Intel Market Analysis 2009
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The document outlines Intel's strategy to expand its architecture into adjacent markets, specifically identifying opportunities in mobile, server, and embedded segments. Key recommendations include investing in scalable x86 architecture for cloud computing and mobile devices while minimizing focus on less lucrative markets. The analysis employs five criteria to evaluate potential growth areas and emphasizes the need for partnerships and competitive differentiation in the evolving tech landscape.
Intel Market Analysis 2009
- 1. Intel Accelerated Leadership Program Case Competition One of Intel’s goals in the foreseeable future is to extend Intel Architecture into adjacent market segments. What markets should be targeted/developed and how? Brian Burstein Antony Chen 9/19/2009
- 2. Market Segmentation Client Server Embedded The client market encompasses all The server market encompasses all Embedded chips are application specific: consumer/enterprise devices that are devices which offer shared resources to utilized by end users. multiple users. Digital Set-top Boxes Mobile Entry Level TV – Handheld devices that support voice – 1 to 2 processor servers used for Automotive communications (e.g. cell phones, departmental or small business use for smart phones) general purposes (e.g. file server, – e.g. traction control Exchange, light database) or pre- Mobile Internet Devices (MIDs) / production purposes Engineering Solutions UMPC Midrange Healthcare Solutions – Handheld devices with WiFi capabilities (e.g. iPod Touch) – 3+ processor servers used for production applications Netbook High – Ultra-portable, inexpensive (<$400) devices that are primarily used for – Servers that support enterprise network computing computing and high-performance computing Notebook – Portable computing platforms Desktop – Non-portable computing platforms Intel is a major player in all of the above markets with the exception of mobile and high-end servers. -2-
- 3. Industry Trends Trend Industry Need: Impact / Risk to Intel Cloud Computing / Cloud computing and virtualization are growing rapidly Cloud computing requires highly scalable multi- Virtualization processor configurations that support virtualized server Revenues expected to hit $42B in 2012 (CAGR=27%) 1 instances in data centers Cloud computing will be 25% of all incremental spending in As the industry shifts to cloud computing, the SMB IT1 server market will diminish Intel needs to have a best-in-class highly scalable processor capable of supporting cloud computing Intel needs support of leading virtualization companies (e.g. VMware) for its platform Mobile Convergence Client computing is moving towards increasingly mobile This mobile convergence requires high performance, devices. System on a Chip (SoC) is becoming increasingly low power processors for mobile devices popular in client applications Mobile convergence has a high potential to disrupt Between 2007 and 2008, smartphone sales increased by some of Intel’s core market segments, notebooks 47%2 and netbooks Smartphones accounted for $11.4B in revenue in 20082 Embedded Embedded processors are in everything from TVs, set-top Due to application specific design, Intel must keep Processor Market is boxes, automobiles, etc. flexible manufacturing Growing Source: 1 2008, IDC Research, Frank Gens, Senior Vice President and Chief Analyst, Preparing for the next 20 years of IT 2 2009 June, Portable Technology – US, Mintel through Kresge on 9/19/2009 -3-
- 4. 5 Key Criteria Criteria Description Relevance of Criteria Rating Description Market Size / Analysis of current market size and Semiconductor industry is extremely scale 0 1 2 3 4 Potential growth potential intensive. Small Large Disruptive Disruptiveness of growth in this market Disruptive technologies could cannibalize 0 1 2 3 4 Potential to Intel’s current business model Intel’s markets. Small Large Intel’s Intel’s market dominance in this market There may be an opportunity in large 0 1 2 3 4 Competitive markets where Intel has a weak or non- Position existent competitive position. Weak Strong Competitive Intensity of competition based on Competitive intensity roughly measures 0 1 2 3 4 Intensity / Market market structure and concentration of price sensitivity of the market. Intel should Structure competitors not compete in undifferentiated, commodity Not Intense Intense markets, such as DRAM. Intel’s Distance Amount of resources required for Intel This criteria helps determine the amount of 0 1 2 3 4 to Innovate to compete in this market resources that should be allocated to a given market. Close Far -4-
- 5. Market Analysis Summary Decision Criteria Competitive Intel’s Intel’s Market Size / Disruptive Intensity / Distance Competitive Recommendation Potential Potential Market To Position Structure Innovate Need to enter due to disruptive potential Mobile 4 4 0 2 3 and market size MID / UMPC 0 2 4 1 0 Do not focus resources in this area Continue to focus. New entrants may Client Netbook 2 4 3 2 0 threaten the dominance of the Atom Needs focus as notebooks cannibalize Notebook 4 1 3 1 0 desktop sales Limit future investment, market will be Desktop 1 0 3 2 0 cannibalized by notebooks Limit future investment, cloud computing Entry Level 1 1 3 1 0 will replace SMB market Maintain as intranet production servers Server Medium 2 2 3 1 0 will continue to be important Grow to meet demand (cloud High 3 3 2 3 2 computing). Focus on x86, not Itanium. Since embedded chips are application Embedded Embedded NA NA NA NA NA specific, each application needs to be Market analyzed separately. -5-
- 6. Recommendation 1: Where / How to Grow the Client Segment Recommendations Enter mobile sub-segment by developing Atom-based SoC capabilities through partnerships and licensing Lower Atom’s unit costs to support continued netbook dominance and entrance into mobile sub-segment Minimize investment into MID/UPMC market as early indications show poor adoption Problem / Opportunity Rationale Risks As VIA, AMD, and ARM contend for With netbooks showing 27% CAGR, Intel ■ There is potential for a long-term pricing market share in netbook sub-segment, needs to maintain its dominance with the war. While Intel could likely win a price netbook processor prices will fall. Atom processor. As competitors move war with VIA, ARM and AMD due to a into the market, pricing pressures will stronger financial position, price wars Smartphones are becoming mobile increase, driving down the Atom’s are never desirable. computing platforms, which has allowed margins. Therefore, the unit cost of the ARM to consider moving into netbook Atom will play an increasing role in Intel’s ■ Mobile phone companies may not be sub-segment. ability to maintain dominance. willing to adopt the Atom processor. Therefore, Intel must create substantial Smartphones account for over 50% of The decrease in unit cost is important to differentiation to overcome switching cell phone revenue. support a unique opportunity for Intel to costs from ARM architecture. aggressively pursue the mobile market. Mobile market has driven SoC ■ Licensing technology introduces However, Intel’s primary strategy of innovation due to power and form factor intellectual property concerns. To vertical integration has made it difficult for requirements. reduce this risk, Intel could license its integrators to build SoC designs using Intel’s architecture. Therefore, Intel older Atom cores, however the older SoC design and manufacturing may should either extend its design and cores may not be technologically require a different vertical integration manufacturing capability to support SoC competitive. strategy. or consider ARM’s strategy of licensing its architecture. -6-
- 7. Recommendation 2: Where / How to Grow the Server and Embedded Segments Recommendations Expand investment in x86 architecture to increase its scalability for high-end enterprise market Deprecate Itanium processor Maintain but limit future R&D expenditures for processors supporting the SMB market Analyze opportunities in the embedded market by using the five key criteria provided Problem / Opportunity Rationale Risks Itanium Processor lags behind other Itanium was meant to be a heads-on ■ The x86 architecture may have difficulty server technologies. competitor to the RISC architecture, but scaling while maintaining compatibility. – Market-leading virtualization firm, Intel’s own x86 architecture has relegated the Itanium to mid-to-high range ■ Server component makers may be VMware, does not support Itanium applications since the SMB market unwilling to adopt new architecture. – Market adoption is weak prefers the x86 platform. Rather than ■ Without support from virtualization SMB server market will be disrupted by challenge the market with two processors, software makers, any new architecture the growth of cloud computing and focus should be given to one. With the will fail. virtualization. x86’s prevalence, expanding its capabilities into the enterprise market ■ Despite short-term losses in Sun – Variable cost structure is highly attractive to SMB users would give companies the ability to scale SPARC market share, Sun’s new up and scale out. Furthermore, it owner, Oracle, may increase investment – Reduced IT personnel spend provides a cost-effective upgrade path for and marketing of SPARC architecture. cloud computing companies as they move to larger scale platforms using less expensive, commodity components. This may allow Intel to commoditize the enterprise market and extract a larger share of server revenues. -7-