Intel: The Next Catalyst Is 5G

Sep. 19, 2017 4:21 PM • INTC Summary #Intel: The Next Catalyst Is #5Gs 5G Mobile Trial Platform ( #MTP) is aimed at ensuring successful operability of devices in 5G cellular network. 5G will boost the sales of Intel’s commodity hardware as well as hardware accelerators. With semiconductor stocks rallying, I believe Intel’s stock also will join in the league. Intel (INTC) announced its 5G Mobile Trial Platform (NYSE:MTP). Intel has taken this initiative as the first tech company to quickly expand the adoption of upcoming new radio standards, better known as 5G new radio (NR), in the telecom industry. Once the finalization of the non-standalone NR specification is over, Intel will start working with the world’s leading TEMs (telecommunications equipment manufacturers) to ensure the successful operability of devices in the network of the initial NR standard.  Image Credit: Intel Intel’s Competitive Advantage: 5G Meets AI 5G is an advanced wireless network where the scope of applying AI (artificial intelligence) tools would be far more compared to 4G. With virtualization-based SDN (software-defined networking) maturing rapidly, AI software applications are now capable of running 5G wireless networks smartly and intelligently. It’s software that would be at the helm of 5G. And that’s good news for Intel despite it's a hardware company. Why? Well, you write part of the program inside hardware accelerators, and the rest at the app level. Some leading network operators in the world, such as #ATT (T), #Verizon (V) and #Google (GOOGL)(GOOG), have formed the #OpenNetworkingFoundation, or #ONF in short, to bring open resources in this area. Hardware vendors like Intel, #Cisco (CSCO) and #Huawei have joined hands with ONF. For Intel this is a tremendous opportunity to boost hardware sales, particularly hardware accelerators. ONF has embarked on a project called Central Office Re-architected as a Datacenter (CORD), which has successfully finished the huge task of virtualizing the existing hardware devices. To learn more about this, click here for a research report. According to the report: CORD has successfully completed the virtualization of existing hardware devices such as CPE (customer premises equipment), OLT (optical line transmission) and BNG (broadband network gateway), and produced software counterparts (e.g., applications running on open network operating system (ONOS)) on top of commodity hardware. Moreover, CORD has provided a framework on which these software elements (plus any other cloud services an operator may want to run) can be plugged into, leading to a coherent end-to-end system. Advertisement  Investors' Angle Again, product diversification is Intel’s competitive edge. For successful 5G deployment around the world, operators have to ensure the network is fully operable with tomorrow’s smart devices in the cloud environment. In a previous article I explained how product diversification will help Intel boost its IoT (Internet of Things) group and programmable solutions group (PGG) revenues. As far as 5G is concerned, SDN and NFV (network functions virtualization) will be two integral parts of it. According to Verizon: SDN (software-defined networking) and NFV (network functions virtualization) are really a foundation for how 5G will be deployed. The separation of the control and user plan are all coming from what we see in the web-based environment and are part of what is happening with 5G. And for NFV, FPGAs (field-programmable gate arrays) play a significant role. It's no longer a secret that 5G will boost Intel's FPGA sales, although Intel's stock isn't pricing in. Meanwhile, FPGA-maker Xilinx (XLNX) has seen a huge surge in its stock price in the last one year. Image Source: Wikipedia This implies the Street isn't unaware about the prospects of FPGAs. As a competitor of GPU (as a parallel processing product), FPGA is increasingly being used in the datacenters. That's why Xilinx is trading at a PS multiple of 7.8x and PE multiple of 30x. In this light, I believe Intel is a good bet for the long term. Conclusion Intel's effort to create the 5G Mobile Trial Platform will help it stay ahead of the curve in the 5G hardware game. Not only the demand for its commodity processors will increase, the demand for its highly specialized Xeon Phi co-processors and of course FPGAs will increase as well. I'd recommend buying Intel on dips. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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