Intel mobile chip contra-revenue strategy coming to an end

Posted on Tuesday, March 03 2015 @ 14:59 CET by Thomas De Maesschalck
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With the launch of Intel's new Atom x3, x5 and x7 chips, Intel Communications and Devices Group Corporate VP and General Manager Aicha Evans suggests the chip giant is winding down its contra-revenue strategy. Intel relied on this tactic to capture marketshare in the tablet market by paying manufacturers to adopt its Bay Trail platform.

Some of the new Atom parts are already competitive enough so contra-revenue tactics won't be neccesary and in the future Intel expects it won't be necessary at all. Earlier this year we wrote on DV Hardware that Intel's mobile chip division ran at an operating loss of $4.21 billion in 2014.
In general, first of all, that was a very calculated move. I think our Chairman—the Chairman of our board—which was a pretty tough moment for us, stood up and said, "Look, this is something we're gonna have to do to get into the market and be relevant in the conversation." So, long term, you should not expect to be seeing that.

Now, nothing happens overnight. You don't lose 100 lbs overnight, right. So, some of the product will still have a little bit of a BOM [bill of materials] offset this year, but in general, we are now starting to be able to be in a position where we don't have to automatically offer contra revenue in order to make up for some of the BOM offset issues we have.

And I think we've been public also at the Investor Day . . . in November, and we set a very public [profits and losses] goal of $800 million of improvement in this space. And that comes from the mix, and that comes from the fact that we don't have to offer contra revenue in the SoFIA line and in some of these different lines, because we're getting more and more efficient in the BOM and the overall platform design and pre-integration.
Source: The Tech Report

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