Intel's Cell-Phone Investment Yet To Pay DividendsIntel's Cell-Phone Investment Yet To Pay Dividends

With an investment in the billions of dollars, Intel's now six-year-old initiative to establish itself as a major provider of processors for the cellular phone market remains an unfilled promise, although the company insists its prospects are improving.

At the Intel Developer Forum on Wednesday, Sean Maloney, executive VP and general manager of its Mobility Group, said that unit sales of the company's XScale processor into cell phones has grown sequentially in the past eight quarters, but he declined to provide any cumulative totals.

Intel will likely discuss specifics of its cell-phone chip shipments later this year, Maloney said, adding that there's been significant momentum established in the past year.

Intel CEO Craig Barrett, during his keynote opening the forum on Tuesday, acknowledged that the cell phone initiative has been a disappointment to date. But Maloney stressed the company remains committed. "You can never get paralyzed by fear of failure," Maloney said. "You have to continue to move forward."

Intel's batting average in the cell phone market today "is somewhere around .000," says Will Strauss, an analyst with Forward Concepts. But the company remains attracted by the sheer volume potential, he says. Around 700 million cell phones shipped in 2004, and the market is expected to grow to one billion by 2009.

"It takes a lot of silicon to supply that size of a market," Strauss says. "Intel is very proud of its manufacturing prowess, and they believe they should get a nice piece of that pie."

Intel has been battling market leader Texas Instruments since 1999 to gain leverage in the cell-phone processor market, but has had only limited success. Strauss estimates Intel has invested between $4 billion and $5 billion in developing the cell-phone market, including multiple large acquisitions.

"Some of that dates back to the dot-com days when everyone was playing with Monopoly money, but so far they don't have much to show for their investment," Strauss says.

Intel has long been the leading supplier of flash memory to the cell-phone market, and during his keynote, Maloney showed 25 different smart-phone platforms using XScale that he said are new to the market from such companies as LG Electronics, Motorola, and Samsung.

Intel is positioned with a range of processor offerings spanning the entry-level handset to high-end smart phones, Maloney said. The company can leverage technologies from its laptop computer market to help its future position, he said. "We're just getting to the intersection of the laptop and the cell-phone markets."