This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Intel in More Trouble Than Anyone Knows

Stocks in this article: INTCBRCMAAPLARMHAMZN

NEW YORK ( TheStreet) -- Nearly a decade ago I had the chance to talk with Chinese original equipment manufacturers about Intel (INTC).

Why aren't you buying their communications chips, I asked? Why are you buying chips from Broadcom (BRCM), for instance?

The answer came back clearly. Broadcom gives us designs and orders. Intel just gives us chips and an "ecosystem" of software suppliers. We can't afford to design products. We can't market them to consumers. We need complete designs from mass-market customers.

Since then the situation has gotten much worse. Back in the last decade, Intel was worrying about peripheral lines of business, like communications chips. Now it's losing the plot of the microprocessor market, its bread and butter.

A recent CNET story about Apple's process in creating the new iPhone is illustrative. Apple (AAPL) licensed a design from ARM Holdings (ARMH), then had its own design shop, formerly called PA Semi, push that design to its limits.

The result was a design called the A6, a proprietary product manufactured by Samsung, against which the company was competing directly both in the consumer market and in court. But we can't let business get in the way of business.

In the PC world, a product was designed around the chip. Intel dominated that market because it designed great chips and could manufacture them at low cost. In the device world, the chip is designed around the product, foundries can be rented to create a myriad of designs. Intel has no answer for this business model.

Instead, Intel has designed a new Atom processor called Clover Trail, reports Toms Hardware, which supports Windows 8 but not Linux. That's a step in the right direction, but it provides little differentiation for all the Windows OEMs out there, struggling to compete not only with Apple but with one another.

The PC era in which every machine was nearly identical is ending. The device era is one where you need to be different, and that starts at the level of the processor. Intel is the only company big enough to manufacture its own designs. What I call Moore's Second Law -- as designs get more complex, they cost exponentially more to get into production -- means Intel has won the mass market race.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,399.67 +19.26 0.12%
S&P 500 1,904.01 +17.25 0.91%
NASDAQ 4,316.0740 +57.6360 1.35%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs