'Wintel-ization' of auto market on horizon?
PARIS -- Intel’s Mobileye acquisition Monday has stirred mixed emotions and contrasting reviews among those who cover the industry. Excitement, puzzlement, surprise, fear, confidence and some disappointment.
One of the most scathing comments came from Semiconductor Advisors LLC, financial and strategic advisory services:
Even though Intel tried to suggest a strong link to Intel's data center business we find little to no synergy as there is no direct uplift of the data center business.
This suggests that Intel is taking a leap of faith to go very far outside its core business franchise. This can also be viewed as an admission that the core Semi business is not likely getting significantly better any time soon and that the company needs something new to jumpstart growth.
Intel CEO Brian Krzanich
Clearly, those at Semiconductor Advisors aren’t buying Intel CEO Brian Krzanich’s argument. Krzanich reportedly told shareholders at last month’s investor day that the “traditional market view” of Intel as a Silicon Valley giant making chips for PCs and servers is “wrong.” Intel today, he said, sees itself as “a data company.”
There are, of course, numerous tech analysts applauding Intel’s acquisition of Mobileye. While acknowledging that autonomous vehicles are still in their infancy, this school of observers believes this was the right decision at the right time.
Most seasoned electronics industry veterans remember how badly Intel missed the smartphone market. Intel didn’t listen to customer demand and believed they could forcefeed the x86 architecture onto a market already dominated by ARM.
The Mobileye buy, however, is different. Some die-hard Intel skeptics appear to be even optimistic, inferring that Intel might have learned its lesson as it prepares its plunge into the automotive market.
Richard Windsor, analyst at Edison Investment Research, shared his view in his research note: "Missing the boat in mobile has damaged Intel’s reputation…The acquisition of Mobileye by Intel highlights both Intel’s determination not to miss the next big trend as well as the concentration of Google’s competitors around HERE."
He further noted, "In addition, other ecosystems such as Tencent, Baidu, Facebook and Amazon are also working with HERE for their location data, all of which will benefit Intel as it tries to break the mold that the market has set for it."
Windsor said that Mobileye represents the second largest acquisition in Intel’s history. "It underlines the need for semiconductor companies to move into markets beyond consumer electronics and PCs. This is why Qualcomm is buying NXP and why Samsung is buying Harmon."
Technology/industry analysts who cover the automotive market see the Mobileye acquisition as Intel’s getting “a seat at the table,” as Phil Magney, founder and principal advisor of technology advisory Vision Systems Intelligence, said. Further, the deal will allow Intel “to be a one-stop-shop offering hardware and software solutions for infotainment and automated driving applications,” according to IHS Markit.
The key to understanding Intel’s move is to know how powerful Mobileye has gotten over the last several years in the ADAS market.
Next page: Fear and loathing for Wintel-like duoploy
Mobileye, “the leader for front-view camera processors with around 80 percent market share,” as noted by IHS Markit analysts, can literally open the door for Intel to any car OEM and most tier ones in the world. This will eventually enable Intel to “solidify its position in the autonomous driving supply chain,” according to IHS Markit.
This is a play similar to that of Qualcomm – why it needed to buy NXP. It’s all about gaining access to a promising, electronics-intensive “future” autonomous vehicle market dominated by traditionally closed automakers and tier ones.
IHS Markit analysts concluded: "For autonomous car architectures, Intel now has control over key automated driving building blocks including object recognition, sensor fusion, path planning, localization (Mobileye’s Road Experience Management) and last but not least – connectivity and telematics."
Further, the market research firm reiterated: "The advanced machine vision algorithms implemented by Mobileye ensured the growth in average selling price (ASP) and high margin of EyeQ processor family ever since its inception."
This sounds all good and rational for Intel and Mobileye. But there is a rub. Intel and Mobileye are both known to have a commanding share in respective market segments (Intel with PCs, Mobileye with automotive vision).
Fear and loathing for Wintel-like duoploy
While Intel and Mobileye are both admired, they both often induce fear and loathing in casual conversation among their competitors. “Intel-killer” or “Mobileye-killer” is a phrase rivals like to use when explaining how good their own products are compared to the market leader.
The picture of two dominant players in the electronics industry joining hands (even though they are not in the same market at the same time) is evocative of the Wintel model in the PC era.
Philippe Lambinet, CEO at Cogito Instruments and a former senior executive at STMicroelectronics, was the first to point out to us the potential of Intel pursuing a “Wintel-like duopoly” in the automotive market via Mobileye, just as the processor giant did with Microsoft in the PC industry.
After the Intel-Mobileye announcement, Lambinet asked us again: “Will automotive customers get scared and fear a ‘Wintel-izazion’ of their industry? In the PC industry, Wintel captured almost all the value. Is there such a risk with automotive?”
We don’t know the answer yet. But one thing we should all fear is a lack of competition that might be led by Intel’s becoming a “one-stop shop” for autonomous driving technology. One of the unintended consequence of the merger of two dominant players is the risk of “getting rid of potential competitors,” Luca De Ambroggi, principal analyst, Automotive Electronics at IHS Markit, told us.
Never return to prior growth
But analysts at Semiconductor Advisors shared even darker thoughts on the semiconductor industry as a whole:
Given that Intel continues to reduce its focus on the Semi side with its talk about non-semi coupled with investments outside of Semi we think this is a confirmation of the view that the Semi business will never return to prior growth or profitability. Intel has lowered capex spend levels, slowed technology transitions, reduced staff — all moves that squeeze more profitability out of a slowing business.
Now, what are we going to do about that?
— Junko Yoshida, Chief International Correspondent, EE Times