's growth markets has its challenges. Memories have big up and down cycles, IoT pinches pennies and the data centre increasingly represents a complex mix of inter-dependent products.

Memory was the one segment that made a loss in Intel's latest quarter, thanks to costs of ramping new 3D NAND and 3D Xpoint products, and especially to falling prices. "We are seeing aggressive pricing in this space," said Krzanich.

But today's over-capacity in flash and aggressive pricing typically shifts to normal and then tight pricing [and] we think we've done a good job of structuring the business for these cycles," he said, adding the new high-end memories will become strategic parts of its systems offering to data centres.

"Cyclically it's a tough time but we are investing for a strong position going forward," said Smith hoping with Krzanich for firmer pricing when Intel is shipping 3D NAND and 3D Xpoint products.

Market and financial analysts doubt Intel will see much growth or profit in its IoT group. Krzanich remains bullish about the area he was quick to champion since taking over as CEO, noting he will focus on the most lucrative automotive, industrial and retail segments where users want machine learning and connectivity.

"Over the long term this area will be mid-teens growth with, for the most part, PC-like margins and we will try to play to segments that play to our strengths," he said.

Both Brookwood sand Gwennap expressed skepticism.

"Most of the IoT volume will come from really cheap processors that Intel is not really good at making," said Gwennap. "Intel will make money on IoT by making more servers for the cloud not smart lightbulbs," he said.

Indeed, all sides are bullish on Intel's data centre group which is going gangbusters," said Brookwood. "They are more in position to do a top-to-bottom rack architecture than anyone, and they have a more unified approach than IBM," he said.

Intel forecasts average selling prices in its data centre group will rise through the year. Krzanich admits the portfolio is a mix from Xeon Phi processors that sell for thousands of dollars to network chips that sell for tens of dollars.

"But in each family ASPs are increasing, people are buying up the stack as we offer more performance for a better price," Krzanich said.

Asked about heated competition from ARM's many partners, IBM and Google offering or exploring alternative architectures, Krzanich pointed to his PC era mentor. "Having been raised by Andy Grove, I'm always paranoid about the competition," he said.

This year Intel will finally start shipping silicon photonics. It is already sampling chips that put an Altera FPGA and Xeon processor in one package, and has an array of networking chips from earlier acquisitions. 3D Xpoint memories will ramp late this year. All are pieces of an emerging system of systems offering for data centres

"That's key to keeping our position, to understand the whole rack from top to bottom," said Krzanich.

- Rick Merritt
EE Times

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