Intel Corporation (NASDAQ:INTC) is utilizing its manufacturing expertise to make MPUs that are lower powered, more efficient and involve lesser cost than the alternatives. Analysts Mark Lipacis and Sundeep Bajikar from Jefferies believe that, with the new area of focus, Intel could gain market shares in the sub $500 tablets, 2-in-1 PCs and handsets.
Owing to such reasons, analysts have upgraded Intel to Buy from Hold and have raised the price target from $27 to $30.
Earlier this month, value investor Mohnish Pabrai took part in a Q&A session with William & Mary College students. Q3 2021 hedge fund letters, conferences and more Throughout the discussion, the hedge fund manager covered a range of topics, talking about his thoughts on valuation models, the key lessons every investor should know, and how Read More
Intel has the ability to compete with best manufacturers
There is a general consensus that Intel’s 86 MPUs have inherent disadvantage compared to ARM, and that its 3-year, $60 billion investment will not pay off at all. However, Jefferies analysts noted that Intel is one of the two semi manufacturers that can compete with dominant manufacturing capability. The company is in the process of spending $60 billion in R&D and capital expenditure between 2011-13. TSMC, which manufactures for ARM based MPU competitors, has shelled out less than 50 percent and is struggling to come in level to Intel’s manufacturing.
Intel Corporation (NASDAQ:INTC) is getting a significant push from its “tri-gate” transistors, and analysts expect that further development in the material will give it a leading edge in the near future.
Focusing on lower-priced, lower power PCs segment
Intel is trying to gain traction in lower-priced and lower power PCs through its BayTrail MPU (22nm). Analysts hope that Bay Trail (22nm) will cost below $100 for the tablet and below $400 for the 2-in-1 notebook segment, which will drive unit growth for Intel Corporation (NASDAQ:INTC) again after 3 years of flat to down growth. Additionally, the company is expected to launch lower power versions of Intel’s 4th generation PC-MPU (Haswell – Y), which will have less than a 10 hour battery life. In the first half of 2014, analysts are expecting Intel to gear up both; 5th generation performance PC/notebook MPU (Broadwell on 14nm), and its next-gen handset processor Merrifield (22nm) for LTE smartphones.
Intel managers realize what went wrong
At IDF, analysts feel that Intel was looking forward to gaining significant traction in the low-power portion of the market. Intel managers held the view that they were not right regarding their success of the tablet, and readily accepted that the tablet was a dominating force to cannibalize their business. Further, the managers believed that they could not design such MPUs, which could give their customers an advantage over competitors.
Analysts are expecting Intel to launch more competitive products in fiscal 2014. Intel is expected to revive its shares at the low end, gain share in handset SoCs and maintaining the gross margin in 60 percent range.