Intel keeps throwing billions down the drain at tablets, phones

Despite the fact that it recorded net income of $11.7 billion in 2014 on¬†$55.9 billion in revenue, Intel still isn’t reaping financial benefits from the mobile revolution. In fact, just the opposite is happening.

Yes, [company]Intel[/company] met its goal to have its chips in 40 million tablets last year, for example — it actually powered 46 million, according to the company — but it didn’t make any money on them. Purely from a financial perspective, Intel might be better off ignoring tablets and smartphones: The company’s mobile division posted a $4.2 billion operating loss in 2014.

ASUS ZenFone 2 color line up 2

That’s worse than the $3.1 billion operating loss by the same division a year earlier, so all of the mobile device wins are in some respects, big losers.

Here’s a chart showing the quarterly operating losses for Intel’s Mobile and Communications group, which is responsible for “Delivering platforms designed for the tablet and smartphone market segments; and mobile communications components such as baseband processors, radio frequency transceivers, Wi-Fi, Bluetooth*, global navigation satellite systems, and power
management chips.”

[dataset id=”907172″]

Why the big — and getting bigger — losses for the Mobile and Communications group?¬†Several reasons but likely the biggest one is this, which I’ve emphasized, from the company’s 10-Q statement in the third quarter of 2014 (Note: Intel hasn’t filed a 10-Q for the most recent quarter yet):

“This decrease was primarily due to higher cash consideration to our customers associated with integrating our tablet and phone platforms. Additionally, lower MCG phone components unit sales contributed to the decrease. These decreases were partially offset by higher tablet platform unit sales.”

Cash consideration in this case generally means subsidies to device makers to choose Intel chips over the competition, which Intel noted earlier this year. Reports indicate that the subsidies will slow or even cease in 2015, but we’ll see.

It’s great the Intel is getting mobile device wins; it keeps the company in the conversation when discussing tablets and phones. Indeed, Asus launched new Android-powered ZenPhones earlier this month with Intel Atom chips. Several new [company]Microsoft[/company] Windows tablets introduced at the Consumer Electronics Show have Intel inside as expected too.

Very few [company]Google[/company] Android tablets do, however, and of course Apple’s iPad runs on a custom-designed ARM chip. So Intel is still on the outside looking in when it comes to mobile. And it’s getting very costly to keep fighting that battle.