14 DAY TRIAL // Early in 2014, Intel set some pretty ambitious plans for itself, which included shipping 40 million tablets which take advantage of its chips, four times the number it posted in 2013.
And for this scenario to be likely to happen, the chip giant came up with a competitive strategy.
The chip maker announced it would be helping tablet makers build slates with Bay Trail chips on the inside. What’s more, the company offered to pay for their extra component cost.
Intel wanted to provide a better alternative to ARM design
Basically, Intel was hoping the force of raw cash would woe manufacturing companies away from budget-friendly ARM chip designs, which are quite widespread and popular with big companies such as Qualcomm, Apple, Samsung and NVIDIA.
But what were the costs of such strategy? Evidently, Intel ended up losing lots and lots of money and even if Intel-based tablets are becoming more and more common, the chip giant can’t really afford to maintain this growing hole in its budget.
According to Morgan Stanley analyst Joseph Moore, Intel will put a stop to the plan it has been applying so far, as reported by Apple Insider.
Stacy Rasgon analyst, Bernstein Research, revealed Intel was most likely subsidizing as much as $51 / €40 per tablet, which is quite a lot considering that these Android tablets normally arrive in retail with a $199 / €158 price tag or even less.
Intel proves unable to cope with loss
Overall, the chip behemoth is expected to lose $4 / €3 billion on mobile chips by the time the year comes to an end. But Intel apparently can’t handle such a drastic burn through its profits anymore.
Moore notes that even though Intel will renounce subsidizing tablets in 2015, the reduction in profit loss will continue to be quite modest.
The prospects are quite grim for Intel, as Moore states that eliminating these losses would entail either massive revenue gains or important expense cuts, but either scenarios seems quite unlikely.
At this point you might be wondering what Intel phasing out tablet subsidies translates into for the average customers. Well, for starters, do you remember those dirt cheap Android tablets? Well, they might no longer be possible in 2015.
Surely, there’s always the possibility that some other chip maker jumps in to fill Intel’s shoes and save the day, but if you’re from the Intel fan base, you’ll have to start saving up to purchase a tablet powered by one of the company’s chips.
But maybe Intel will end up finding a solution. After all, the company has partnered up with Chinese low-cost chip-maker Rockchip for the production of the budget SoFIA chips.
