Good day, ladies and gentlemen, and thank you for your patience. You 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. 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.
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 and A With both Brian and Josh. So with that, let me hand the call over to Brian.
Thanks, Laura. Last week at our annual stockholders 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 5 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 40,000,000 tablet SoCs in 2014. And we tallied more than 90 design wins on Android and Windows and exceeded our Q1 target by 500,000 units. We shipped 5,000,000 units in the Q1, placing us squarely on track to the goal of 40,000,000 for the year. 2nd, we've increased our communications capabilities. Our first LTE solution, the 7,160 is now available in the Samsung Galaxy Note 3 Neo and the Asus PhonePad 7.
In addition to the previously announced Samsung Galaxy Tab 3, our Cat 6 LTE solution, the 7,260 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. 3rd, this year we announced multi year, multi device agreements Lenovo, ASUS, Dell and Foxconn to expand the availability of atom based smartphones and tablets. And finally, we're developing an integrated system on chip product to drive our ultra mobile innovation more 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 are on track to ship the 3 gs solution to OEMs in Q4, 2014 And with the LTE version following in the first half of twenty fifteen. And 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 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 and this strategic agreement 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 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 2 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 Sofia family.
We expect to have our entire Sofia family in market before the middle of 2015. Taken together, today's announcement in In conjunction with the other milestones I've mentioned, give 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, but 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 and A session with Brian and Josh. We will be taking questions from both media and investors. Operator, would you like to go ahead and introduce our first question, please?
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 is conceptually your competitor in a lot of markets?
Sure. I mean, 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 of The Adam 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. So think of this as an addition to our roadmap, Not a way to remove or change our roadmap dramatically.
Got it. And just as a follow-up, any comments on how the distribution of sales and profits and Account management will be done like how do you create a separation between customers? And then once a sale is 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 will have a special designation identifying it as Rockchip design part. We will both be selling the part.
Rockchip will focus mainly on its customer base in the China Tech ecosystem. And we will focus on the variety of other
Thank you. Our next question comes from Don Clark of Wall Street Journal. Your question please.
Thanks. So 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?
Yes, 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. But 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, It's growing at a very rapid rate.
And we looked at this purely from access and speed to those markets.
If I could follow-up, I understand what IP is on the SoC from Intel, but I don't quite understand what Rockchip will add on the SoC.
Yes. So we haven't finished and announced what the final architecture will be, but what we're bringing is the ADAM core And the comms, but you can think that there's a lot of and the Sofia architecture itself, right? How the Sofia is laid out and put together. But things like graphics and connectivity and whether 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?
Yes. 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 shipments. The press release stated that the part will be available in the first half, but would you expect volume shipments in the first half? Or is that really something that would be in the second half.
And if the second half, would it be more the Q3 or the Q4?
We think we can have this starting to be shipped in the first half. We have not gotten as I said, we are 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 But we have not defined exactly what the bicorder ramp will be of the product.
Okay. The question there was whether the part would really be Available in volume to hit the key Golden Week selling season in China the 1st week of October.
So it will Absolutely be available in the first half in volume. What exactly in the first half, we're not saying yet, but If you want to place as many orders as you want and starting in this even in the second half, we will fill those orders.
Super. And then the second question is, this is an interesting partnership with somebody that is indeed well established in China, But there are other application processor vendors that are probably equally well established. Is this going to be an arrangement that we should think It's relatively exclusive in that Intel wouldn't do another agreement like this or are you evaluating other agreements such as this to further broaden your in country penetration?
There's nothing in this group agreement that drives exclusivity, but I'm also not going to comment if we're there's no other discussion Going on or announcements at this time.
Good luck with it. Thank you. Thanks.
Thank you. Our next question comes from Rick Merritt of Electronic Engineering. Your question please.
Thanks for taking my question. Can you give some color on But 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 questions, but let me see if let me try and answer it. It was a little hard to hear you. But what you were asking was, what are the system price point breakouts of the Android tablets in China? There's a 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.
So I look at kind of the sweet point is somewhere in there. And the parts that Rockchip and Intel will be targeting with Sofia are in those price points as well.
And are those predominantly ARM now? Are there any X86 in that space?
Absolutely, yes. There are I see the 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 $300,000 $400,000 $500 range. So we span that entire range with X86.
Clearly, at those lower price points now, the majority of those systems are ARM based.
And just to follow-up the other Question that you had earlier, is there any thought to working with other SoC designers and similar kind of design partnerships?
Yes, we don't have any other announcements or partnerships in the works right now.
Hi. Thank you.
Thank you. Our next question comes from Kevin Cassidy of Stifel Nicolaus. Your line is open.
This is Dean Brumlos calling in for Kevin. Thank you very much for taking my call. I 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 2 Sofia's 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 As we move out of 2015 and into 2016 is when we would be moving it internally.
And 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?
So 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? And 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?
So we said earlier, we weren't going to talk about how the dollars flow between the Some of that partly is still being worked out. The other part of your question was
Is Rockchip still going to sell their ARM portfolio?
Yes. You You really have to ask them, I would assume so. I hope they love this product so much though that they realize this is the one to No, but that's really a decision. There's nothing in this agreement that says they're prohibited or not.
Got you. And then I was
just The Q1 wins were on plan to hit that $40,000,000 I was wondering if you just from a very high level just talk about To actually do this deal, it seemed like you were getting traction in that region already.
Sure. I mean, but this is Also probably the fastest growing segment of the tablet market. And as we said in the statement, we think there's so much growth there that Probably no one company can support it. So this is a way to expand our presence and expand our footprint. And as we move into Next year, right, we want to continue to grow it faster than the rate of tablet growth.
So I think
Thanks.
Thank you. Our next question comes from Alex Gona 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 customer engagement model That I think we'll learn from over the next few years. And so I wouldn't put off the table that they couldn't bring or other ways or features that we want to get into our silicon. But right now, I think it's more focused on Directed products towards that market.
Okay. And I understand that this is agreement that involves 3 gs. Why didn't it involve 4 gs? Can you give us any update on if there was a discussion around 4 gs 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, so we have a dual core 3 gs, which we said would come out in the 4th Quarter of this year. And then we said we had quad core LTE product coming out in the first half of next year. And so this product is really meant to sit in between there as a quad core 3 gs.
And that's really what's required for that China market right now. So as we said, it's really targeted towards a very specific market, but that doesn't preclude us in the future Allowing them to use our LTE solutions as well for future products. So this
is not a measure, this is not a comment on
the readiness of LTE You already think it's purely targeting the right product with the right features at the right cost for this market. And 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 Moorsman of Raymond James. Your line is open.
Great. Operator, we'll take one last question, if there is one.
Yes, ma'am. That question comes from Chris Rolland of FBR. Your line is open.
Hey guys, thanks for fitting me in there. So some of your competitors in the phone space have had pretty good success with reference design and sort of a tight design relationship there. So 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. And so absolutely that would be something that they will do with this product as well.
Okay. So if you were to sort of weigh this sort of a 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, there 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. So they are absolutely bringing a speed and execution and proliferation for us that would not otherwise get done. Then absolutely though, they also bring these relationships and partnerships That go well beyond what ours are currently. So 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.
And one more if I 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?
But all the Sofia products Our designs do not require cultural revenue. So 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're bringing down in the tablet space. And as we go through this year, as we bring out some of the Baytrail 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. And so like our own internally designed, Sofia's, the 3 gs and the LTE, we are targeting those To be designed for these price points and not require contract. And this is all into that as well.
I see. Great. Okay. Thank you so much, Brian.
And 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.