Intel - Moving from a Tech to a Commodity Play?
Intel the tech giant. How about Intel the commodity play? According to one strategist, the chip giant has the ability to move beyond its world of semiconductors to become a leading commodity company focused on solar panels and smart grid solutions.
"Intel has always been at the forefront when manufacturing sillicon wafer technology, I believe they can use that same manufacturing expertise and apply that to solar," John Licata, Chief Commodity Strategist at consultancy Blue Phoenix told CNBC on Tuesday. Click here for full interview.
One of the biggest challenges facing the solar industry, Licata noted, is the technology behind retaining heat. And it's in this area Licata thinks Intel could apply its know-how.
"As nanotechnology continues to challenge size structure by making things increasingly smaller, Intel needs to discover the next generation of mineral combinations to better store energy in chips and more importantly in solar power," Licata said. "Intel has the opportunity to be a leader in solar."
Intel may be the leading maker of advanced semiconductor chips globally, but its market share has been chipped away in recent years as close rivals such as Advanced Micro Devices play catch-up.
"Intel has lacked innovation," Licata said, which is why the tech firm has turned to its investment arm — Intel Capital — to look for the next big driver of growth. Since 1991, Intel Capital has poured $9.8 billion into 1,100 companies in over 40 countries around the world, most of them in green technology.
But the strategy seemed to lack focus. "Instead of building its presence in one or two new areas, Intel was investing in many technologies at once hoping one would result in an IPO or an acquisition," said Licata. He thinks Intel Capital can be better deployed to funding growth for a new technology that could ultimately be sold at a premium to a rival company.
Licata observed that Intel's consulting deal struck with California-based thin-film solar company Miasole in April was a way for it to test the waters in solar, albeit in a less risky way. "They didn't get involved with Miasole to stay idle for 5 years," he said.
Coupled with a war chest of $5.5 billion, its highest level since 2007, Licata said "Intel has the muscle to spend on R&D at a time when new technologies for greener energy are emerging quickly."
Another factor working in Intel's favor is lower costs in the solar space. The price per watt of solar energy has halved to $1.80 at the end of 2010 from levels in 2007, said Licata, and is expected to dip below $1 per watt in coming years.
This lowers the entry barrier for new players, and encourages the commercial use of solar energy. Solar power, Licata points out, currently accounts for 1 percent of electricity in the U.S. But that could grow to the high double-digit teens in the next decade. Combine that with the potential demand in Asia, "the global outlook for solar is extremely strong."
"To maintain its ability to grow in an alternative energy world, Intel has to move this way," Licata said. And because Intel already has manufacturing expertise, "it could produce solar at a discount," he added.