Good day, ladies and gentlemen, and thank you for your patience. You've joined the Intel Corporation conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. Should you require any additional assistance during the call, please press star then 0 on your touch-tone telephone. As a reminder, this conference may be recorded. I would now like to turn the call over to your host, the Director of Corporate Public Relations at Intel, Ms. Laura Anderson. Ma'am, you may begin.
Great. Thank you. Welcome, everyone, to Intel's conference call. By now, you should have received a copy of the press release we issued an hour ago about Intel entering into a strategic agreement with Rockchip. If you've not received the press release, it is currently available on our online newsroom at newsroom.intel.com. I'm joined today by Brian Krzanich, our CEO, and Josh Walden, Intel Vice President and General Manager of the Platform Engineering Group. In a moment, we'll hear brief remarks from Brian, followed by Q&A with both Brian and Josh. With that, let me hand the call over to Brian.
Thanks, Laura. Last week at our annual stockholders meeting, I outlined progress made against our 2013 imperatives and shared what we're focusing on in 2014. As many of you know, we're focusing on five things: continuing our silicon leadership, which is furthering Moore's Law; accelerating growth in the data center; driving leadership in the Internet of Things and wearables; continuing PC innovation; and building on our ultra-mobile momentum. We've been making progress against these most critical strategic objectives, and I'd like to take a few minutes to summarize the progress made in the last year in ultra-mobile. First, we set an aggressive goal of 40 million tablet SoCs in 2014, and we tallied more than 90 design wins on Android and Windows and exceeded our Q1 target by half a million units.
We shipped 5 million units in the first quarter, placing us squarely on track to the goal of 40 million for the year. Second, we've increased our communications capabilities. Our first LTE solution, the 7160, is now available in the Samsung Galaxy Note 3 Neo and the Asus Fonepad 7, in addition to the previously announced Samsung Galaxy Tab 3. Our Cat 6 LTE solution, the 7260, with carrier aggregation, is on track to ship this quarter, and Samsung, Asus, Lenovo, and Dell are all committed to the platform on a combination of phones and tablets, along with module vendors like Huawei and Sierra Wireless. Third, this year we announced multi-year, multi-device agreements with Lenovo, Asus, Dell, and Foxconn to expand the availability of Atom-based smartphones and tablets. Finally, we're developing an integrated system-on-chip product to drive our ultra-mobile innovation more quickly and bring products to market faster.
We demonstrated SoFIA, our first integrated apps processor and communications platform, after adding it to the roadmap late last year. We're on track to ship the 3G solution to OEMs in Q4 2014, with the LTE version following in the first half of 2015. This brings us to why we're having this call today. What's next? Today, we're announcing that Intel has entered a strategic agreement with Rockchip. The agreement focuses on expanding the breadth and accelerating the rate at which we bring Intel architecture and communications-based solutions to market for a range of entry-level Android tablets worldwide. Rockchip is a leading mobile system-on-chip design organization that also has strong relationships with many of the OEMs and ODMs in the China tech ecosystem. There are many emerging OEMs and ODMs in that ecosystem, growing faster than Intel or Rockchip can support alone.
We are excited to work with Rockchip, this strategic agreement is an example of Intel's commitment to take pragmatic and different approaches to grow our presence in a global market more quickly and giving us greater resources to bring broader portfolio of Intel architecture and communications technology solutions for tablets to market at an accelerated pace. As the tablet market continues to grow fast and expand with greater choice of screen size, form factor, and price, the strategic agreement with Rockchip also enables Intel to immediately increase the number of customers we can support with the right products globally. Under the terms of the agreement, the two companies will deliver an Intel-branded mobile SoC platform that will be added to our SoFIA family of integrated mobile SoC platforms.
Under the agreement, Intel will provide the integrated SoFIA solution and work closely with Rockchip's design teams to modify the design to create a quad-core derivative solution. Both companies will sell the Intel-branded product, which is part of Intel's SoFIA family. We expect to have our entire SoFIA family in market before the middle of 2015. Taken together, today's announcement, in conjunction with the other milestones I've mentioned, gives me confidence that the pace inside our company and our progress with mobile customers is accelerating. We've made a lot of changes. We have more work to do, I'm confident that we will continue to transform and realize our vision that if it computes and connects, it does it best with Intel. With that, let me turn the call back to Laura.
Great. Thank you, Brian. We'll now move on to the Q&A session with Brian and Josh. We will be taking questions from both media and investors. As is our normal practice, we would ask each participant to ask one question and just one follow-up if you have one. Operator, would you like to go ahead and introduce our first question, please?
Sure. Once again, ladies and gentlemen, please press star one on your touch-tone telephone to ask a question. To remove yourself from the queue, you can press the pound key. Our first question comes from Vivek Arya of Bank of America. Your line is open.
Thanks for taking my question. Brian, I'm trying to understand the bigger picture here. I'm wondering, are there other ways of going after the same base of customers versus, say, partnering with a player who's conceptually your competitor in a lot of markets?
Sure. There's always multiple ways to go after a market or gain market share. We really felt like the relationship partnering with a company like Rockchip, who is well-established in the China tech ecosystem and has a great design team that's targeted towards that, in conjunction with our great products, so the Atom IP, the comms IP, and the SoFIA architecture, was just a great way to quickly get in there and make additional product and add to our roadmap. Think of this as an addition to our roadmap, not a way to remove or change our roadmap dramatically.
All right. Just as a follow-up, any comments on how the distribution of sales and profits and account management will be done? How do you create the separation between customers and then once a sale is recorded, how are sales and profits going to be shared with Rockchip? Just anything behind the logistics of how you will accomplish this partnership. Thank you.
Sure. I can't go into the profit or exactly what will happen with the sales dollars. What I can tell you is that the part will be branded as an Intel part. It'll have a special designation identifying it as a Rockchip designed part. We will both be selling the part. Rockchip will focus mainly on its customer base in the China tech ecosystem, we will focus on the variety of other customers that we normally focus on.
Thanks.
Thank you. Our next question comes from Don Clark of Wall Street Journal. Your question, please.
Thanks. Brian, does it give you any pause, the recent sort of China-U.S. tensions that have emerged in recent weeks with various investigations and things like that? Could this cause any problems, do you think?
Yeah, good question, Don. We don't believe so. I'm not going to comment on any of those other press discussions that are going on right now, we really look at this as simply a great way to build a partnership with a good company, independent of where it is. The China tech ecosystem, especially for tablets, is growing at a very rapid rate. We looked at this purely from access and speed to those markets.
I understand what IP is on the SoC from Intel, I don't quite understand what Rockchip will add on the SoC.
Yeah. We haven't finished and announced what the final architecture will be, what we're bringing is the Atom core and the comms, you can think that there's a lot of and the SoFIA architecture itself, right? How the SoFIA is laid out and put together. Things like graphics and connectivity and what types of connectivity there are going to be on there, targeting directly for that marketplace. Those are the types of IPs that they will likely bring.
Okay, thank you.
Thank you. Our next question comes from Ian King of Bloomberg News. Your line is open.
Thank you for the opportunity. I wonder if you could tell us whether there is any financial component to this, whether there's any investment, please?
Yeah, there's no investment or financial connection between the two companies with this announcement.
Understood. Thank you.
Thank you. Our next question comes from Craig Ellis of B. Riley. Your line is open.
Thank you for taking the question. Hi, Brian. My first question is on volume shipment. The press release stated that the part will be available in the first half. Would you expect volume shipments in the first half, or is that really something that would be in the second half? If the second half, would it be more the third quarter or the fourth quarter?
We think we can have this starting to be shipped in the first half. As I said, we're announcing this partnership. We're still finishing the definition of the product, and getting the design team starting to work together. We're comfortable with the timing that we can have it in the first half, but we have not defined exactly what the by-quarter ramp will be of the product.
The question there was whether the part would really be available in volume to hit the key Golden Week selling season in China the first week of October.
It will absolutely be available in the first half in volume.
Okay.
What exactly fits in the first half, we're not saying yet. If you want to place as many orders as you want, and starting even in the second half, we will fill those orders.
Super. The second question is, this is an interesting partnership with somebody that is indeed well established in China. There are other application processor vendors that are probably equally well established. Is this going to be an arrangement that we should think is relatively exclusive in that Intel wouldn't do another agreement like this? Are you evaluating other agreements such as this to further broaden your in-country penetration?
There's nothing in this agreement that drives exclusivity. I'm also not going to comment if there's no other discussions going on or announcements at this time.
Good luck with it. Thank you.
Thanks.
Thank you. Our next question comes from Rick Merritt of EE Times. Your question, please.
Thanks for taking my question. Can you give some color on what you see going out to systems level in the entry-level Android tablet market now in China, particularly the sort of system level prices and trends of those and maybe the breakout of Arm versus x86?
I think I've got most of your question, but let me try and answer it. It was a little hard to hear you. What you were asking was, what are the system price point breakouts of the Android tablets in China? If that was the majority of your question, there's a wide range. The fastest-growing segment of tablets in China right now is roughly sub-$150, probably even more so in the sub-$100 region. I look at the sweet point is somewhere in there. The parts that Rockchip and Intel will be targeting with SoFIA are in those price points as well.
Are those predominantly Arm now? Are there any x86 in that space?
Oh, absolutely. Yes. I see your second part of your question. There's absolutely x86 in the market at those price points. You see x86 tablets anywhere from the high 80s, low 90s, I'd say, up as high as you want to go, into the $300, $400, $500 range. We span that entire range with x86. Clearly, at those lower price points now, the majority of those systems are Arm-based.
Just to follow up the other question that you had earlier, is there any thought to working with other SoC designers in similar kind of design partnerships?
Yeah. We don't have any other announcements or partnerships in the works right now.
All right. Thank you.
Thank you. Our next question comes from Kevin Cassidy of Stifel Nicolaus. Your line is open.
This is Dean Grumless calling in for Kevin. Thank you very much for taking my call. I was wondering if you might be able to clarify the process technology that you plan on using for this chip.
Sure. Like the other two SoFIAs we've announced, in this timeframe, it's prior to us moving it internally, so this one will be made at TSMC. What we said is, as we move out of 2015 and into 2016 is when we would be moving it internally.
Okay, as a follow-up, as part of this agreement, would you expect to be leveraging any of Rockchip's manufacturing and test capabilities, or how do you plan on approaching that portion of the task?
We are accountable for the manufacturing and test and basically product distribution, when you think of the supply chain, for this part.
Okay. Thank you very much.
Thank you. Our next question comes from Blayne Curtis of Barclays. Your question, please.
Question. I was wondering if you could, is Rockchip still going to sell their Arm product suite? If you could just talk about how do you recognize the revenue? Is it whether they make the sale or whether you make the sale?
We said earlier we weren't going to talk about how the dollars flow between the two of us. Some of that partly is still being worked out. The other part of your question was I forgot now.
Is Rockchip still going to sell their Arm portfolio?
Yes. You really have to ask them. I would assume so. I'd hope they love this product so much though that they realize this is the one to sell. That's really a decision. There's nothing in this agreement that says they're prohibited or not able to.
Gotcha. I was just, the Q1 wins were on plan to hit that $40 million. I was wondering if you could, just from a very high level, just talk about the impetus to actually do this deal. It seemed like you were getting traction in that region already.
Sure. This is also probably the fastest-growing segment of the tablet market. As we said in the statement, we think there's so much growth there that probably no one company can support it. This is a way to expand our presence and expand our footprint. As we move into next year, we want to continue to grow at a faster than the rate of tablet growth. I think this is critical for us to be able to do that.
Thanks.
Thank you. Our next question comes from Alex Gauna of JMP Securities. Your question, please.
Yes, thank you. Does this agreement lay the foundation for, or is it your hope that this will lead to Rockchip bringing some IP for use on Intel manufacturing at some future date, either through foundry or just collaboration?
I can honestly tell you that there's not a current agreement or plan for anything like that. Again, this is meant to be a partnership to build great products together. I think they bring knowledge of the China tech ecosystem and a customer engagement model that I think we'll learn from over the next few years. I wouldn't put off the table that they couldn't bring IP or other ways or features that we want to get into our silicon. Right now, I think it's more focused on directed products towards that market.
Okay, I understand that this is agreement involves 3G. Why didn't it involve 4G? Can you give us any update on if there was a discussion around 4G and maybe your readiness in that market?
Sure. It has nothing to do with the readiness. If you take a look at the SoFIA products we've already announced, we have a dual-core 3G, which we said would come out in the fourth quarter of this year. We said we had a quad-core LTE product coming out in the first half of next year. This product is really meant to sit in between there as a quad-core 3G, and that's really what's required for that China market right now. As we said, it's really targeted towards a very specific market, that doesn't preclude us in the future from allowing them to use our LTE solutions as well for future products.
Okay.
This is not a comment on the readiness of LTE or anything. It's purely targeting the right product with the right features at the right cost for this market. That's really what's critical in this market. You want to bring the right product. You don't want to bring something that has features that aren't required, that just add cost.
Thank you. Our next question comes from Hans Mosesmann of Raymond James. Your line is open.
Thanks. My questions have been answered.
Great. Operator, we'll take one last question if there is one.
Yes, ma'am. That question comes from Chris Rolland of Susquehanna. Your line is open.
Hey, guys. Thanks for fitting me in there. Some of your competitors in the phone space have had pretty good success with reference designs and sort of a tight design relationship there. Do you see Rockchip providing that component for you guys on the tablet side?
Absolutely. They do that already in that China tech ecosystem and with many of their Chinese partners. Absolutely, that would be something that they will do with this product as well.
Okay, if you were to sort of weigh this sort of relationship here, would you say this is really more of a relationship based on the IP that they bring to the table, or is this really those Chinese relationships that you're valuing?
I would tell you that it's some mixture of those, and probably, if you take a look at it right now, by partnering with them, we're getting a product out that's targeted very specifically for these tablet designs that wouldn't probably otherwise get onto our roadmap in this timeframe. They're absolutely bringing a speed and execution and proliferation for us that would not otherwise get done. Absolutely, though, they also bring these relationships and partnerships that go well beyond what ours are currently. I'd still say it's a mixture of both of those. They're absolutely adding to our roadmap, but they also absolutely have that relationship and that customer base.
Okay, one more, if I could. The manufacturing support, is it pretty much the same as with other partners?
I'm not exactly sure the nature of what do you mean by manufacturing support?
The contra revenue.
All the SoFIA products are designed to not require contra revenue. Part of what we've been articulating as we go through this year is that was targeted at our products that were really more designed for netbooks and laptops that we were bringing down in the tablet space. As we go through this year, as we bring out some of the Bay Trail cost reduction products and others, that contra revenue continues to decrease, and our way out as we enter next year is the SoFIA product line. Like our own internally designed SoFIAs, the 3G and the LTE, we are targeting those to be designed for these price points and not require a contra.
I see.
This is all up to that as well.
I see. Great. Okay. Thank you so much, Brian.
At this time, I'd like to turn the call back over to Laura Anderson for any closing remarks.
I want to thank everyone for joining us today. Operator, please go ahead and wrap up the call.
My pleasure, ma'am. Thank you, ladies and gentlemen. That does conclude today's Intel Corporation conference call. You may disconnect your lines at this time. Have a great day.