Friday, January 15, 2016

Dying PC Market Means New Things For Intel

With PC sales continuing a downward spiral it should come as no surprise that major chip manufactures are looking to diversify offerings and move into more markets. That certainly is the case for the world's leading chip manufacture, Intel, who relies heavily on the Client Computing Group (CCG) side of their business to generate revenue. The company hopes 2016 will be different, as they are seeking to break their reliance on the PC market and move focus towards markets such as data centers, the Internet of Things and memory, which the company hopes will ultimately provide revenue exceeding that of PCs.

Intel's Data Center Group (DCG), IoT and memory divisions generated 40 percent of the company's revenue in the 2015 financial year. That will grow even more in 2016, said Brian Krzanich, CEO of Intel, during a fourth quarter earnings call on Thursday.

Intel is expected to continue to drive innovation in the PC business, but it won't be the sole driver of the company's growth in 2016, Krzanich said. According to his statements, Krzanich believes Intel we see more diversification in the coming years. Stating that, "Our future as a company will increasingly be the virtuous cycle of opportunities in the data center, memory and IoT market segments."

Intel reported revenue of $14.9 billion in the fourth quarter of 2015, growing by 1 percent year-over-year, while profit was up 1 percent at $3.6 billion. CCG revenue was $8.8 billion, declining by 1 percent. Revenue for DCG in contrast grew 5 percent to $4.3 billion while the revenue of the IoT group was up 6 percent to $625 million.

For the past several years Intel has heeded the writing on the wall and has tried making the move away from a PC market that has seen steady declines as upgrade cycles and demand have shrunk thanks largely to more customers opting for mobile platforms over the traditional desktop or laptop.  

Worldwide PC shipments totaled 71.9 million units in the fourth quarter of 2015, declining by 10.6 percent year-over-year, according to IDC. According to Intel, desktop shipments declined by nine percent in 2015 compared to 2014. Laptop shipments were down 10 percent. The prices of PCs went up in 2015, which helped cut some losses.

So far Intel has unsuccessfully tried to diversify into the smartphone and tablet market. Intel's Atom chips account for only a small segment of the mobile market, finding their way into only a handful of smartphones and tablets that shipped in 2015.

With their acquisition of chipmaker Altera and the new offerings from that collaboration coming soon we may see that change. The first chips that combine Intel and Altera technology will be multi-chip modules, in which Intel's server chips and Altera FPGAs will be combined as separate processing units for servers. Samples of those chips are expected to be released this year with mass production ramping up down the road. Intel says we should also expect to see new chips from the the tandem making their way into cars, robots, the Internet of Things, automation equipment and other products in the near future.

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