Even though Intel’s quarterly earnings were a mixed bag, the biggest surprise comes from its research and development investment plans. In 2013, the company plans to invest $13 billion compared to $10.15 billion in 2012 and $8.35 billion in 2011. This money will be used to bridge the mobile gap, as ARM-based manufacturers are current market leaders.
Intel is the leading laptop and desktop computer processor manufacturer. As this particular market is shrinking, the company needs to find new potential markets in order to maintain its earnings and drive growth. Only seven smartphones currently sport an Intel system on a chip.
In 2012, Intel’s revenue was 1.2 percent lower than in 2011 at $53.3 billion. That’s why shares (NASDAQ:INTC) fell 6.31 percent on Friday.
According to Bloomberg, analysts expected around $10 billion of investment for 2013 — $3 billion lower than what the company actually announced. The two key challenges are to reduce costs and keep power consumption very low. As a high-end processor manufacturer, Intel is not used to tackle those design issues.
Yet, Intel has always been a company with very high research and development investments and a talented team. At CES, the company announced that it would release new systems on a chip for smartphones and tablets during the second half of 2013.
Even after releasing those new products, making the shift to mobile systems on a chip won’t happen overnight. It will take time and a lot of partnerships with big smartphone manufacturers. As Samsung and Apple are by far the dominant players, convincing them to switch will be tough. They both currently use ARM -based systems on a chip.
Intel’s future earnings will suffer from looking for a new growth driver. The company predicts that revenue will be up between 0 and 5 percent for 2013. It will be a major year for the company, as succeeding in making a dent in the mobile processor market will define whether or not Intel’s best days are behind it.