It is probably still not that big, however. During a previous conversation with Light Reading, Rivera said the networking group generated about $1 billion in 2015 -- just 1.8% of Intel's overall sales that year. But the data center group in which Rivera is also involved has become vital to its interests, and a high flyer in the overall business. Last year, sales at this division were up nearly 8%, to $17.2 billion, accounting for about 29% of the total, and Intel bosses reckon opportunities outside the enterprise sector will fuel growth in future. (See A Few Minutes With Intel's Sandra Rivera.)
"Enterprise is now less than 50% of our total make-up for the data center group, and the cloud is growing great and that will continue, but… the majority of the rest of the growth for the rest of this decade in the data center alone [will come from] networking and storage, where we have very low market share today," said Brian Krzanich, Intel's CEO, during a recent earnings call (see this Seeking Alpha web page for a full transcript). "We're bringing things like SDN and NFV to those and so that's a growing and expanding TAM [total addressable market] as those markets move to Intel architecture."
Could ARM Ltd. threaten Intel's data center business in the same way Intel tried to upset ARM in mobile? Last year, French telco Orange (NYSE: FTE) flagged "white box" experiments in which it replaced x86 chips, based on Intel architecture, with ARM-based smartphone processors. Even more significantly, cloud-computing giant Microsoft Corp. (Nasdaq: MSFT) last month announced plans to use processors from ARM licensee Qualcomm Inc. (Nasdaq: QCOM) in its servers. The move augurs badly for Intel. (See Orange Plots Mass Network-as-a-Service Rollout and Microsoft, Qualcomm Bring ARM to Azure.)
Even so, loosening the semiconductor giant's tight grip on the data center market will clearly not be easy. The bigger challenge to Intel will come in the modem space. Qualcomm unveiled X50, its first 5G modem, back in October. This week it drew attention to its rivalry with Intel during a legal spat with Apple Inc. (Nasdaq: AAPL), claiming the iPhone maker tried to hide the fact that Qualcomm technology "outperformed" Intel's in iPhone 7 devices. (See Oh Snap! Qualcomm Unveils X50, Its First 5G Modem and Qualcomm Blasts Apple for Disrupting Deals in Legal Dispute.)
Perhaps the biggest risk, however, is simply that 5G does not arrive as speedily as Intel would like, or in the shape it desires. Rivera concedes that it will be "challenging" for operators to build a 5G business case based on revenue growth, which has eluded the industry for years. Yet one based around cost savings and efficiency may be a much harder sell to investors. Deutsche Telekom and Orange have both expressed concern about the cost of building a 5G network. Shifting IT resources to the network edge could leave operators with an eye-watering bill. And to provide the fastest speeds, telcos may need to use very high frequency bands, necessitating the costly installation of more network equipment. (See DT CTO: Costs Must Fall or 5G 'Won't Work' and The Growing Pains of 5G.)
Much of the underlying network transformation is already happening, though, as operators lay the foundations for a 5G future. "These industry shifts take anywhere from five to ten years but we are not on day one," says Rivera. US telco giant AT&T Inc. (NYSE: T), she notes, has already virtualized about a third of its network and is working toward a goal of 75% by 2020, when 5G should have landed. And Intel's network business witnessed "strong growth" last year, according to Krzanich, as telcos made investments "in anticipation of 5G." If Intel can continue selling its vision to operators and partners, this mobile story could have a much happier ending than the last.
— Iain Morris, , News Editor, Light Reading