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It's no secret that there are areas of chip giant Intel's (NASDAQ: INTC) execution that are frustrating. The company's continued struggles to transition to next-generation chip manufacturing technologies and the impact that those struggles have had on the company's product competitiveness come to mind first.
On top of that, the company has been late in spotting and capitalizing on hot industry trends, such as mobile computing and artificial intelligence. Nevertheless, under current CEO Brian Krzanich, there have been some things that have gone very right for the company and I think are worth highlighting. Here are three.
Image source: Intel.
The modem success story
Intel failed to capitalize on the market for mobile processors, but, in recent years, it has seen a surge in orders of its stand-alone cellular modems, which has helped deliver a solid amount of incremental revenue and has boosted the profits of its Client Computing Group (CCG). That surge is due almost entirely to Intel's success in getting smartphone giant Apple (NASDAQ: AAPL) to sign on as a customer for Intel's stand-alone modems.
Intel is believed to have had a minority share of Apple's modem orders during the iPhone 7-generation and it also likely has a minority modem share in the current iPhone models. However, according to generally reliable analyst Ming-Chi Kuo with KGI Securities, Apple will be using Intel modems exclusively in the iPhones that are expected to launch this year.
The fact that Intel has been able to continually improve the capabilities of its cellular modems to the point where Apple -- the most important premium smartphone vendor on the planet -- is seemingly willing to trust Intel with the entirety of its cellular modem orders is a huge deal and a big success story for Intel.
Juicing PC profits
Although Intel has been working to diversify its business beyond selling chips for personal computers, the reality is that the company's CCG business unit made up more than half of its revenue in 2017 and the bulk of CCG revenue comes from personal computer processor sales.
Since the personal computer market has been on the decline, Intel decided to focus its investments in CCG to maximize profitability. The company is still investing in trying to build newer, better, and increasingly competitive products for this segment, but is being more careful with its spending here.
Intel's strategy to boost CCG profitability has worked extremely well over the last several years. In 2015, CCG generated $32.2 billion in revenue and $8.17 billion in operating profit. Fast-forwarding two years, CCG generated about $34 billion in 2017 (up about 5.6% in that time) with operating profit coming in at $12.92 billion (up around 58%).