I had a long conversation with someone who posed this question. I know little about WiMAX but I know people who know great deal, people who have put their money where their mouth is. The question I pose isn’t whether WiMAX is going to be successful, but why is Intel (INTC) pouring so much money into making it a reality?
I’m not trying to start a debate about whether WiMAX will succeed. My cycling buddy would define success as 5M WiMAX subscriber adds in a single year (not total). What isn’t clear is how Intel benefits even if the large investment they are sinking into WiMAX pays off.
Intel has a poor history of developing any successful products in the communication space, let alone mixed signal communication. Historically, Broadcom (BRCM) and TI (TXN) (among others) are far more capable. Odds are these vendors would seize the infant technology from the cradle and produce a superior product.
Even if Intel manages to be a leader in WiMAX chipsets, the market opportunity is a pimple when compared to their existing $35BB business of mostly CPU’s and companion chipsets. Even if WiMAX chips generate $1BB, it is still noise. Intel lacks a whole suite of products to wrap around this hard-won hypothetical WiMAX market share to generate additional pull through revenue. They sold their mobile CPU business to Marvell (MRVL). PC CPU’s and chipsets don’t count because they would have won those anyway.
When I asked someone at Intel not involved with WiMAX this question, his response was that Intel sees ultra mobile computing as a key initiative, and WiMAX is the enabler. This makes sense if you ignore the fact existing wireless carriers don’t want WiMAX.
Virtually all carriers are divided between UMTS (HSDPA) and CDMA2000 (EV-DO) as evolutionary 3G technologies. They don’t care about WiMAX because they have a big installed base (2G) they must migrate. There is Clearwire (aborted S-1 excepts here), and Sprint (S ), which has committed to building out a WiMAX infrastructure. There is also Korea, which never met a communication infrastructure it didn’t love (ATM, ISDN, DSL, two flavors of FTTH, 3G – what haven’t those guys deployed?). But the opportunity is dwarfed by the size of the existing mobile voice and data standards.
If Intel was really committed to growing a mobile wireless business they would identify a product that could both fill their fabs AND meet the needs of existing carriers – not build something counter to their desires.
Here are my three possible theories:
I think WiMAX is destined to be what I call a crack filler, an alternative technology that fills in the areas where incumbents are too expensive or not available. WiMAX will be to 3G what Satellite is to Cable – best case.
Either Intel is pouring hundreds of millions of dollars into a foolish endeavor or something is unseen.