SourceCode: Intel struggles in wake of lower demand for PCs as mobile surges

By Gadjo Cardenas Sevilla

The dramatic shift in demand from PCs to mobile devices like tablets and smartphones is taking its toll on the industry and leading processor manufacturer Intel is feeling the squeeze.

During its third quarter earnings call yesterday, Intel disclosed that while it managed to generate an income of US $3-billion, the earnings represent a telling 14 per cent drop from the year-ago quarter. The company's revenue also fell 5.5 per cent year-over year.

“The world of computing is in the midst of a period of breakthrough innovation and creativity,” said Intel CEO Paul Otellini. “As we look to the fourth quarter, we’re pleased with the continued progress in Ultrabooks and phones and excited about the range of Intel-based tablets coming to market.”

Otellini didn't discuss PCs at all during the call.

Intel is the biggest chipmaker for PCs and Macs and most notably the leading partner for Microsoft Windows which is releasing a new version of its OS this month. Windows 8 is the most radical change to the Microsoft operating system since 1985.

Microsoft announced its Surface Windows RT tablet yesterday which is targeting a tablet market dominated by Apple's iPad.  The iPad, a true post-PC device that has replaced the personal computer for millions of users is outselling most PC's combined. The iPad runs on a bespoke chip developed in tandem with Samsung.

PC sales Chart from a recent Apple keynote - Silicon Alley Insider

These Surface RT tablets, designed and developed in house by Microsoft and geared towards consumers, don't use expensive Intel chips but run on low-power quad-core ARM chips from NVIDIA, which power many smartphones and tablets in the market today. 

Intel is rushing to develop their own mobile processors for smartphones and tablets but finds itself in the unenviable position of having to play catch up behind the ARM chip manufacturers like NVIDIA, Texas Instruments, Qualcomm, Samsung, Freescale and others. This is something the long-time leader in CPUs has not had to deal with for decades.

Intel has defined and has aggressively been backing the Ultrabook segment of the market which feature premium, sleek and ultrathin notebooks capable of running 8-hours on a single charge.

Intel's Ultrabook vision from 2011

A number of partner manufacturers like Samsung, HP, Acer, Asus, Lenovo, Toshiba and others have complied with Intel's Ultrabook directive, and released various models ranging in price from $700 to $1400, most consumers still find these attractive notebooks expensive and are opting for non-ultrabook computers.

Many of these manufacturers are also offering cheaper alternatives in the form of Sleekbooks which look very similar to Ultrabooks but which are less premium (plastic cases instead of metal alloys) and which do not use Intel processors opting for cheaper processors from rival AMD.

The launch of Windows 8 PCs this year might help boost PC sales heading into the traditionally strong holiday buying season.

The new Windows 8 PCs will come in a variety of form factors including all-in-one desktops, Ultrabooks, tablets, convertible tablets that double as notebooks and touch-enabled notebooks of varying sizes.