Intel Resorts to Partnerships, Acquisitions to Boost IoT Business

Intel Has Too Many Positives to Miss Earnings, Investors Hope PART 9 OF 13

By Paige Tanner  | Oct 11, 2016 4:51 pm EDT

Intel’s Internet of Things Group

In the previous part of this series, we saw that Intel (INTC) expects cloud buying patterns to pick up and boost its data center revenue in fiscal 3Q16. We also saw that the company is aggressively buying startups to tap deep learning opportunities in the data center space.

Another lucrative market that the company is eyeing is the Internet of Things (or IoT), as it aims to tap the 5G (fifth-generation) revolution and move to the center of the connected world. Until now, IoT has commanded only 5% of the company’s revenue and has been growing at a slow pace.

As seen in the above graph, the Internet of Things Group’s (or IoTG) revenue growth has been volatile over the past few quarters. The IoTG saw 6% YoY (year-over-year) growth in fiscal 4Q15, followed by 12% growth in fiscal 1Q16. IoTG’s growth dropped to 2% in fiscal 2Q16.

This movement occurred because the IoT market’s growth is constrained by a lack of standardization. The 5G revolution and the advent of autonomous cars are expected to boost IoT growth.

Intel looks to tap the 5G world

The president of Intel’s Client and IoT Businesses and Systems Architecture Group, Murthy Renduchintala, stated during the Citi Conference that the company is positioning itself as a complete solutions provider of the future 5G world. With its broad product portfolio, Intel provides an interconnected strategy that links IoT devices and PCs to the network and data center spaces.

Intel is transforming its client portfolio from PCs and smartphones to connected cars, homes, factories, cities, robots, and drones.

Intel’s strategy to grow in the IoT space

Intel (INTC) partnered with Mobileye (MBLY) and Germany’s BMW to develop self-driving cars. Intel acquired startup Movidius to access its visual processors used in drones, virtual reality devices, and autonomous machines.

ARM Holdings (ARMH) is well-positioned to grow in the IoT space. Intel has partnered with ARM to manufacture its chips in its fabrication facilities. This would give Intel the technology and capability to manufacture chips for IoT devices.

There is a possibility that Intel could use ARM chips in some of its products. This would not be the first time Intel would use ARM chips. The company has previously used ARM chips inside its mobile processors and networking equipment, but the chips were sold to Marvell Technology (MRVL) in 2006. Intel also used ARM’s Mali graphics in its x86 Atom X3 chips designed for IoT devices.

Next, we’ll look at Intel’s memory business.