Intel chief says doesn't need ARM for mobile chips

NEW YORK Tue May 17, 2011 6:42pm EDT

A sign is shown at the entrance to the headquarters of Intel Corporation in Santa Clara, California in this February 2, 2010 file photo. REUTERS/Robert Galbraith

A sign is shown at the entrance to the headquarters of Intel Corporation in Santa Clara, California in this February 2, 2010 file photo.

Credit: Reuters/Robert Galbraith

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NEW YORK (Reuters) - Intel's chief executive rejected speculation the world's largest chipmaker might adopt rival ARM Holdings' technology to build mobile chips and said smartphones using its silicon are about a year away.

Intel has failed so far to get its processors into smartphones and tablets, a red-hot market where chips designed with battery-friendly technology from Britain's ARM Holdings are quickly becoming a standard.

Some experts say Intel's architecture, originally aimed at PCs, is inherently tough to adapt to make mobile chips and that Intel should license ARM's technology, a suggestion that Chief Executive Paul Otellini rejected at his company's annual investor event in Santa Clara, California.

"There's no advantage going in there, we'd be beholden to someone else, beholden to ARM. We'd pay royalties to them so it would lower the overall profits," Otellini said. "I think we can do a better."

Intel executives also said consumers in China and other emerging markets who are buying personal computers for the first time are driving healthy growth in the company's core business.

Otellini reaffirmed his expectation that PC unit sales will increase in the "low-double digits" percent this year.

Shares of Intel have surged about 19 percent since the company's record quarterly earnings handily beat expectations on April 19.

But investors remain concerned about PC sales and industry heavyweight Hewlett-Packard on Tuesday slashed its full-year outlook.

Intel's stock closed down 0.38 percent at $23.55.

NEW CHIPS

Intel, whose chips are the brains in 80 percent of the world's PCs, is rushing to improve the power consumption of its mobile processors with new chips for tablets and smartphones.

To put advanced mobile chips on the market more quickly, Otellini said Intel would increase the pace of implementing new manufacturing technologies. Intel currently adopts new manufacturing technology every two years.

This month, Intel took the wraps off next-generation technology that crams more transistors onto microchips, betting it will eventually become a significant advantage in tablets and smartphones, where Qualcomm, Texas Instruments and Nvidia are key players and use ARM.

Intel claims the "3D" new manufacturing process delivers as much as a 37 percent jump in performance while consuming less electricity -- a key ARM selling point.

"To be fair, process technology is just one important element of winning for Intel, but it is a major advantage and one we suspect the Street is underestimating," Raymond James analyst Hans Mosesmann said in a note to clients.

ARM Chief Executive Warren East told the Reuters Technology Summit on Tuesday that Intel's move to 3D technology would not affect plans by ARM's partners to manufacture smaller, more powerful chips.

Concern about Intel's lack of progress in the mobile segment has weighed on its stock, which is trading at 10 expected annual earnings, much cheaper than peers like Texas Instruments at 13 times and Advanced Micro Devices at 14 times.

The market for mobile chips is still tiny compared to Intel's PC processor business, but investors expect it to grow quickly.

Smartphones using Intel's new Medfield chip will go on sale early next year, executives said.

"With Medfield we're in the power envelope for phones ... We're working with several customers and we start to expect to see the revenue ramp toward the end of this year," Chief Financial Officer Stacy Smith said.

In April, Intel introduced a new chip for tablets, codenamed Oak Trail, and said it will be used in more than 35 upcoming tablets and hybrid computer devices made by companies including Fujitsu and Lenovo.

(Reporting by Noel Randewich; Editing by Tim Dobbyn, Bernard Orr)

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