Intel's mobile bout is over after spending $10 billion

After years of insignificant adoption among manufacturers and spending in excess of $10 billion over the last three years in an effort to get a foothold in mobile segment, Intel now thinks it wise to give up on this lost battle. The company tacitly confirmed last week that it has axed several chips from its roadmap, including all of the smartphone processors in its current plans.

It is however, difficult to calculate the exact amount of its losses given that the company only reported the mobile business separately for two years before folding it back into another unit. In just that time, the mobile business posted a whopping $7.4 billion in operating losses. Much of that came as Intel agreed to pay device makers that used its chips to account for the fact that choosing Intel added other costs.

“Suffice it to say, they likely lost well over $10 billion betting on mobile chips that never really got them anywhere,” said Jackdaw Research analyst Jan Dawson.

Intel had hoped those companies to form a ready base of customers once it was ready with more competitive and cost-effective chips in a year or two. Without such payments, Intel felt it would have had to wait several more years to regain a position in mobile chips. Intel’s chips, however, ended up being neither timely nor competitive.

Nearly 12,000 jobs would be laid off with those involved in mobile chips among those expected to be hit hard. It has recently started to notify workers but refused to go into details on the parts of the company that will be most impacted.

Intel however, hasn’t abandoned mobile business entirely. The company is still trying to hold ground in the market for modem chips, a secondary but nonetheless important part of phones. Many believe it has even landed some share of the next iPhone, stealing business away from rival Qualcomm. Intel also says it is investing in next-generation 5G technology expecting the shift to a new approach will give it another bite of the mobile apple.

And it’s not a totally unreasonable notion, says tech industry analyst Patrick Moorhead. “Over the past few years, the industry has consolidated and only Qualcomm, Huawei, Samsung and Intel have the resources to make it to a full 5G wireless transition,” Moorhead said.

With the roadmap changes, Intel will still be making chips for tablets, but more the big Windows 2-in-1 tablets designed to compete in the PC market than the low-end Android models. And any ambitions of powering smartphones will have to wait at least for 5G, meaning not until sometime in the next decade.

Dawson believes “this is a sign of more realistic thinking at Intel and putting their investments where they’re more likely to pay off. Their main focus now appears to be on maintaining whatever they can in the legacy PC business and then trying to grow through data centers and Internet of Things applications. Data centers have been really good for them over the last few years, but IoT is still really small.”

Intel hopes that another shot at mobile segment might come with 5G but isn’t going into much detail. It said the move to cancel the current slate of chips will allow it to invest for the (much) longer term.

“We are committed to long-term leadership and improved profitability of our mobile business,” Intel said in a statement.