Intel Will Fend Off Mobile PC Challengers

Electronic News, July 30, 2001 by Kevin Krewell

INTEL CORP.'S DOMINANCE IN THE MOBILE PC PROCESsor market will continue unabated over the next several years, despite increasing competition by rivals AMD, Transmeta and VIA.A cyclical recovery in the mobile PC market in the fourth quarter will propel Intel's mobile chip business to 5 percent unit growth in 2001, even in the midst of a shaky economy. The expected recovery, pent-up demand and a migration to Windows XP will gain steam in 2002 and boost the company's mobile IC unit sales 26 percent next year.

AMD, Transmeta and VIA will continue to chip away in this market, offering differing combinations of price, performance and power. But Intel should maintain its wide lead in the mobile space. Considering that Intel's present mobile volume is roughly the same as chief rival Advanced Micro Devices Inc.'s (AMD) total CPU shipments (including desktop), the challengers have a long way to go.

However, the increased competition, coupled with a continued reliance on the well-established P6 microarchitecture, will lead Santa Clara, Calif.-based Intel (nasdaq: INTC) to cut mobile processor prices. The average selling price (ASP) for Intel's mobile processors will decline 20 percent from the fourth quarter of this year to the fourth quarter of 2002.

Although Intel's desktop business is migrating from the Pentium III to the Pentium 4 this year, its mobile market is still relying on the PIII due to the large die and high-power requirements of the current P4 chips. When the company moves to its next process generation (0.13-micron), the P4 chips produced will be smaller and run cooler, making them suitable for at least some mobile PCs. The 0.13-micron PIII (Tualatin) will be responsible for the bulk of Intel's mobile business until a new mobile processor, code-named Banias, is launched. Banias should ship in late 2002 or early 2003 and will likely be a highly integrated processor based on an improved P6 (PIII) microarchitecture.

Cahners In-Stat/MDR projects that the first mobile P4 (Northwood) chips will appear during the first half of 2002 at up to 1.5GHz. The company wants to get this chip to market as soon as possible to fend off a challenge from Sunnyvale, Calif.-based AMD (nyse: AMD). Intel will continue to boost Northwood performance in the mobile market and by the end of 2003 should introduce a model produced with a 0.10-micron process that reaches 2.6GHz.

In the mobile PC value segment, the Mobile Celeron brand will rely on sixth-generation cores until at least 2004. In the first quarter of 2002, we project that Intel will launch the 0.13-micron Tualatin chip under the Celeron brand for mobile products. This chip should reach 1.33GHz by the third quarter of 2002.

In its chipset products, Intel's I/O hub will continue to evolve to support new interfaces and eventually, greater bandwidth to the memory hub. The next major change is likely to be the addition of USB 2.0, a higher-bandwidth version of the current USB. Intel will not likely be able to offer integrated graphics to its P4 chipset until mid-2002.

Intel's mobile chip prices have held steady recently despite sharp cuts in desktop products and renewed competition from AMD. In 2002, the mobile P4 will take over among premium mobile PCs. In-Stat/MDR expects decreasing ASPs in this segment next year with prices dipping below $200 by the end of the year due to increased competition and lower volumes of high-end products.

The ASP for the mobile Celeron line looks much like the ASP for the Celeron desktop line: list prices starting at $116 and falling to $70 on the low end. Although AMD is having increasing success with its mobile line, and Transmeta Corp. and VIA Technologies Inc. also offer some competition, In-Stat expects mobile Celeron prices to be stable or even slightly higher in 2002.

Kevin Krewell is an analyst for San Jose-based Cahners In-Stat/MDR, part of Cahners Business Information, the parent company of Electronic News.