Intel to phase out subsidies that flooded the market with cheap Android tablets
Besides offering cheap prices for the Atom chips, Intel also agreed to a co-marketing budget in some cases. Intel also offered to reimburse tablet manufacturers for the price of redesigning the motherboard to accommodate Intel's chips. According to Bernstein Research analyst Stacy Rasgon, the subsidies amount to about $51 per tablet, which is quite a gift considering that these slabs sell for $199 or less. Rasgon says that for 2014, Intel will be selling chips to these tablet manufacturers at a tad above costs, with its margins close to zero.
Morgan Stanley analyst Joseph Moore says that Intel lost $3 billion in its mobile chips division in 2013, and is expected to show another $4 billion in losses this year. According to the analyst, Intel has had enough after the $7 billion in losses, and will start to phase out the subsidies in 2015.
For consumers, eliminating the subsidies will mean higher priced low-end Android tablets over the next few years. For Intel, it will be an attempt to turn around a mobile chip division that has been drowning in red ink.