The past two weeks have been a busy – if not tumultuous – period for Intel. Driven by continued challenges in various semiconductor markets, culminating in weaker-than-desired earnings in the most recent quarter, Intel has set out to change their direction and refocus the company towards what they see as more lucrative, higher growth opportunity markets such as data center/server markets and cellular (5G) connectivity. To get there, the company is making changes to both their product lines and their head count, with the goal in the case of the latter to cut 11% of their workforce by the middle of next year.

Today’s big news out of Intel is along these lines, and with strategy and workforce news behind them, we have our first announcements on product changes that will come from Intel’s new strategy. In a report on Intel’s new strategy published by analyst Patrick Moorhead, Moorhead revealed that Intel would be radically changing their smartphone SoC plans, canceling their forthcoming Broxton and SoFIA products and in practice leaving the smartphone market for at least the time being.

Given the significance of this news we immediately reached out to Intel to get direct confirmation of the cancelation, and we can now confirm that Intel is indeed canceling both Broxton (smartphone and tablet) and SoFIA as part of their new strategy. This is arguably the biggest change in Intel’s mobile strategy since they first formed it last decade, representing a significant scaling back in their mobile SoC efforts. Intel’s struggles are well-published here, so this isn’t entirely unsurprising, but at the same time this comes relatively shortly before Broxton was set to launch. Otherwise as it relates to Atom itself, Intel's efforts with smaller die size and lower power cores have not ended, but there's clearly going to be a need to reevaluate where Atom fits into Intel's plans in the long run if it's not going to be in phones.

For the moment Intel’s announcement leaves some ambiguity in their larger mobile plans – where does the remaining Apollo Lake fit into the picture for tablets, if at all? – but for now we have a very clear picture of the smartphone SoC market, and how Intel will no longer be a part of it.

Intel’s full statement:

Intel is accelerating its transformation from a PC company to one that powers the cloud and billions of smart, connected computing devices. We will intensify our investments to fuel the virtuous cycle of growth in the data center, IoT, memory and FPGA businesses, and to drive more profitable mobile and PC businesses. Intel delivers a broad range of computing and connectivity technologies that are foundational to this strategy and that position us well to lead the end-to-end transition to 5G. Our connectivity strategy includes increased investment in wired and wireless communications technology for connecting all things, devices and people to the cloud, and to power the communications infrastructure behind it. We re-evaluated projects to better align to this strategy.

I can confirm that the changes included canceling the Broxton platform as well as SoFIA 3GX, SoFIA LTE and SoFIA LTE2 commercial platforms to enable us to move resources to products that deliver higher returns and advance our strategy. These changes are effective immediately.

Update 4/30: After publication, Intel sent along a second message clarifying that Broxton is canceled for both "phones and tablets," as the latter was not mentioned in their original message.

Smartphone SoCs: The Path so Far

Anyone following Intel’s exploits in the smartphone space over the last few years has been watching them with interest on product, timeliness and execution.

We’ve interviewed and appeared on video speaking with Aicha Evans, Intel’s current corporate Vice President of the Communication and Devices Group, whose large enthusiasm, energy and mantra of time to market has steered Intel over the past few years into the mobile scene, after bashfully missing an early entry. In that time, Intel has invested many billion dollars in both SoC and modem development to claw a market from the slew of ARM-based solutions in the wild. Aside from having a process node advantage during that time, Intel has had to redevelop its microarchitecture products and radio business into something that could be efficient, performant and price competitive, all the while maintaining the high margins Intel's overall business requires. Particularly in the radio business, the bread and butter of the CVP, Intel acquired and merged several companies to expand its radio portfolio, including the CDMA assets of VIA Telecom announced as recently as Q4 2015, as well as Infineon Wireless (modem/RF) and Silicon Hive (ISP).

As admitted by Intel, the first few generations were rough, either resting on their laurels or not having a complete solution. Earlier this decade Intel used a ‘contra-revenue’ strategy, investing into OEMs that would buy their chips, causing operating losses for the mobile division of $3.1 billion in 2013 and $4.2 billion in 2014 with a much lower revenue stream. Intel subsequently combined the financial reports of their mobile and consumer PC businesses into a new Client Computing Division, bringing all CPU/SoC development under a single roof but also obfuscating the investments and losses behind a high performing, high margin part of the company.


(Image Courtesy Tweakers.net)

Thus Intel’s big wins in the smartphone space have been rather limited: they haven't had a win in any particularly premium devices, and long term partners have been deploying mid-range platforms in geo-focused regions. Perhaps the biggest recipient has been ASUS, with the ever popular ZenFone 2 creating headlines when it was announced at $200 with a quad-core Intel Atom, LTE, 4GB of DRAM and a 5.5-inch 1080p display. Though not quite a premium product, the ZenFone 2 was very aggressively priced and earned a lot of attention for both ASUS and Intel over just how many higher-end features were packed into a relatively cheap phone.

Meanwhile, just under two years ago, in order to address the lower-end of the market and to more directly compete with aggressive and low-margin ARM SoC vendors, Intel announced the SoFIA program. SoFIA would see Intel partner with the Chinese SoC vendors Rockchip and Spreadtrum, working with them to design cost-competitive SoCs using Atom CPU cores and Intel modems, and then fab those SoCs at third party fabs. SoFIA was a very aggressive and unusual move for Intel that acknowledged that the company could not compete in the low-end SoC space in a traditional, high-margin Intel manner, and that as a result the company needed to try something different. The first phones based on the resulting Atom x3 SoCs launched earlier this year, so while SoFIA has made it to the market it looks like that presence will be short-lived.

Overall, Intel’s strategy of ‘Time To Market’ in order to generate revenue in a fast paced market makes sense - if you are late, then you are behind on performance, efficiency, and no-one will buy the chips. However, TTM has drawbacks if the chip comes without the features it needs, and the end result has seen Intel always play catch-up in one form or another, hoping that their strategy would encourage customers. Intel got serious about mobile, but it would appear it hasn't been enough.

Intel's Leaving the Trail: Broxton & SoFIA Cancelled

With Intel announcing the cancelation of their entire suite of smartphone SoCs, this has a significant impact on the company's overall strategy. The next generation of Intel's in-house mobile SoCs, Broxton, was lined up to use Intel’s newest generation 14nm Atom core, Goldmont. Goldmont has already been announced at IDF Shenzhen this year as part of the Apollo Lake netbook/low-cost PC platform, but we have been expecting it to arrive as part of a few handsets this year. Despite the fact that we assume Broxton should be in the final stages of silicon development and less than a few months out, the official word from Intel today is that the Broxton commercial platform has been cancelled for both smartphones and tablets, effective immediately. The resources working on the Broxton platform are being moved to areas within the company that offers better returns on investment and are more aligned with Intel’s connectivity (read: 5G) strategy.

Comparison of Intel's Atom SoC Platforms
  Node Release Year Smartphone Tablet Netbook
Notebook
Saltwell 32 nm 2011 Medfield
Clover Trail+
Clover Trail Cedar Trail
Silvermont 22 nm 2013 Merrifield
Moorefield
Bay Trail-T Bay Trail-M/D
Airmont 14 nm 2015 'Riverton' Cherry Trail-T Braswell
Goldmont 14 nm 2016 Broxton
(cancelled)
Willow Trail
(cancelled)
Apollo Lake
Apollo Lake

The other side of this news is the cancellation of the SoFIA 3GX, LTE and LTE2 commercial platforms as well. SoFIA as a platform had missed its original targets, was delayed (some analysts suggest up to a year), and in the end was developed through agreements made with RockChip and Spreadtrum to manufacture some of the SoFIA SoCs for those markets using a less expensive process node but also using the expertise of these two bulk SoC sales companies. We were expecting SoFIA with Intel’s 2nd generation LTE, as well as the next microarchitecture in SoFIA, to be announced this year. As of today’s email exchange with Intel, these programs are now cancelled, again effective immediately.  At this point details on how the arrangements with RockChip and Spreadtrum are unclear (Intel declined to comment).


One of Intel and Rockchip's current SoFIA SoCs

The Road Ahead for Intel

Intel’s announcements over the past week have included layoffs of 12000 staff, but also a clarification of Intel’s future strategy. Among those five focal points include the Cloud, the Client business, Memory and FPGAs, R&D through Moore’s Law, and 5G Connectivity. These five areas are all high margin, high grossing and high volume market segments. Sometimes an introspective look and an internal refocus on the core strengths is a good thing, depending on how your competitors are doing, but that means shedding parts of the business that don’t meet those expectations.

For the moment at least, Intel is out of the SoC side of the smartphone market. This will allow ARM architecture based SoCs to absorb the remaining market share they didn’t have already.

What's less clear at the moment is whether this will also impact the low-cost/non-premium tablet market, as embodied by products such as the Surface 3. In their updated statement, Intel has told us that Broxton is cancelled for both "phones and tablets." Our current understanding is that Broxton is the SoC at the heart of the Willow Trail platform – the successor to the widely used Cherry Trail-T – but at this time Intel has not explicitly confirmed whether this is in fact Willow Trail, or if Broxton's tablet variation represented another platform altogether. Though regardless of what happens with traditional tablets, we'll continue see Intel in more premium tablet-like devices such as 2-in-1s (e.g. Surface Pro) via Apollo Lake and the Core processor lineup, as Intel has previously identified convertable devices as a growth market for the company.

Update 5/02: In a newer statement, Intel has confirmed that Apollo Lake will be offered to tablet manufacturers. At this point it's not clear what the tradeoffs are for that versus Willow Trail, and whether Apollo Lake is suitable for all types of devices that the current-generation Cherry Trail has been used in. But this does mean we will see tablets using the Goldmont CPU core, while Intel Intel will flesh out the rest of their tablet SoCs with Core-based parts. Intel will also "continue to support" their tablet customers with Bay Trail, Cherry Trail, and SoFIA parts.

Also not discussed in greater detail is Intel's future plans for their overall Atom lineup. With Apollo Lake announced just earlier this month, it's clear that Intel's Atom efforts have not been cancelled entirely. We will still see the new 14nm Goldmont cores appear in low-cost PCs under Apollo Lake, most likely in several 11-to-13 inch high volume devices. However for the moment there is not an Atom core on Intel's roadmap beyond Goldmont.

Finally, despite all of this one key target for Intel will be the rest of the discrete modem market, which is currently Qualcomm’s domain, and the late 2015 acquisition of VIA Telecom’s CMDA assets will help. To put some perspective on this, two things: Intel recently hired Dr. Renduchintala, former Qualcomm VP of Mobile, to head up the client business, as well as Amir Faintuch, also formerly Qualcomm, to co-manage Intel’s Platform Engineering Group. Secondly, at Mobile World Congress 2016 in February, Aicha Evans said that she wanted a big contract in 2016, otherwise we might not see her in 2017.

Source: Intel, tip-off from Patrick Moorhead via Forbes

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  • TomWomack - Saturday, April 30, 2016 - link

    There are an awful lot of sandwiches sold today, and nonetheless Intel is not investing or prioritising in the sandwich market. The year to be selling smartphones was 2014; it's now basically a replace-as-they-break market, much more cost-driven than it was. Reply
  • retrospooty - Saturday, April 30, 2016 - link

    Like I said, they were making billions in profit every quarter on desktop/laptop/server chips... Also, the mobile market was crowded. Also, it was probably a mistake, but that is how it may have seemed to make sense. Call the same thing for MS. From the early 2000's until 2012, how did it make sense for Microsoft to put in a "half assed" effort on a Smartphone OS? Bad choice in hindsight. By the time Windows Phone was actually pretty good, no-one cared to switch. Reply
  • Ratman6161 - Saturday, April 30, 2016 - link

    "By the time Windows Phone was actually pretty good, no-one cared to switch." Great analogy Reply
  • zeo - Saturday, April 30, 2016 - link

    Actually, they did put priority on it... The ATOM went from a 5 year product cycle to a two year cycle like the Core series... The ATOM also rapidly went on the newest FAB, there was just delays with the 14nm FAB in general that put Intel behind schedule but they still got Cherry Trail out within a year of Broadwell and Cherry Trail even used a Intel gen 8 based GPU like Broadwell's...

    The problem is ARM dominates the mobile market, is a cheaper technology for OEMs to invest in, OEMs can customize ARM in ways they can't Intel SoCs, and it was basically a hard sell for Intel without any clear advantage, which they couldn't offer without going to their much more pricey Core series technology product...

    Sure, profit margins played a role and they also didn't want to give up their profit margins for their higher end products but the ATOM hasn't been a gimped or low priority product for over three years now... It just hasn't been successful enough in the mobile market versus ARM, which is especially doing well in GPU performance, which has started to rival even some of Intel's higher end iGPUs...
    Reply
  • Ratman6161 - Saturday, April 30, 2016 - link

    "The ATOM went from a 5 year product cycle to a two year cycle like the Core series" But...Apple, Qualcomm and Samsung come out with a new generation every year. Of course I expect this to grind its way down as phones and tablets reach "good enough" and people start losing the itch for constant "upgrades" Reply
  • zeo - Sunday, May 22, 2016 - link

    No, when referring to Intel's 2 year product cycle it is referring to an actual cycle between their FAB advances... Meaning everything that happens between one FAB advance to the next, which includes yearly updates...

    For Intel this usually falls into what is known as the Tick-Tock cycle... The Tick being the FAB advance, which offers the usually smaller product improvement that is then followed by the Tock, which offers the better architecture advancement that improves the product on a given FAB...

    Intel previous held a FAB lead because they rapidly advanced to the next FAB... Only recently has ARM managed to close this gap... It helped that Intel has had issues with their FAB and thus had to temporarily extend their cycles to 2.5 years and we may not see the 10nm FAB released from them for close to another two years.

    Besides, aside from the switch to 64bit ARM hasn't seen a really big update in awhile...

    So no, it wasn't a issue of SoC updates with the competition... Though, you're not entirely off because Intel wasn't updating what went into a typical system as rapidly... Things like 4K cameras, faster storage, etc. are what Intel was really falling behind on.

    The advantage to ARM is it is extremely easy to customize and scale... While Intel products was whole package or else... The new Goldmont update would have finally changed this but it was basically too little too late on that score and products are more than just how good the processor are anymore... The entire product ecosystem is what matters in mobile...

    Even companies like Nvidia had to give up phones because of this, though that doesn't mean they can't find other niches they better fill... Like Nvidia is doing very well in cars right now...

    It remains to be seen if Intel can make a go at IoT, either in the actual products or in the infrastructure that supports those products, such as their new emphasis on 5G...
    Reply
  • ViRGE - Friday, April 29, 2016 - link

    The short answer: margins.

    The long answer: Intel could absolutely build a killer smartphone SoC on the 14nm process. However it would need to be Core based; the Atom CPU line isn't performant enough. They may need to go back to Ivy Bridge or strip down Skylake a bit to get there, but they could do it.

    The issue is that smartphone SoCs have very low margins. MediaTek, Rockchip, etc are crushing the market. Atom is designed for margins, not performance. If Intel built a winning Core smartphone SoC, then they'd have to sell it for significantly lower margins than what their other Core parts sell for. And that in turn would put pressure on the rest of their chip stack; why should an OEM pay $250 for Core-M when you could get a similar smartphone SoC for $30?

    For what it's worth Apple faces a similar challenge. But being vertically integrated means they don't have to share with others, and the total profit off of iPhones/iPads can offset the higher costs involved in developing and fabbing the A-series SoCs. However Intel doesn't have that luxury, and Asus would never let Intel have all of the profit.

    Smartphone SoCs are a race to the bottom. And Intel as a business has nothing to gain from taking part in that race. The winner is the guy who got badly hurt but didn't die; a Pyrrhic victory.
    Reply
  • madwolfa - Friday, April 29, 2016 - link

    ^ This guy is correct. Reply
  • Klinky1984 - Friday, April 29, 2016 - link

    I agree with this. Intel has been adverse to getting into markets that become commoditized. How many smartphone parts do they have to sell to get the same margin they get from a single sale of server-class CPUs that cost thousands? Reply
  • Intel999 - Saturday, April 30, 2016 - link

    You are correct, Virge.

    However, the margins in smartphones were crap two years ago as well. Why did Intel keep throwing more money at it as long as they did if margins are and were their ultimate goal?

    Probably due to the fact that margins are dropping in their PC market and possibly in DCG, as well, based on two quarters of lower ASPs. These "core" segments can no longer provides Intel with sufficient margins to offset this ill advised attempt to be a player in the low end.

    They better hope that their FPGA business picks up to offset the major drop in volume in their fabs from a crashing PC market and now non-existent phone processors. With all the fixed costs associated with fabs it is also a margin killer to run fabs at low utilization rates.

    I wouldn't be surprised if Intel has already started cutting shifts at some of their fabs starting this quarter. They have a lot of inventory to burn off as it seems they chose to keep the fabs running through Q4 and Q1 holding out hope for a rebound in the PC market that hasn't seemed to arrive yet.

    As far as FPGAs are concerned, they missed their guidance in Q1 by over 10% on their new Altera business. It's early, but if they are that off on the guidance how far off were they on the proper amount to spend on Altera in the first place.
    Reply

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