Intel Corp (INTC)

[Unkwn]

What is the value Intel can bring to a low ASP commodity that is
sold in thousands of highly customized variants?

Scale, basically. Intel is also the only one in the mobile market who can develop really differentiated products instead foranother me-too ARM SoC.

Volume is crucial for Intel's fabs, which are not fully utilized by its PC and server processors. With every node shrink, things will get worse for them. Capacity will increase while costs explode but Intel's core market, in terms of chips/wafer output needed, will stay as small as it is (shrinking with PCs, increasing with servers).

Intel needs the volume and it needs it bad. Mobile chips, if done right (high level of integration, high performance aiming for higher end of market), still offer a better margin than just doing foundry business. Memory is (very) high volume too, but lower margins and it needs different equipment.

Intel's priority therefore should be:

1. Server (highest margin)
2. PC (high margin)
3. Mobile (medium margin)
4. Foundry (lower margin)
5 Memory (lowest margin)

In my opinion, Intel needs, in order to stay at the top of the semiconductor business and compete against companies like Samsung, to touch all of those areas, where mobile is one of the more important ones.

Intel failed horribly so far, where others succeeded. That's a fact.

Regarding XScale - I don't think it was such an economic failure. It was actually quite a successful platform in Windows Mobile devices, which were kind of the predecessors of todays smartphones (capable OS, awful usability). Most of them had an XScale chip inside and volume was growing strongly.

I believe the decision to drop XScale was a strategical one as Intel did in fact see the potential of this market with XScale, but they wanted their own instruction set to own it. The decision was right, the execution wasn't. Intel basically failed in developing a single competitive mobile platform in more than 10 years.

There is one additional thing about the importance of success with x86 in mobile: The ecosystem developing from mobile is huge, It is getting bigger than that used in the x86 space. That's a problem for Intel since it can't dominate the market in the future as it did in the past. Intel's economic success was tightly related to the success and domination of x86. This is about to change.