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4 August 2017

Intel’s IoT scatter gun hits its mark, with admittedly broad definition

By Jack Vernon

Last week Riot reported that Intel had killed off its attempts in the IoT silicon maker market. This week, Intel revealed its second quarter earnings, with robust growth coming from its IoT segment. Continued interest in its industrial, video and automotive segments supported 26% year on year growth to $720m in revenue for the IoT division – in comparison to just 2% growth in the same quarter last year. The earnings statement seems testament to Intel’s scatter gun approach in IoT.

Intel has been under pressure to diversify, as most of its revenue still comes from the PC market, the general trend of which has been in decline – where IDC reported that, for the first time in 5 years, the PC market grew 0.7% in Q1 of 2017. Intel made a point of highlighting to investors in its earning presentation that its non-PC focused business in which is included its data center, memory, and IoT operations, now accounted for over 40% of its revenue– hoping to demonstrate the company is transitioning into a new phase in which revenues will be driven by these growth areas.

The news comes in contrast to the same quarter in 2016, when Intel’s PC business shrank by 3% year on year and its IoT business only grew by 2% – causing some to question the company’s strategy in IoT. Since then, Intel has gone through restructuring that halved its net income for the same quarter and cut 12,000 jobs – a move that now looks like it might pay off.

However, there have been well-documented casualties to get to this point. Intel has pursued a strategy of dipping its finger in as many IoT-related pies as it can tolerate – an approach similar to that deployed in the venture capital community, where a fund might invest in 10 start-ups in the hope that just one takes off.

This approach is expensive, but Intel has continued to produce around 20% net income on in its revenues, giving it deep pockets for such investments. The strategy in IoT has ensured Intel had at least tried its hand at most IoT trends, but has also meant a number of misfires and false starts where Intel has lost patience with a project or product line.

A case in point was the aforementioned IoT maker market, when Intel announced it would kill off its Arduino and Curie module product lines – following the previous month where Intel canned its Edison, Galileo and Joule maker boards and development platforms. Intel is reportedly going through yet another round of internal reorganization, and as these products fell under Intel’s New Technology Group, rather than its IoT Group (IoTG), the fate of the New Technology Group looks uncertain.

Intel faced Raspberry Pi in the maker market, but didn’t appear to be making any headway against its rival in terms of market share. Intel didn’t seem prepared to make its silicon open source, a factor that always put the company’s products at a disadvantage in the maker market.

Raspberry Pi’s success amongst the maker community is due to a combination of backwards compatibility, an open source platform and an active community to promote the ecosystem. This combination of factors has given customers confidence to invest their efforts developing their ideas and prototyping using the Raspberry Pi board – knowing that they have a large ecosystem to draw parts and experience from, with backwards compatibility.

Intel also recently axed its wearable division, having previously acquired wearables company Basis back in 2014. Intel had touted the wearables market as a key area in which it could expand its business. However, Intel recalled all of the Basis Peak watches in 2015, after some customers complained about the wearables overheating and causing blisters. Intel then stopped supporting the watch, forever characterizing the purchase of the wearable maker as a misguided decision – far from an x86 showcase.

Given that Intel has been killing off several parts of what might be considered its IoT silicon business, it’s not obvious where the growth in its IoT business is actually coming from. Intel’s definition of ‘IoT’ is quite broad – covering its automotive, video and industrial wings.

In the video segment, Intel has been notching up early wins recently with its machine-vision Movidius processor. Intel paid an undisclosed fee for Movidius in 2016 and has since been supporting the development of its low-power vision processor. The product is already being integrated in the drone market with DJI, but it is also targeting small devices such as phones, VR headsets and cameras – any IoT application that needs eyes for the physical world.

Much of Intel’s IoT business revenue looks to be coming from the industrial sector, in which Intel builds custom solutions to monitor the data emanating from automated industrial processes. The IoT industrial solutions business is advertised on Intel’s website as using a complete range of the company’s processors, from the Quark, Atom, Intel Core and Xeon, as the solutions would likely involve analyzing data across the entirety of a company’s production line.

In terms of its automotive business, Intel had been building in-vehicle-infotainment (IVI) systems for automakers – but the platform looked to be declining in popularity as more automaker move over to BlackBerry’s QNX, Android Auto, Apple Car Play, and AGL.

Intel also had been working on more machine vision technology for the automotive sector, but then decided to acquire machine-vision specialist Mobileye for a reported $15.3bn. Intel decided to include the revenue generated by Mobileye for the quarter under IoT in its revenue figures, even though it is yet to complete the acquisition – which has helped boost the figures.

Mobileye is currently the number-one supplier of chips and software that power video-based image recognition in cars – a huge market for growth, and one where Intel has paid a huge premium to entre relatively securely. The IP portfolio could bring in patent license fees from autonomous driving for decades to come.