Heavy Android subsidies, losing iPad business cost Intel a whopping $7 billion

In case you were wondering how those Android devices powered by Intel Atom chips manage to sell at rock-bottom prices, here’s an eye opener. Intel has been paying Android device manufacturers to adopt its Atom (Bay Trail) chips over ARM-based Qualcomm  or NVIDIA chips. As reported by CNET earlier, Intel has been subsidizing its Atom chips to manufacturers of cheap Android tablets, hoping to woo consumers with its brand name. However, things clearly haven’t worked as Intel planned, as buyers continue to opt for Apple iPads which currently dominate the tablet market. According to Apple Insider, Intel started a war with Apple back in 2010 when the chipmaker went on to create Windows-powered Ultrabooks that were heavily inspired by the Macbook. This “backstabbing style of partnership” caused Apple to invest in its custom iOS processors that arguably work better than Intel Atom chips. The same year, Apple moved away from Intel Atom by launching an iPad using its own A4 chip. By 2011, Microsoft also ditched Intel for more efficient ARM chips on Windows RT devices that were to compete with the reigning iPad. In order to catch up, Intel began pushing its hardware on Android devices with an aim to ship 40 million devices by the end of this year. They did this by offering manufacturers fat subsidies for using them on Android tablets such as the Asus Memo Pad 7 and the HP 7. Thanks to the iPad domination and the decline of the overall tablet market, Intel reported mobile chip losses of $3 billion in 2013. Morgan Stanley analyst Joseph Moore has estimated that Intel’s Mobile and Communications Group will lose $4 billion in 2014, which amounts to a total loss of $7 billion. This has left Intel with no choice but to phase out subsidies for cheap Android tablets. Instead, Intel plans to launch new ‘SoFiA’ chips next year, which it won’t sell at subsidised costs. However, this also means that we may find fewer Android tablets running Intel processors at cheap prices.