Intel to Drop Atom Subsidies For Android Tablets In 2015

AH Intel Logo 1.5

The AppleInsider ran an article citing how wonderful Apple iPads are and how Intel is the boogieman, having been spurned by Apple for the original iPad, it’s been “flooding” the market with subsidized Atom processors. Putting aside the jingoistic tones of the article, there are some interesting statistics buried within. First, I should put things into perspective: Apple started selling Intel-powered computer in 2006 and presumably Intel wanted a look in with the new iPad, but Apple instead used their own processor design, the A4 (the same processor as is found inside the iPhone 4). The article claimed that following this loss, Intel started subsidizing the Atom processor to other tablet and netbook (Chromebook?) manufacturers to the estimated value of $50, which is steep given that these devices typically sell for under $200. Intel’s support includes selling the processors at just above cost price and providing grants to allow companies to redesign circuitry so away from ARM processors and to make it compatible with Intel processors. There have also been joint marketing schemes.

According to Morgan Stanley, Intel’s Atom division will run to $7 billion of losses for the last two years and with this in mind, the processor giant is calling a halt to these subsidies. They’re going to be phased out during 2015. From an Android tablet perspective, this may result in either more expensive Intel Atom-powered tablets or many manufacturers switching to ARM-based designs, perhaps using processors such as MediaTek and Rockchip. This in turn could result in significant revenue gains for Intel or a cut in volume, but either way it should reduce losses. Morgan Stanley state that they are unsure the direction of the movement. We have already seen evidence that manufacturers are considering moving away from Intel, for example the recent article covering Asus’ decision to use alternative processors in their 2015 ZenFone range. What we understand is that instead of supporting manufacturers and encouraging them to use Intel processors, instead Intel are planning to license the x86 Atom processor and 3G / 4G LTE baseband to manufacturers, using a similar licensing model to Qualcomm and ARM Technologies.

It remains to be seen how Intel’s plan will unfold. It seems clear to me that Intel’s plan with inexpensive Android and Chromebooks was not to make money but instead to build branding and consumer awareness. In my own experience, Intel’s processors in mobile devices offer comparable performance to the ARM equivalents but offer long standby times, but after reading the AppleInsider article, I’ll be checking under my bed tonight for the Intel boogieman.