Supply chain
Digitimes Research: White-box tablet players turn to Windows 2-in-1s using Intel Bay Trail in 2Q15
Jim Hsiao, DIGITIMES Research, Taipei

Shipments for white-box tablets using Intel solutions enjoyed significant growth on quarter in the fourth quarter of 2014 and are expected to see flat performance or drop slightly in the first quarter of 2015 despite the quarter being the traditional slow season. Compared to shipments for MediaTek, Rockchip and Allwinners, which are all seeing dramatic declines from a quarter ago, Intel's application processor (AP) shipments are performing rather well.

Digitimes Research believes Intel stands a chance of becoming the largest AP supplier of the white-box tablet industry in the first half of 2015; however, the momentum will not be contributed by its newly released SoFIA or Core M processors, but instead by its Bay Trail-T CR processors.

Intel's strong rise in the white-box tablet market in the first half is down to three major factors. The first is Microsoft's participation in tablet subsidization. In addition to giving free Windows licensing to devices sized below 9-inch, Microsoft has also been providing subsidies to white-box players for their non-recurring engineering (NRE) and marketing expenses on their Windows-based tablets since the fourth quarter of 2014.

White-box players are able to receive US$3-4 in subsidies from Microsoft and Intel each.

The second is Intel's adjustment of its subsidy policies. To achieve its tablet AP shipment goal for 2014, in December 2014, the CPU giant changed its policies from giving subsidies after vendors shipped their products to directly offering discounted prices for its Bay Trail-T CR processors at US$4, which attracted vendors to place large volumes of orders in the fourth quarter to prepare for their shipments in the first and second quarters of 2015.

The last is the fact that white-box vendors are also looking to diversify their tablet products. In the fourth quarter of 2014, inexpensive Windows tablets were the focus of white-box vendors but it changed to dual-operating system (OS) tablets in the first quarter of 2015. For the second quarter of 2015, white-box vendors are planning to promote inexpensive 2-in-1 products.

As for Intel's AP solutions, Digitimes Research believes that the SoFIA and Core M series processors - which have generated much discussion - will not be the growth driver of its AP shipments. The growth driver will be the Bay Trail-T CR series APs released more than a year ago.

With demand for low-end/entry-level tablets with phone function from several key emerging markets in the first quarter weaker than expected, plus the fact that Spreadtrum, MediaTek and Qualcomm have been offloading their 3G smartphone AP inventories into the tablet market, demand for Intel's SoFIA 3G and 3G-R APs, which have weak supply chain support and slow development process, is being seriously impacted.

According to Digitimes Research's findings from China's upstream supply chain, Intel's SoFIA 3G solution has been available since early first quarter, but has not seen any major adoption by white-box vendors. The SoFIA 3G-R has recently entered pilot production, but the solution is expected to encounter fierce competition from products such as MediaTek's eight-core MT6592 processor, which has already seen pricing drop below US$10.

White-box vendors are mostly interested in the SoFIA 4G solution since competition in the 4G market is milder. Intel's 4G technology and solutions are not lagging competitors' as seriously as its 3G ones have been. And among SoFIA solutions, Microsoft is planning to focus mainly on providing its support on the SoFIA 4G for its Windows.

Since the SoFIA 4G solution does not yet have a firm release schedule, some white-box players believe that the sample may not be distributed for development until the fourth quarter and if such a schedule turns out to be true, it would be better for them to turn back to ARM solutions.

As for Intel's Core M processors, related end products' high prices are the main obstacle stopping them from becoming a popular choice among white-box players.

White-box players are able to develop quality Intel Core M-based Windows 2-in-1s with prices US$100 less than those of first-tier brand vendors' devices, but their prices are still above US$400 and could become difficult to sell in the white-box channel or compete against devices from other first-tier brand vendors in standard retail channel.

As a result, white-box players are mainly choosing Bay Trail-T CR processors for their 2-in-1 devices. Most players have already planned new Windows 2-in-1s for mass shipments in the second quarter, priced between US$150-250, and these devices are expected to pose a great threat to first-tier brand vendors' similar products in emerging markets.

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