July 15 (Bloomberg) -- Intel Corp. doesn’t want to be left behind by the mobile-device revolution. So the world’s largest semiconductor maker is now working to put its server chips into machines that help bring smartphone data closer to users.
The company is currently preparing a trial with Nokia Siemens Networks Oy and South Korea’s SK Telecom Co., where its chips are being deployed in base stations -- wireless network antennas that include computers. The goal is to ease the congestion caused by an explosion in demand for data and services, said Intel Vice President Rose Schooler.
For Intel, the effort is another attempt to offset the impact that mobile devices are having on the personal-computer market that provides the majority of its revenue. Intel’s server chip business grew sales 7.5 percent to $2.59 billion in the first quarter, compared with a 6 percent decline in sales of PC chips to $7.99 billion. The company will report its second-quarter performance July 17.
Putting server chips into base stations “is a multi-hundred-million dollar opportunity for us at a minimum,” said Schooler. Commercial use may begin next year, she said.
Chief Executive Officer Brian Krzanich has said he will accelerate attempts to get Intel’s processors into smartphones, where it has less than 1 percent market share, according to Strategy Analytics. The company has had to settle for a dominant share -- more than 90 percent -- in the smaller market for servers that supply phones and tablets with information from data centers, according to Mercury Research.
Success in this latest effort will hinge on Intel’s ability to convince potential customers such as Nokia Siemens, Ericsson AB, the largest maker of wireless networks, and Huawei Technologies Co. to build new equipment based around its chips.
“They will have to sign on in a big way for this to take off,” said Ken Rehbehn, an analyst at Yankee Group. “To be sure, it’s a goal of major operators, particularly in Asia.”
Intel is testing its chips in smart base stations as the strain on networks is forecast to increase. Globally, mobile data traffic will grow 13 fold from 2012 to 2017, a compound annual growth rate of 66 percent, according to Cisco Systems Inc. By the end of the forecast period, mobile traffic will be five times the volume for the entire Internet in 2005.
Currently, phone networks deploy radio waves to connect phones to base stations, which then use wires to access remote computers where video, Web-search results and Facebook pages are stored. A finite amount of radio spectrum limits how much data can be transmitted at once.
With the newer base stations that Intel is putting its server chips into, data relevant to local users is stored there in an attached computer. The proximity would get the data to a mobile phone more quickly and allow it to be disconnected, freeing up space for the base station to connect other users, said Schooler.
Examples include providing local weather information or video, pictures and information on a nearby tourist attraction. In tests, videos loaded 50 percent faster and Web search times had seconds knocked off them, said Schooler.
“Fundamentally, the biggest issue is that there’s not enough spectrum,” she said. “It’s about how do you add intelligence and bring the cloud out to the user?”
Phone services operators will add computing to their networks if it will increase revenue and localized, targeted advertising will be one of the more lucrative uses, said Joe Hoffman, an analyst at ABI Research.
“It really gets down to advertising,” said Hoffman. “Suddenly you walk into a store and they know you’re there.”
Intel is banking on the rapid growth of small cells, which are scaled down versions of larger base stations that service providers are deploying to improve the capabilities of their networks in areas of high demand such as city centers.
Still, wireless carriers may want to delay including servers in new equipment as it adds cost and increases the complexity of managing networks, said Hoffman. U.S. companies including Verizon Wireless and AT&T Inc. are trying to cap spending because they haven’t yet recouped investments in faster 4G networks, he said.
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