Some news leaked out of Intel last week by a side channel when industry consultant Patrick Moorhead posted about a recent meeting he’d had with execs at the chip giant. They told Moorhead that as part of the company’s big reorg announced on April 19, Intel was killing some versions of its Atom line of processors, the multi-billion-dollar-losing line of system-on-a-chip (SoC) wafers aimed at competing with ARM-based chips in the least expensive tablets and phones.
Atom has been one of the biggest duds in the history of semiconductors as Intel spent billions designing and producing the chip, then billions more paying hardware makers to use them before failing to get any traction at all and eventually burying the the whole project last year inside of its shrinking but still highly profitable PC unit.
For the last three years, Intel (INTC) disclosed specific results for its mobile efforts. From 2012 through 2014, revenue declined to $202 million from $1.7 billion, an 89% drop, and the unit’s net operating loss more than doubled to $4.2 billion from $1.8 billion.
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Moorhead’s post prompted plenty of well-deserved bashing of Intel’s mobile failings and a recounting of how the once dominant company of the “Wintel” era had been disrupted by smartphones running weaker, slower but cheaper and lower-powered ARM-based chips.
But the more important point looking ahead is that CEO Brian Krzanich is ignoring all the sunk costs of failed and dying efforts to compete in mobile and investing in areas where maybe— just maybe—Intel can leapfrog ahead of the competition. The battle for 4G mobile gear is long over, but the war for the next generation of faster gear 5G is just getting started.
Intel will still be fighting the mobile device battle, though no longer at the very low end. The future low end of the Atom line wasn’t Intel’s expected gateway to the next iPhone, that’s more about mobile modems. And while Intel’s surviving higher end “Apollo Lake” and Core M lines sell for more than the discontinued Atom chipsets, they are also more suited to the kind of mid-level tablets, Chromebooks, and convertible Windows PCs with removable touch screens that seem to be growing in popularity right now. Almost all of Microsoft’s (MSFT) Surface line of tablets, for example, run higher-end Intel chips.
An Intel spokeswoman confirmed the changes, citing the specific Atom lines that are being ended. “We are committed to long-term leadership and improved profitability of our mobile business and the decision to cancel Broxton for phones and tablets and SoFIA 3Gx/LTE/LTE2 enable us to move resources to products that deliver higher returns and advance our strategy,” the spokeswoman said in a statement. “Our connectivity strategy includes increased investment in wired and wireless communications technology for connecting all things, devices and people to the cloud, and to power the communications infrastructure behind it.”
The machinations may explain why the company’s well-regarded head of mobile chips, Aicha Evans, reportedly tendered her resignation last month, only to change her mind after Krzanich made a full court press to keep her.
For more about Intel’s latest changes, watch:
The 5G push is still years away from actually creating products that will get into customers’ hands. Intel has announced partnerships and pilot tests with some leading players, including Ericsson, Nokia, LG, and Verizon. But commercial deployment isn’t expected for another three or four years. Qualcomm, (QCOM) among the companies that crushed Intel in mobile in the past, also has its own 5G push in the works.
Analysts are split on whether Krzanich’s pivot came in time. As Macquarie Research analyst Deepon Nag put it after the reorganization announcement:
Only time will tell whether all of the changes echo Intel visionary Andy Grove (“Only the paranoid survive”) or Macbeth (“full of sound and fury, signifying nothing”).