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Intel's tablet adventure looking more like its netbook disaster

Agam Shah | April 21, 2016
Intel chips for low-end tablets could be axed as part of the company's restructuring

Intel's rise and fall in tablets are starting to resemble the company's misadventures in netbooks less than a decade ago.

The company is quickly distancing itself from basic tablets, a market it prized as little as two years ago, to go after detachable devices, hybrids, and high-end tablets that can double as PCs.

Intel could also ax some Atom tablet chip lines that brought the company success two years ago. Intel this week laid off 12,000 people as part of a restructuring plan that could also include cuts in some product lines.

Tablet chip shipments for Intel were down 44 percent in the first quarter of 2016 compared to the same quarter last year, the company said during its quarterly earnings call late Tuesday.

That translates into roughly 4 million tablet chips shipped in the quarter, according to an estimate by analyst Dean McCarron of Mercury Research.

It's a small number even in a declining tablet market. IDC is estimating worldwide tablet shipments will drop to 195 million this year, falling by 5.9 percent compared to 2015.

Intel "had the same thing with netbooks," with the company targeting the market as it rose quickly before collapsing suddenly, said Jim McGregor, principal analyst at Tirias Research.

Netbook shipments exploded in 2008, before starting to decline in 2010 after users started to move to tablets like Apple's iPad. Netbooks were criticized for being slow and small, and Intel's chips for those PCs were slowly phased out by 2013. A market for netbook-like PCs has re-emerged in recent years with Google's Chromebooks.

In the tablet market, ARM-based processors offer a better mix of performance and power efficiency, and investing in low-cost Atom chips for tablets isn't worth Intel's time if profits are a priority, McGregor said.

The failure in tablets is among a handful of recent short-sighted moves by Intel's management. Intel has invested in a number of failed efforts over the years, including WiMax and a TV service called OnCue, ultimately acquired by Verizon. Intel is now focusing on the Internet of Things, data centers, and connectivity.

Intel aggressively chased the tablet market in 2014, and the company said it would sell 40 million tablet chips that year. It subsidized its Atom chips for tablet makers, particularly small Chinese companies, which helped bring tablet prices down. The goal was to catch up with ARM, which dominated the then-hot tablet market.

Intel met its goals, selling 46 million tablet chips that year. But it lost money on the chips sold and took billions of dollars in losses in its mobile division. Realizing the blunder, Intel in the following year focused on profitability instead of volume and market position.

The results are showing. Intel sold fewer, but higher-priced, tablets, which contributed to a profit for the mobile division in the first quarter this year.

 

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