Tags: Intel | Mobile | wireless | phone

Intel Is ‘Just Getting Started’ in Mobile Market, CEO Says

Thursday, 10 May 2012 01:58 PM

Intel Corp. Chief Executive Officer Paul Otellini said the company’s effort to get more chips into mobile phones is just getting under way and it plans to announce more customer wins in the wireless market.

“We intend to be a leader in this business,” Otellini said in a presentation for investors today at the chipmaker’s headquarters in Santa Clara, California. “We’re just getting started here. You’ll see more announcements coming.”

Intel’s processors run more than 80 percent of the world’s personal computers. The company has struggled for more than 10 years to make headway in the mobile-phone market, which is led by Qualcomm Inc.

Otellini, 61, also said the cost of building factories that are capable of producing the most advanced chips is going up and the process itself is becoming more difficult. A current state- of-the-art plant costs more than $5 billion, he said, and that will rise to more than $10 billion within this decade as the industry shifts to using 450-millimeter disks of silicon from 300 millimeter.

“Much of the industry will move towards increased consolidation,” said Otellini. “The ability to operate on the leading edge will get harder and harder.”

Otellini predicted that only “one or two” other chip companies will be able to match Intel in building such production facilities.

Intel’s Profitability

Intel’s costs are rising as it overhauls older plants and builds new ones in a shift to more advanced production. The company expects to recoup that investment when the factories reach full output, and Intel is sticking to its gross margin forecast of 64 percent for the year, Chief Financial Officer Stacy Smith said in April. At the time, Intel forecast second- quarter gross margin that was lower than some analysts predicted.

Gross margin, or the percentage of sales remaining after deducting costs of production, will be about 62 percent in the second quarter, the company said last month. Analysts had projected gross margin of 63.5 percent for the period, the average estimate compiled by Bloomberg.

Gross margin is the only measure of profitability that Intel predicts. The margin reached almost 65 percent last year, boosted by rising average prices for Intel’s chips amid a lack of competition.

Intel shares gained less than 1 percent to $27.24 at 1:30 p.m. in New York. The stock has increased 12 percent this year.


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