Intel Profits Fall as PC Slump Cuts Demand for Chips | Hacker News Reader

Intel Profits Fall as PC Slump Cuts Demand for Chips

nytimes.com

37 pointseplanit46 comments

What's interesting is that as a power user I still cannot buy a good ultrabook. I have a Samsung New Series 9 13" , that besides having major quality problems (dead pixels, clicking fan noises), lacks several essential features that I think many people would like to have:

-Retina display (at least like on iPad 3, 2048 x 1536 )

-Default fan-less thermal profile (i.e. no moving parts- it has fanless thermal profile, but it "forgets" it every time it's turned on)

Further down the road:

-Lid can be detached from the keyboard and used as a touchscreen tablet

Preach it. I can't find a decent Ultrabook. It's amazing that there are so many that dont even have at minimum a 1080p screen. That really should have been part of the Ultrabook specs.

What is really astounding is how completely clueless OEMs are. Intel, a chip manufacturer, not only had to go to each OEM and convince them to make some competition for Apple, but they had to help them design the laptops too. What the hell do engineers at Dell, HP, and even Lenovo do all day? They are the ones who should be coming up with laptops and telling Intel what they want.

I'm just complaining, but it feels like Lenovo is busy pissing off all the loyal ThinkPad users. Each iteration takes ThinkPad one step closer to shiny crap laptop, like a Dell or HP. And they still can't get decent resolution screens, even on 14" models. Some of the newer stuff looks neat (like the Helix), but has nerfed hardware, like 8GB RAM max.

I don't even really care about "ultra" book. The old X-series ThinkPads were great. 12", a few pounds, portable enough. They killed that line by switching to a crap consumer screen.

I wonder if the laptop market will go to hell and the shiny factor won't be an issue cause consumers will be buying other things. At that point, perhaps laptop companies will once again focus on people willing to spend a lot on good hardware.

I think you're overselling the old screens. They were bad TN screens with a crappy resolution (1024x768, 1280x800). At least the x220 and x230 have a very nice IPS screen, even if it's still with the crappy resolution.

Unless you mean the SXGA+ X61 with the gorgeous 1400x1050 IPS screen with just the right aspect ratio. But those only existed officially in the crappy tablet form factor. It's possible to mod one of them to a normal X61, but it's highly non-trivial and takes a lot of time and money.

From what I hear from a friend that worked in laptop development at Dell and HP, most of the actual design is done by the Chinese companies that will eventually manufacture the hardware. American hardware companies have stripped themselves down to the point where they basically just specify and test outsourced designs. It's a system designed to produce commodity hardware at low prices, not innovative products.

That mostly just shifts the frame without answering the core question. Why can't the chinese design a decent laptop?

They're stuck in a local optimum. These companies have to be structured in a certain way to succeed at low margin, high volume commodity hardware sales. It isn't easy to adapt that to higher-end products, and when they try the market is slow to recognize changes in a brand, which discourages them from trying.

R&D spending: when you are in a race to the bottom, you can only afford to invest in safe designs, and most of your focus is on efficiency. In contrast, Apple can afford lots of R&D spending.

and yet, long term, it's apple that makes the bulk of the profits in this sector, while the rest rat race tothe bottom.

I m not sure if its by design, or these smaller companies just cannot come up with a long term plan...

If you can handle the tiny-ass (but much higher res) screen the Surface Pro comes pretty close and is in about the same price bucket. It's silent/vibrationless in practice (I don't know if the fans are off or just very quiet) on any workload other than games. I'm happy with mine.

I can also vouch for the Surface Pro. It's extremely well made, and pretty much the only downside is the small (but hi-res) screen.

And the tiny amount of RAM and extremely limited storage? SD expansion, if you don't mind slow transfer rates.

Also, I understood that you can't actually use the Surface Pro as a laptop; it has to be with the kickstand at just that angle. That seems to indicate the keyboard/laptop mode is fairly limited.

It's not a no-compromises device, the whole thing is a portablity/power tradeoff. I'm happy with the result; moving from a 5+ pound laptop that I lugged around in a bag or left behind to a 2 pound one that I don't mind carrying around everywhere and using as a main workstation has been a nice change. The big downside is limited customizability, I would put a much larger SSD in it if it were at all feasible. I just keep the stuff I don't use often on a server or an external USB drive.

Using it on your lap isn't as awkward as it would seem. I'm a largish guy so I'm sure it looks preposterous tapping away at this tiny thing perched on my knees but it works just fine, although the flexible keyboard sounds like a bongo when I type on anything but a firm surface. You can also flip down the stand and use it unfolded 180° so you get your choice of two whole screen angles. In a pinch pen input is sufficient for writing an email or filling out a webform, or you can scribble freehand notes and transcribe them later.

The RAM hasn't been an issue. I haven't found any software that truly needs more than 4G of RAM, and the fast SSD makes swapping/not caching disk not a big deal. I don't think I'd want to take the battery life hit of a ton of RAM even if it were upgradeable.

If there were one thing I could add to the Surface Pro 2 wishlist it would be built in LTE, having to carry around a USB dongle or drain the hell out of my cellphone to get connectivity in places with no wi-fi is a drag. Reliable connectivity would also make the scarce disk space less annoying.

Well, the Retina MacBook Pro very nearly fits your profile. The fans are whisper-quiet, and the screen is beautiful.

I'm a ThinkPad die-hard, but somehow Lenovo is managing to destroy every last bit of the legacy IBM worked so hard to build, so, sadly, I'm typing this from a 13" MacBook Air.

I couldn't bring myself to buy a cheapened fiberglass budget laptop after my lovely T60p.

It's frustrating. I bought a MacBook Pro to replace my aging but much loved Thinkpad X200, but it just doesn't measure up. The Thinkpad has a better keyboard, is more easily expandable (at least memory/hd), and most importantly for me, is built like a tank. The MBP already has a dented corner after an unfortunate tumble, the Thinkpad has endured much, much worse.

All I want is a newer version of the X200, but Lenovo has moved off in a different direction...

It seems like many Ultrabook shoppers are unaware that there is a 13" Retina MacBook Pro. It's obviously not everybody's cup of tea, but surely worth considering.

Typed on an IBM ThinkPad. :)

The mbp also heats up like crazy

Not sure what constitutes an ultrabook, but would the macbook air fit your needs? It's really high quality and fan is off almost always. It doesn't have retina at the moment, though.

I read "ultrabook" as "any high-end laptop not made by apple".

>Lid can be detached from the keyboard and used as a touchscreen tablet

You should check out the computers known as "convertibles". There's some listed here: http://www.intel.com/content/www/us/en/ultrabook/shop-ultrab...

Of course, Intel is in the position that it can't compete with the people that makes its products--choosing to be horizontal rather than vertical in the PC market. So those quality and options are really on the OEMs, and Intel can only provide so much of a carrot and/or stick.

Obviously, retina is not Intel's problem; plenty of notebooks sold by the fruit have these displays already. Its only a matter of whether the OS/app ecosystem can deal with high resolution displays.

I have an "ultrabook" and I love it. Except for the lack of F{n}, Home, End, and Insert keys, and the 4 GB RAM. The 13" 1080p screen is about as retinarrific as I can stand.

I'm not sure if I'm being ironic or not.

Intel is among the best at staying paranoid and investing into R&D. It makes how they've been pinched by the rapid shift to smart phones + tablets all the more amazing. A textbook example of how the best of companies can be caught with their pants down.

They've always managed to respond impressively in the past to challenging circumstances. Can they do it again? Their future depends on it.

It wasn't really that though. They saw it coming, but the margins were so low in this new field that they had to decide: stay in their high-margin but slowly dying business or turn ship to compete with the inevitable but not very profitable new order that was coming online.

It is quite easy to think that these big companies are not getting it, but they really do. Intel was and is basically in a no win situation: they could become like ARM and TSMC combined, but that wouldn't justify their valuation at all. Their only hope was to come out with a new breakthrough high-margin product, which might not simply exist right now (i.e. no big leaps to be had for the next 5-10 years).

It's not ARM that Intel has to compete with per se, it's Qualcomm. They're the new Intel.

People keep saying Intel stayed away due to the low margins. Well the market doesn't have low margins. Qualcomm has a 30% net income margin; it's 50% higher than Intel's today.

> Qualcomm has a 30% net income margin; it's 50% higher than Intel's today.

Qualcomm doesn't run its own fabs as far as I know, these comparisons aren't very meaningful.

Perhaps I mispoke using the word "margin:" Intel makes a lot of money as a hardware company. Of course, they have to invest in their fabs, but their 15% is on a much higher number than Qualcomm's 50%. So let's just think profit instead ($1.2B vs. $2B).

Of course Intel is larger - QCOM was founded in 1985 - but Qualcomm is making more money per dollar of sales they take in - 50% more in fact - and they're growing radically faster than Intel.

And it's not chump change either, it's $6.6 billion in profit, which makes them one of the most profitable tech companies on the planet. So it's not like we're comparing $11b in profit versus $300m (ARM Holdings).

Their market cap is already larger than Intel's, and that's not going backwards given QCOM's growth rate compared to Intel's contracting business.

Within three or four years at the current rate, Qualcom will be making more money than Intel. That's dramatic to say the least.

The comparison is perfect. With $13 billion in cash now, and no real debt, Qualcomm has begun talking about building their own fabs in the future. Which is exactly what they will do by necessity. They already make more money than TSMC. The notion of relying on TSMC long term would be absurd as Qualcomm grows so much bigger than them. Given the numerous problems QCOM has already had with TSMC, they have every incentive to soon abandon the fabless approach.

As soon as Qualcom starts fabbing, their margins will go down; that's just the nature of the hardware game. Microsoft, for example, was always very profitable BECAUSE they stayed out of hardware. But its really a false distinction: someone has to make hardware, and if you can do that profitably, why not?

But you are right: QCOM is doing very well, they should eventually overtake Intel in profits. They were very lucky to be in the cellphone business early on. I'm not sure if their tablet business is very profitable though. Its not like their are many successful tablets with snapdragons inside them.

Any data to show whose tablet business is very profitable except Apple? or more generally, is there any evidence showing that the "tablet market" is not equivalent to the "iPad market" anymore?

Most of the Google tablets seem to have Tegra's in them. Apple does their own chips of course. I'm not sure anyone is very profitable with tablets yet beyond Apple, but Asus might do OK.

So... Will desktop/laptop computers ('workstations') become super expensive (high-end) to justify Intel's valuation?

Free market: we can buy what we want! Its only Intel that is screwed.

1. If Intel collapses, who will make the processors? I guess AMD is still out there, but their capacity, might not be high enough (which would drive up the price of the processors).

2. If Intel enters a death spiral, it seems to only make sense that it would attempt to raise the price on its processors, which could drive up the cost of desktops/laptops. Sure the market may respond by attempting to go with AMD (for example), but this may require retooling of processes and would probably incur a time delay (it may even drive some PC makers out of business, depending on their financial situation).

3. If Intel collapses who would buy up their assets (manufacture plants, design, research, etc)?

Um, yep. If the average "PC" turns from a $500-750 laptop to a $200-500 tablet, Intel's going to lose a lot of business. It can't afford to live on Atom chip margins.

That's assuming that Intel gets a decent cut of tablet market at all. Intel making a decent low power CPU isn't going to make Arm go away, and Arm is only going to work its way up the ladder from its current dominance in the embedded and mobile space.

Arm exists because they went after a market Intel didn't care about. Intel was slow to react to the shift in market, but they have reacted and they are focused now. It is only a matter of time before Intel dominates the market. Their latest Atom processors are already better than Arms. They may not get the same cut from mobile processors, but they will have larger volume and there is an emerging market in the hybrid tablet space. The Surface Pro is considered a tablet but it still has an i5 in it. If Microsoft didn't screw it up so much it could have been a huge success.

If any company can touch Intel fabrication process, then maybe I will start to be worried about my Intel stock.

>Their latest Atom processors are already better than Arms.

Source? Every review I've seen says they still struggle to beat ARM on power/performance/price.

I've absolutely not heard that their mobile chips are "better" by any margin.

http://www.anandtech.com/show/6536/arm-vs-x86-the-real-showd...

On the horizon: http://www.anandtech.com/show/6790/intels-clover-trail-dualc...

I really wish people would stop using Javascript benchmarks as a CPU benchmark, especially across architectures. The amount by which they vary between browsers on the same device should make it obvious they aren't a good general-purpose benchmark.

I mean, Kraken for one says my laptop is 60% faster than itself.

I'd appreciate some thoughts from more informed people than myself.

As I understand it: Intel didn't go into mobile devices because of lower margins. Arm has now taken that market, and are killing it because they have the volumes to make the lower margins palatable and not much competition.

Intel is now going into the mobile space now as they have decided they are better off with low margins rather than no sales.

I could only imagine the total demand for mobile devices is a much bigger market than it ever was for PCs so surely with Intels production capability they can own this segment soon?

And with that being said, at the price intel stock is right now, we should be buying them up by the bucket load?

The companies leveraging ARM are the ones really killing it.

eg Qualcomm - 100% profit growth in 24 months, to $6.1 billion ($6.6b in last four quarters). They might be the size of Intel in three or four years at this pace, and their market valuation has already passed them (the market is making a clear bet there).

ARM itself is tiny by comparison. The real killing is being made by the companies leveraging ARM's designs (QCOM / AAPL / Samsung etc).

I view it as akin to taking commodity energy products (which often have good margins to begin with) and leveraging into the chemicals business with extreme margins (everything from Tide to perfume to industrial chemicals).

A few errors in your numbers, it was $6.02 billion, and this was gross revenue not profit - profit was $1.9 billion (still 91% growth in 24 months).

However, Qualcomm is more than ARM chips, so really those numbers are only semi-relevant. If Apple started making their own chips, you wouldn't attribute Apple's financial success to that alone.

Based on the fact that Qualcomm's profit is ~31.7% of it's revenue (in FY12Q4) you could estimate that the profit from chip sales was closer to $1b/quarter (based on annual chip sales revenue of $12.976 billion in 2012) and then the question is how much of this is from ARM sales, which I don't have an answer to.

As to their valuation passing Intel - again, this is based on more than chip sales, and Intel's market share is still almost four times that of Qualcomm currently (though this is likely to keep dropping, for sure).

Personally I'm still far more keen on ARM than the manufacturers. Having factories that create chips from ARM's licenses is very different to turning commodity products into goods like perfume - in the latter it is in part about creativity and marketing (and probably patents, etc. etc.) in the former it is much more about economy of scale, efficiency, etc.

What would it take to beat Qualcomm when it comes to producing ARM chips, and can it be done - get the price lower, and yes it probably could be by someone like Texas Instruments, Samsung, event Intel if they wanted to, potentially AMD (who do want to but I think probably are too small to). How about beating ARM themselves - all of a sudden you're not just trying to out-price the same products, you have to come up with better architecture and get the world to switch over. Whole different ball game.

All that said, Qualcomm are definitely in a great position, and are doing really well. But from a spectator point of view I think ARM are much more exciting, from an investor point of view I think that ARM's long-term future has more potential, and short-term they are paying out dividends per share greater than Qualcomm's total earning per share.

edit: Oh, and remember that even after the decline in profit, Intel's quarterly net profit is still higher than Qualcomm's. For now.

Number sources:

Qualcomm FY12 Q4 http://www.ft.com/cms/s/0/089f7c6e-6b23-11e2-8017-00144feab4...

ARM FY12 Q4 http://online.wsj.com/article/SB1000142405297020474090457719...

2012 chip sales https://en.wikipedia.org/wiki/Worldwide_Top_20_Semiconductor...

No, Qualcomm's profit was $6.1 billion in 2012. With $19 billion in sales. It was $4.26 billion in profit for 2011 with nearly $15 billion in sales.

So the error is on your side.

Their trailing four quarters was closer to the $6.6 billion profit range (note that I did not say in the 4th quarter, I said the trailing four quarters).

http://finance.yahoo.com/q/is?s=QCOM+Income+Statement&an...

Here's Qualcomm's press release on fiscal 2012 confirming my numbers:

http://files.shareholder.com/downloads/QCOM/992946673x618427...

$6.11 billion in net income, with $19.12 billion in sales.

Apologies, I misunderstood you. When you said $6.1billion you didn't specify what period that was for, and due to the proximity to their Q4 revenue ($6.02 billion) I mistakenly jumped in and assumed you were talking about their last quarter and had misread the numbers, when in actual fact you were correct we were just talking about different things. Sorry!

Regardless, whether you look at the year or the quarter, the rest of my points weren't related to my thinking you had made a mistake with your numbers.

Thanks for the clarification!

"An improving economy should help, as well as new products like its Haswell chips, a power-saving processor that supports touch-screen computing on ultrabook computers, which are hybrids of notebooks and tablets."

I was expecting this, let's see how it holds up against ARM.

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