March 29, 2014
Game is all set to change in battle for our hearts and mindsPosted in International Economy · 9 comments ·
WHEN every fashionable tech start-up company is being bought by competitors or is raising billions on the stock market or from private investors, it is clear we are in the era of marketing, hype and opportunism, fuelled by lots of people having lots of money to throw around. Silicon Valley is full of hype and hot air these days.
But there is one exception to this trend. That exception is Intel, which is still a company with more substance than style. This may be about to change.
The computer chip maker has just revealed it has spent $5bn (€3.63bn) over the past three years upgrading its Leixlip plant in Co Kildare, in a move that will underpin the jobs of the 4,500 employees into the medium term.
There’s lots of talk about how this means Ireland is a great place to invest, but what the investment actually reflects is the next phase in the battle for the hearts and minds of us, the consumer.
This is a battle Intel intends to fight and win.
In Leixlip, the investment has seen a number of the plant’s silicon wafer fabrication plants (Fab) refurbished, creating 5,000 temporary construction jobs at the site. The size of the investment comes as a surprise because the company said in January 2011 that it was planning to invest $500m (€363m) in recommissioning Fab 14, which was shut down in 2009.
However, the notoriously publicity-shy company did not disclose this further investment until yesterday.
But people who watch the company are hoping to see it diversify into tablet and smartphone processors. Up to now the fortunes of the company have been closely tied to the PC market. PC sales made up 62pc of the company’s sales last year.
Intel’s PC division experienced sales declines in 2012 and 2013 and this is expected to continue in 2014.
Intel’s PC sales began to decline as people began to spend their technology money on tablets instead of PCs.
But tablets are limited. They are great for surfing the web, reading books or playing games. But real stuff, like spreadsheets, word processing and accounting software, still has to be done on a PC.
This is where Intel has recently introduced a game changer for PCs and this is behind the move in Leixlip.
It has invented a new processor, powerful enough to run a real PC with very low Thermal Design Power, meaning it can run on batteries for hours without the need for a cooling fan.
In other words, Intel has crammed a full-blown, fully functioning, real PC into a tablet.
Last October, several manufacturers quietly began selling this new technology in what is known as a ‘Detachable 2 in 1′ – meaning, the (optional) keyboard can be separated from the tablet.
They’re also two in one, meaning they’re a tablet, but also a real PC with a processor powerful enough to do everything a real PC can do. The demilitarised zone between tablet and PC has been breached, successfully, by Intel.
There are several manufacturers of these Detachable 2 in 1s. They’re powered by Intel’s fourth-generation Core i3, i5 and i7 family of processors. These are real PCs, capable of doing anything a real PC can do, in a tablet form.
Today, only a minority of PC buyers are replacing their old PC with these new Detachable 2 in 1s. We’re still buying laptops or the traditional contraption under the desk with a dusty mess of wires and cables behind it which we all fall over. If Intel can get people to buy its new PC/tablet product, it will be a huge opportunity.
Intel enjoys monopoly status when it comes to real PC processing power in a tablet form.
The company has always had faster, newer PC processors for sale at premium prices. The latest, greatest, fastest processor has always appealed to hardcore video gamers and computer geeks. But never before has Intel had this kind of competitive advantage. Not only are these processors faster, but for the first time, they can be carried around in your pocket.
So we may be seeing a renaissance in Intel. If this is the case, it will be good news for Leixlip and its Irish workers.
Now the company, which has always prided itself on technology and processing, has to become a retailer, a marketer and a persuader. Apple did it. But it’s not easy and Intel has to get inside the head of the consumer.
Having the best technology isn’t always a guarantor of commercial success, but it’s a good start.
David McWilliams writes daily on international economics and finance at www.globalmacro360.com