The writing is on the wall and Intel has seen it. The chip maker reported a considerable decline in revenue from their PC and chip architecture groups in 2012. As part of their end-of-year roundup, they also forecast that 2013 revenue will only increase between 0 and 5 percent.
All this dour news is in large part due to the shrinking PC and laptop markets. Consumers are flocking to smartphones and tablets and these are devices where Intel has very little presence. The obvious course, and the one suggested both by recent executive soundbites and Intel’s own CES booth, is to pursue developing an ARM architecture competitor that would give the tech giant a viable competitor in the mobile market. While mobile-ready chips are indeed needed for the company to compete, doing this alone will only prove to be a short-term solution at best.
Intel cannot reverse the consumer trend of declining PC sales by creating a better processor. Nor can they expect to achieve anything more than parity by competing in the mobile market. There are no breakthroughs to be had anymore in either sector, just incremental improvements.
To get real gains, Intel needs to get ahead of the market. By following what we call the Demand Horizon – posts coming soon – Intel will see a return to preeminence. Getting ahead of the curve by inventing new technologies instead of merely competing in well-known and understood markets is the key to disruptive and accelerated growth.
I suspect this is what Intel is doing. By doubling down on their R&D budget ($13B in 2013, up from $10B in 2012 and $8B in 2011), Intel is going for the home run. The ARM competitor and mobile markets are short-term plays, required for such a public company. However, there is no doubt that some portion of that $13B research budget is going towards revolutionary technologies. Whether these ever see the light of day is up to the engineers and managers, but Intel’s future as a market leader rests on something new and disruptive. You cannot hope to lead by chasing declining markets or entering well-established ones. To capture a market you generally have to invent it, and $13B will go a long way towards that.