Intel Corporation (NASDAQ:INTC) is aggressively pricing its new Bay Trail Atom chip following recent speculations that it will participate in all forms of the computing continuum. Pricing for the tablet version Bay Trail is as low as $10 and the notebook version is $20 for Bay Trail M compared to traditional $25-30 pricing for Atom chips, says a report from Morgan Stanley by analysts Joseph Moore and Francois A Meunier.
Intel has for long neglected the smartphones, tablets
Intel Corporation (NASDAQ:INTC) has had a long strategy on smartphones, tablets and PCs. In 2011, the chip maker neglected smartphones and tablet as a potential threat to PC and posted profitable numbers for straight two years amidst the increasing popularity of the smartphones.
However, in the beginning of 2012, Intel recognized the rate of growth of the tablet market, but believed that PC market growth will not be impacted by tablet market.
The current situation is that Intel is depending upon its Bay Trail, which is made for tablets primarily. The company holds that tablet and smartphone market, as they develop further, will require higher performance CPUs but believe it is risky to wait for that stage to come. Intel right now needs to enter the tablet market and drive that migration even if it involves higher cost along with bringing down the price of touch based notebooks to alleviate cannibalization, says the report.
Apple, Samsung a concern
Intel’s biggest concern is Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), who hold a substantial ground and prefer their own CPU. Low priced tablets like Kindle Fire HD prefer Mediatek solution, which is growing at a better rate than expected. Analysts are expecting Android tablets would capture 20 percent of market share and Windows will also account for small market share.
Analysts feel that Mediatek will greatly benefit from commoditization of the tablet market as MediaTek’s s A/P only chips are substantially less than Intel’s price point and A/P + BB is around $10-15.
Intel moving in right direction
There is a possibility of increasing OEM/ODM PC demand. For 2014, analysts expect a limited impact for Bay Trail as it coming late in the year, but unit demand is expected to improve from next year. Intel is working at bringing down the price of convertibles to as much as $300 and diminish the line between the convertibles and the tablets.
Analysts at Morgan Stanley are expecting that Silvermont design will be much efficient in terms power consumption compared to ARM chips. The architectural features of both Silvermont and ARM have much similarity. Intel chips will also support Android devices from the first day onwards.
Though Intel Corporation (NASDAQ:INTC) is heading in the right direction, it could experience some near term pressure as there is the possibility of cannibalization on the high end. Rival, ARM can be impacted due to Intel’s aggressive pricing; however, the impact may be marginal.
