Intel is stepping outside of its traditional internal processor market and into the consumer devices market with the announcement of a range of hand held devices, but this change in course could pose some difficult challenges.
A slowing PC market has made Intel's late arriving P4 chip difficult to drive. Additionally, the Internet's growth is delivering more applications to servers, instead of the traditional desktop. Intel is well placed to benefit from the ASP growth, but the American giant will need to plug the gap left by the PCs decline. The company has always had processors as its core business and benefited from a strong global brand name. Moving into the consumer electronics market will be a test as to whether a brand name can be carried into a new marketplace, as one analyst from Metagroup said, -The big expense is not actually building the product - of course Intel can make a digital music player. It is creating the distribution channel," Peter Burris group analyst said.
The first product to hit the market will be a MP3 player, which is being unveiled at the Consumer Electronics Show (CES) in Las Vegas this week. Other products to follow include the ChatPad, an instant messaging and e-mail device and the WebTablet, a wireless device for surfing the Web. The latter two are charged with accelerating the handheld PC peripheral market and will be going head-to-head with some major players, many of who install Intel's Pentium chip in their other products. Industry observers will no doubt enjoy watching the relationships of these partners and rivals.
The Intel brand as a PC processor is in little doubt, but some analysts seriously doubt that the same image can be transferred to the consumer hand held device market, -Consumers don't care whose chips are in these devices. They want devices that work together so they can download their music from the Web and import it into their player without problems," Burris said.
In the PC market Intel relies on good brand recognition to overcome a higher price, but the consumer gadget market is not so sensible. But if it does succeed it could create demand for its other technologies such as digital signal processing (DSP), flash memory and other microprocessors that are used in these types of device. -They want a brand name they recognise, trust and associate with this market," Burris said.
